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TMI Blog2014 (3) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant are very specifically covered under the said provision and there can be no two opinions about the coverage of the same after 2005 whatever the difference of opinion or anything can be is for the period prior to 2005. Regarding knowledge of the department - held that:- The appellant has not shown any evidence whatsoever that the jurisdictional Service Tax officials were informed about the activities of the appellant and, therefore, they were fully aware about them. The jurisdictional Central Excise officials may be aware of the ongoing litigation but there is no evidence to indicate that the Service Tax officials were aware of appellant's activities. Regarding revenue neutral situation - Held that:- If such a theory is accepted, it will lead to a situation wherein the final consumer of goods or services only should be taxed or charged and all other irregularities by various manufacturers or service providers would become non-taxable. It is also noted that service tax authorities issued summons in February 2006 but appellant did not co-operate. Extended period of limitation is sustainable in the facts and circumstances of this case. Regarding levy of penalty s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial or Industrial Construction Service and also proposing to impose penalties under the provisions of Finance Act, 1994. The appellant contested the levy on the following grounds: 2.1 The customers of the appellant floated tender work for interior works and most of the customers are banks. These customers appoint there own architect and planning consultants who prepare drawings, sketches, plans, etc. for the interior works to be undertaken by the appellant. Based on such planning, drawings, etc. the appellant undertook the work. The work executed inter alia includes supply and making built in storage/side rack for work stations with laminate finish, built in storage of given specifications, supply of loose furniture, laminate finish wooden flowing, Venetian/vertical blinds, civil work. Toilet block and lift lobby renovation, civil works in the nature of flowing, cement plastering, ceramic tile flooring, wall mounting, urinal for gents toilet, wash basins, plumbing and drainage work, flush doors for WC, wash basin counter, pantry counter etc. The said work included supply of goods they have discharged VAT/Sales tax liability. The appellants were under the bonafide belief tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding of civil structure. The activity undertaken by the appellant does not come under repair activity and the activity undertaken by the appellant is in the nature of interior decoration work. Therefore, the appellant has not undertaken nay activity of renovation or restoration. It is further argued that Section 65 (25b) envisages that the activities listed or specified therein should be in relation to the building or civil structure. On a plain reading of the aforesaid provisions, only if the activities are undertaken in relation to a building, the same comes under the tax net. However, in the instant case the activities have been undertaken in relation to a building, the same comes under the tax net. However, in the instant case the activities have been undertaken in respect of an individual unit of the building and not to the building as such and therefore, the provisions of Seciton65 (25b) are not attracted. The appellant also relies on the Board's Circular No. 80/10/2004-ST dated 17/09/2004 and B1/6/2005-TRU dated 27/07/2005 wherein it has been clarified as follows: 13.1 Services provided by a commercial concern in relation to construction, repairs, alteration or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd industrial construction service' under section 65(25b) of the Finance Act 1994 and renovation of a commercial or industrial building or civil structure has now been specifically included within the purview of service tax. 14.2 Post construction completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, especially if undertaken as an isolated or stand alone contract, are also specifically included. Thus post construction completion and finishing services are specifically included in the definition of commercial or industrial construction services. 3.2 In the present case the appellant has not undertaken repair/renovation or completion of services in respect of a building. It is also contended that clause (a) of Section 65 (25b) provides for construction of a new building or a civil structure or a part thereof. Clauses (b), (c) (d) do not use the expression a part thereof . It simply states in a relation to a building or civil structure or pipeline or conduit . When the legislature used in the same section two phrases building or civil structure and or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Therefore, extended period of time could not have been invoked in the instant case. 4. The Ld. Commissioner (AR) appearing for the Revenue made the following submissions: 4.1 Even if the activities undertaken by the appellant does not get specifically covered under repair, alteration, renovation or restoration, it would get covered under the expression similar services as specified in 65 (25b). Similarly even under clause (c) relating to completion and finishing services, while certain services are specifically mentioned therein, there is a residuary clause other similar services and therefore, the appellant cannot escape from the liability to pay service tax under Commercial or Industrial Construction Services . As regards the arguments that the activities undertaken by the appellants are for a part of the building and not for the entire building, this argument is absurd. Any activity carried in a part of the building will be nothing but in relation to the building. If a part of the car is repaired it cannot be said that the repair is only of the part and not of the car. It is also contended that the activity of the appellant is covered under Commercial or Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is - (i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;] The taxable service is defined in Section 65 (105) (zzq) reads as follows. (zzq) to any person, by any other person, in relation to commercial or industrial construction; Explanation. - For the purposes of this sub-clause, the construction of a ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Financial Institutions and other firms and supply fixing of various furniture, etc. This portion of the findings of the lower authorities is not challenged by both sides. It is also undisputed that the appellants, in all these cases, have executed these works based upon the orders placed by the customers to them. With this factual matrix, it would be necessary to reproduce the definition of term 'interior decorator services' under Section 65(59) of the Finance Act, 1994 which reads as under:- Interior decorator means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether man-made or otherwise and includes a landscape designer. It can be seen from the above reproduced definition that 'Interior Decorator' gives advice, consultancy and technical assistance or in any other manner, services related to planning, design or beautification of spaces. In the entire records before us, the adjudicating authority has never recorded a finding that the appellants herein were giving adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued for clarifying the Scope of 'Commercial or Industrial Construction Service' (after amendment), has categorically clarified as under:- (2) Post construction completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentery, especially if undertakes as an isolated or stand alone contract, are also specifically included. Thus post construction completion and finishing services are specifically included in the definition of commercial or industrial construction service. It can be seen from the above that the activities which had been undertaken, as enumerated in the clarification, have now been specifically included. This would indicate that prior to 16.6.2005, these were not included in the category of 'interior decorator service'. In a series of decisions of the Tribunal which laid down law that if the category of services is brought into service tax net from a specific date, such services would not be covered under any other category of services. 5.3 The activities undertaken by the appellant in the present case are almost identical to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or or unit of the building, it would certainly amount to activity being undertaken in relation to a building as envisaged in clauses (c) and (d) of Section 65 (25b) of the Finance Act, 1994. In the definition of taxable service, under section 65 (105) (zzq), the expression used is in relation to has been construed by Apex Court to be of widest amplitude. In Doypack Systems Ltd. Vs. UOI [(1988) 2 SCC 299]. The hon'ble court observed as under: The expressions pertaining to , in relation to and arising out of, used in the deeming provision, are used in the expansive sense. The words arising out of have been used in the sense that it comprises purchase of shares and lands from income arising out of the Kanpur undertaking. The words pertaining to and in relation to have the same wide meaning and have been used interchangeably for among other reasons, which may include avoidance of repetition of the same phrase in the same clause or sentence, a method followed in good drafting. The word pertain is synonymous with the word 'relate'. The term 'relate' is also defined as meaning to bring into association or connection with. The expression in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability. Therefore, the provisions of proviso to Section 73 (1) of the Finance Act, 1994 is clearly attracted. A similar issue arose before the hon'ble High Court of Gujarat in the case of Neminath Fabrics and the hon'ble high court held as follows: The termini from which the period of one year or five years has to be computed is the relevant date which has been defined in sub-section (3)(ii) of section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub-section (1) of section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal. In view of the above legal position, we have to conclude that the extended period of limitation has been rightly invoked in the present case. 5.8 As regards the penalties imposed on the appellant, the same have been imposed under Sections 76 and 77 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the present case, the carpentry work undertaken by the appellant resulting in built-in furniture which are immovable cannot be classified as goods, leviable to excise duty and therefore, the appellant's claim in this regard is not sustainable in law. If the appellant had supplied any movable furniture, it is for the appellant to produce documentary evidence in this regard to claim exclusion from service tax liability and the appellant is at liberty to do so. 6. In sum, we uphold the classification of the services rendered by the appellant under Commercial or Industrial Construction Services and also the demand of service tax under the said classification during the impugned period along with interest thereon under the provisions of section 73 read with section 75 of the Finance Act, 1994. We also uphold the imposition of penalties under Sections 76, 77 78 and Rule 7C of the Service Tax Rules, 1994, except for the modification that for the period after 10/05/2008 only penalty under Section 78 would be imposable and not that under Section 76. If the appellant wants to claim any abatement towards supply of movable furniture, it is for the appellant to produce evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decoration of a unit or a part of building will be covered. Further, only in clause (a) of Section 65(25b), 'part thereof' is mentioned, whereas in clause (c) and (d), under which the activity of the appellant is covered, there is no mention of 'part thereof'. Hence, a layman from a plain reading of this section will possibly believe that only the activity of completion, furnishing and renovation, repair etc. is mentioned in the clause (c) and (d) and Service Tax will be attracted only if the work is in relation to building or civil structure and not with respect to a unit or part thereof. It is only on a homogenous reading to the whole sections involving rules of interpretation, it can be said that even the activity mentioned in the clause (c) and (d) of Section 65(25b), taxability of Service Tax will be attracted, even if the work is for a part thereof or a unit of the building or structure. 7.4 That, it is also observed that in the case of Spandrel Vs.CCE, Hyderabad- 2010 (20) STR 129 in similar circumstances the activity as of the appellant, it was the contention of the Revenue that the activities of the appellant fall under the category of 'Interior Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax is made out accordingly, I hold that the extended period of limitation is not available to the Revenue. I further hold that in the facts and circumstances of the case, the penalty imposed under Section 76, 77 and 78 of the Finance Act, 1994 and Rule 7C of the Service Tax Rules, 1994 are fit to be set aside. 8.1 I further hold that the appellant will be entitled to set off for the value of the goods transferred to the principal in the course of execution of the contract in question as assessed by the Sales Tax authorities and/or supported by the records of the assessee/appellant. 9. To sum up- (a) I uphold the classification of the service as taxable under 'Commercial or Industrial Construction Service' (b) The extended period of limitation is not attracted and thus, not available to the Revenue in the facts and circumstances of the case. Accordingly, the demand other than the normal period is set aside. (c) The penalties imposed under Sections 76, 77 and 78 of the Finance Act, 1994 and Rule 7C of the Service Tax Rules, 1994 are set aside. 10. Thus, the appeal is partly allowed. DIFFERENCE OF OPINION Following points of differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove three reasons in detail. The learned Advocate argued that since the work was not undertaken in the whole buildings, his client was under the bona fide belief that the activities are not liable to service tax. He further argued that the appellant was not repairing any existing structure and the appellant was only doing carpentry, masonry and interior decoration work. The learned Advocate further stated that they were under the bona fide belief that the demand was being made under interior decorator service'. The learned Advocate also reiterated the grounds (b) and (c) mentioned above to support his contention that they had bona fide belief. The next contention was that the issue involved is relating to interpretation of the statute and, therefore, extended period of limitation is not invokable. He argued that initially the department has classified the said activity under interior decorator service' and later on, under commercial or industrial construction'. Thus, it indicates that there is difference of opinion within the department. This indicates debatable issue of interpretation. The learned Advocate also argued that the department cannot allege that since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 591 (T) to support his contention. The learned Advocate also contended that in the present case, the appellant was paying VAT under works contract' and earlier the department has demanded excise duty and, therefore, they were under the bona fide belief that their activity will not be covered by the provisions of Service Tax. 13. The learned AR, on the other hand, argued that Service Tax and Excise Law are two different laws. These two laws are being implemented by distinct authorities having different jurisdictions. The Service Tax Law is being implemented by Commissioner of Service through various divisions and ranges. Similarly, Central Excise Act is being implemented by Commissioner of Central Excise having jurisdiction over different geographical parts of the city and the officers working under them. Just because the Board is common for collection of central excise and service tax or the officers are transferable from one wing to the other, knowledge by one wing or the stand taken by one wing cannot imply the knowledge by other wing or understanding of the law by the other wing. In any case, Central Excise Law and Service Tax Law operate in different fields and have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt that the department has issued in some cases demand notices for executor activities under the category of interior decorator service'. The learned AR contended that in case of the appellant, no demand relating to interior decorator service was issued and, therefore, they cannot claim the benefit of such interpretation in respect of other assesses. The learned AR further argued that once the service relating to commercial or industrial construction was introduced in 2005, there was no confusion whatsoever as the said definition specifically included the executor service. In respect of knowledge of the department, the learned AR argued that there is no evidence that the jurisdictional service tax authority was aware of various activities of the appellant. In fact when the appellant has not even taken the registration, there is no question that the service tax authorities will have any knowledge about the activity of the appellant. Regarding revenue neutrality, he stated that this concept is relevant only when somebody who pays the duty is also entitled to take the credit. In the present case there is no such thing. Whether the customers of appellant would be able to take the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned Advocate is based upon bona fide belief, interpretation of the statute, knowledge of the department and revenue neutrality. I find that none of these concepts find any mention in the said proviso. The Hon'ble High Court of Gujarat in the case of Neminath Fabrics [quoted by learned Member (Technical)] has held as follows:- The termini from which the period of one year or five years has to be computed is the relevant date which has been defined in sub-section (3)(ii) of section 11A of the Act. A plain reading of the said definition shows that the concept of knowledge by the departmental authority is entirely absent. Hence, if one imports such concept in sub-section (1) of section 11A of the Act or the proviso thereunder it would tantamount to rewriting the statutory provision and no canon of interpretation permits such an exercise by any Court. If it is not open to the superior court to either add or substitute words in a statute such right cannot be available to a statutory Tribunal. The above observation of the Hon'ble High Court is with reference to the knowledge of the department. However, I find the similar thing would be applicable not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o excise duty should have made them believe that their activities involve services and would be liable to payment of service tax. In view of this position, I do not find any merit whatsoever in the appellant's contention that they had bona fide belief. In fact, conduct only indicates willful intention. As far as their contention relating to interpretation of statute, the first contention is that initially the department raised the demand on the said activity on various assesses under interior decorator service' and later on under commercial or industrial construction service'. Thus, there was difference of opinion within the department itself. I find that this argument is not correct. Interior decorator service' was introduced in 1998 much before the introduction of commercial or industrial construction service' (in 2005). There are entities who only provide the advice consultancy relating to interior decoration. There are also entities which not only provide the advice consultancy but also execute such advice consultancy. Therefore, it was natural that the department in the initial phases was also trying to cover both types of entities under the interior de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axable. It is also noted that service tax authorities issued summons in February 2006 but appellant did not co-operate. Appellant also did not take registration. It was only in 2010, after lot of persistence that details could be obtained. Conduct of the appellant cannot be considered as bona fide. 15. In view of the above position, I agree with the learned Member (Technical) that extended period of limitation is sustainable in the facts and circumstances of this case. 16. The other point referred is whether the imposition of penalties under Sections 76, 77 and 78 of the Finance Act is sustainable in law as held by the learned Member (Technical) or whether these are not imposable as held by the learned Member (Judicial). I find that the learned Advocate for the appellant has not contested the imposition of penalties under Sections 76 and 77 before me. The only point urged was that penalties under Sections 76 and 78 are mutually exclusive and, therefore, penalty under only one of these Sections can be imposed. I also find that the learned Advocate has also contended that in the facts and circumstances of the case, no penalty is imposable under Sections 76, 77 and 78 in view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 2006 (1) STR 185 (Ker.), the penalty under Section 76 is also imposable. The learned Advocate for the appellant has quoted the Hon'ble Karnataka High Court judgment in the case of Commissioner of Service Tax, Bangalore vs. Motor World reported in 2012 (27) STR 225 (Kar.). However, in view of the Hon'ble Kerala High Court judgment, till 2008 when the law was amended, penalty under Section 76 will also be imposable. The appellant has not been able to bring out any reason or proof that there was reasonable cause for failure to take registration and make payment of duty etc. Under the circumstances, penalties under Sections 76, 77 and 78 of the Finance Act, 1994 are imposable and I accordingly hold so. 17. In the result, I agree with the learned Member (Technical) that imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994 are sustainable in law. 18. The matter may be placed before the regular Bench for passing majority order. (Pronounced in Court on 2.1.2014) In view of the majority decision, we uphold the classification of the services rendered by the appellant under Commercial or Industrial Construction Service and also the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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