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TMI Blog2018 (7) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... at:- The periods of demand in all these disputes related to construction of residential complexes for KHB etc. spans from 2005 to 2015. There are merit in the appellant’s contention that demands on this score prior to 1.6.2007 is liable to be set aside in view of the decision of the Hon’ble Apex Court in CCE & CC Kerala Vs Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] - demand set aside. Demands for the periods subsequent to 1.6.2007 - Held that:- In a number of decisions, the higher appellate forums have consistently held that there is no liability to pay service tax for the reason that the complex so constructed are intended for personal use which is excluded in the definition of construction of residential complex - Even after the negative list regime w.e.f. 1.7.2012, higher appellate forums have consistently held that services provided by contractors to Housing Boards, Local Development Authority under JNNRUM etc. there could be no service tax liability since such houses etc. were meant for residential purpose, was within exemption under Notification No.25/2012- ST. Tax liability - CICS, MMR services etc. alleged to have been provided by the appellant - Held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TNSCB, on which activity, department took a view that that assessee should have discharged service tax liability under Commercial or Industrial Construction Services (CICS) as defined in Section 65 (25b) of the Act. For certain periods, such construction work has been alleged to be falling within Works Contract Service (WCS) as defined under Section 65 (105) (zzzza) of the Act. (iv) Department also took the view that work of repair and renewal of electrical installations at Iron and Steel complex, Santhanakadu, Chennai for CMDA would be exigible to service tax under the category of Management, Maintenance or Repair Services (MMR services). (v) Assessee provided fire fighting system in double level basement parking for two wheelers at Chennai Metro Bus Terminal (CMBT) for CMDA which was alleged to be exigible to service tax liability under CICS. 3. Show cause notices were issued to the assessee based on the above allegations, inter alia proposing recovery of service tax liabilities with interest, as also imposition of penalties under various provisions of the Finance Act,1994. In adjudication of these proposals, demands of service tax under various heads were confirmed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Not Confirmed Sriram Aveneue, Coimbatore 8,925 8,925 Pudhukottai Municipality Shopping Complex 2,12,455 2,34,127 TOTAL 6,61,18,056 6,52,95,618 ST/40066/2014 SCN NO 108/2011 dated 18.10.2011 OIO No 08/2013 dated 7.10.2013 POD April 2010 to March 2011 Royal Orchid Bangalore 1,68,251 1,68,251 Interest Under Section 75 Penalty of ₹ 200 per or ₹ 10,000 under Section 77 for non registration Penalty of ₹ 10,000 for non- filing of returns Penalty of ₹ 200 or 2% under Section 76 till the date of payment of Tax. Tamil Nadu Slum Cleareance Board 85,32,053 85,32,053 Karnataka Slum cleareance Board 2,39,974 2,39,974 Karnataka Housing Board 99,73,813 99,73,813 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OD April 2012 to June 2012 Amount With held released from Tamil nadu Slum Cleareance Board 20,01,055 20,01,055 under Section 77 for non registration Penalty of ₹ 10,000 for non- TOTAL 2,03,65,809 2,03,65,809 filing of returns under Section 77 Equal Penalty under Section 78 ST/42180/2017 SCN 18/2016 dated 22.08.2016 OIO No 06/2017 dated 31.05.2017 POD 01.04.2013 to 31.03.2015 Karnataka Housing Board 2,47,91,740 2,47,91,740 Interest Under Section 75 Penalty of ₹ 10,000 for non- filing of returns under Section 77 Equal Penalty under Section 78 5. On 18.4.2018 when the matter came up for hearing, on behalf of the assessee, Ld. Advocate, Shri S. Muthuvenkatraman submitted oral and written submissions in respect of each disputed service and the projects that have come under the department s scanner. These arguments and submissions can be broadly summarized, project wise, as under : I) Activity allege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al such as bricks, sand, cements, steel, etc. 2. Name of the Project : Package I (Kodungaiyur) Service Tax liability in respect of these projects has been demanded in impugned orders No.8/2013-ST dt. 7.10.2013 (ST/40066/2014), 5/2014 dt.28.3.2014 (ST/41599/2014) and 4/2015 dt.30.4.2015 (ST/41748/2015).With regard to the above project, Ld. Advocate reiterated the submissions made in respect of Southern Basin Package Velacherry Project. It is also submitted that work undertaken by assessee is for improvement to Kodungaiyur drain from 3050m to 3450m (beneath) GNT Road), construction of diversion channel for surplus in Kollathur Tank to Madhavaram Tank, improvements to OtteriNullah like widening and construction of floor protection wall concrete bed lining; that construction of diversion channel from Kolathur Tank (Surplus water) to Madhavaram Tank beneath GNT Road so as to divert the same to OoteriNullah and widening the construction of flood protection wall to OoteriNullah. The presumption that OoteriNullah as a river is incorrect. The work undertaken by the assessee cannot be considered as dredging service in a river. The said project was merely a construction service and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability in respect of this project has been demanded in impugned orders No. 5/2014 dt.28.3.2014 (ST/41599/2014). It is alleged that as the assessees rendered widening, deepening in a river, the work would cover no project service. The adjudicating authority has confirmed the tax liability under project service and held that Exemption Notification No.41/2009 is not applicable. The work undertaken by assessee is in no way connected with the dredging services and it is only draining of storm water to Cooum. Therefore it cannot be classified as dredging services. II (a) Arguments in respect of demand on construction of Residential complex to Karnataka Housing Board (KHB), Karnataka Airport Land Gulbarga, R1/V1 Quarters, Gadag, Thalikottai, Institute Hostel at Gulbarga, Suryanagar, Sheiqroza, Ragigudda. Demands in respect of these activities have been confirmed by adjudicating authority in impugned OIO dt. 28.09.2012 (ST/40066/2013), OIO dt. 7.10.2013 (ST/40066/2014), OIO dt. 28.3.2014 (ST/41559/2014), OIO dt.30.4.2015 (ST/41748/2015).Assessee had constructed residential units for the KHB Bangalore. In impugned order dt. 28.9.2012 (ST/40066/2013), adjudicating authority has re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur. The demands in respect of these activities have been confirmed in impugned order dt.28.9.2012 (ST/40066/2013). The adjudicating authority has rejected the assessee s plea that construction of complex services is liable for service tax only after 1.6.2007 Adjudicating authority has held that assessee is not entitled to benefits given in Master Circular No.96/2007 dt. 23.08.2007, on the ground that houses built for Slum Clearance Board are meant for sale to the allottees. Assessees reiterated the submissions made in respect of the demands made on Karnataka Housing Board (KHB) and Bangalore Development Authority (BDA) residential projects. Assessee has constructed houses for TNSCB under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) towards slum clearance. Post 01-07-2010 the service is exempt vide Notification No.28/2010- ST Dt.22-06-2010, wherein service tax on the construction of complex provided to JNNURM is exempt. Reliance is also placed on the decisions placed in SANTOSH KATIYAR Vs CCE, BHOPAL 2017 (3) GST 203 (Tri.-Del.) and CCE, Allahabad v. Ganesh Yadav 2017 (6) GSTL 428. III In respect of Management, Maintenance or Repair Services. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services since the definition confines to installation of electrical and electronic devices, plumbing drain laying, heating ventilation or air conditioning, thermal installation, sound installation, fire proofing or water proofing, lift and excavator and such other services similar to fire proofing. In the instant case, the assessee is only rendering service for firefighting. Therefore it cannot be said the definition includes the firefighting system. (iii) Residential Complex for Bangalore Development Authority (BDA) SCN dt. 22.08.2016 alleged that construction of residential complex to BDA will not fall under definition of rendering of service to government authority since it is not an activity in relation to entrusted to municipality / local authority, hence it is not exempted category provided in Notification 25/2012. Adjudicating authority in impugned order dt. 31.05.2017 (ST 42180/2017) has accepted the contention of assessee that BDA and KHB are government authorities. However, he has refused to grant exemption under Notification No.25/2012. It is the contention of assessee that the Adjudicating authority has failed to rely on serial No. 12(a) of the Notification No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... palika for Royal Orchid Hotel, Bangalore. Original authority vide impugned order dt. 28.09.2012 (Appeal ST/40066/2013) has upheld the tax liability on the ground that construction activity has not been carried out on behalf of the Government. Assessee submits that construction activity is related to road and hence they are exempted. The work had only done by their customer as the municipal authorities had procrastinated coverage of the drain. In impugned order dt. 7.10.2013 (Appeal ST/40066/2014), the demand has been made of ₹ 1,68,251/- in respect of the works of RCC cover of storm water drain inside compound of Royal Orchid Hotel Bangalore. Assessee submits that adjudicating authority proceeded on wrong presumption that storm water drain is inside the hotel whereas it was situated outside the hotel on the public road. (iv) Name of the Project : Rain water harvesting system at Arasur sub-station of Power Grid Corporation Ltd. The demand has been confirmed by the impugned orderdt.28.3.2014 (ST/41559/2014). The adjudicating authority has held that since the assessee has paid service tax it has to be held that they have accepted the classification as Works Contract S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc : i) The construction of complex was brought under service tax w.e.f. 16.6.2005 and is defined in Section 65 (30a) of the Act to include construction of a new residential complex or a part thereof. As per Section (91a) residential complex means any complex comprising of inter alia, a building or buildings having more than 12 residential units. Ld. AR referred to Master s circular No.96/2007 dt. 23.08.2007 to argue that the assessee having building the residential complex as contractor is liable to pay service tax on the gross amount charged for the construction service under the construction of complex category, the argument of assessee that there is no sale in the case of Slum Clearance Board and Housing Board building till the completion is over is also not relevant and their activities will definitely fall under the construction of complex service during the impugned period. ii) The housing buildings for Slum Clearance Board and Karnataka Housing Boards are for sale to the allottees. These Boards therefore are the promoter or developers and the assessees are the contractors, and in view Board s Circular No.108/02/2009-ST dt. 29.01.2009 they are very much liable for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being only a commercial activity, service tax liability will very much arise under the category of Erection, Commissioning or Installation Service . 6.6 In respect of departmental appeal, Ld. A.R reiterated the grounds of appeal and points out that when ingredients for invocation of extended period was very much present, penalty under Section 78 of the Finance Act, 1944 should have been compulsorily imposed. Hence action of the adjudicating authority to impose reduced penalty under section 76 of the Act instead of section 78 is not correct and legal and that part of the order requires to be modified to the extent of ordering imposition of penalty under Section 78 ibid. 7. Heard both sides and have gone through the records. 8. We intend to take up the issues one by one. 9.1 Dispute on activity alleged to be dredging Services Name of the Projects : 1. Southern Basin Package VII (Velacherry) ₹ 2,52,64,423 2. Package I (Kodungaiyur) ₹ 3,44,49,740 3. Package III (Buckingham canal) ₹ 8,26,33,444/- 4. Package II (Maduravoyal) ₹ 85,17,042/- 3. South Buckingham Canal- ₹ 21,53,012/- Period : 2010 2013 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a barge used in dredging On origin and etymology, the dictionary opines that the word Dredge has emanated from Old English *drecge: akin to Old English dr ge dragnet, dragan to draw. 9.4.2 As per the Collins English Online Dictionary Dredge (Verb) means : When people dredge a harbour, river, or other area of water, they remove mud and unwanted material from the bottom with a special machine in order to make it deeper or to look for something. The word dredging (Noun) is explainedas: The process of clearing a channel or harbour by using a dredge A Dredger (Noun) is described as: a machine, in the form a bucket ladder, grab or suction device, used to remove material from a riverbed, channel etc. The Origin of the word dredge is explained as : prob. MDu dregge, akin to drag A Dredger is defined as: A dredger is a boat which is fitted with a special machine that is used to increase the size of harbours, rivers, and canals. 9.4.3 As per the Oxford Online Dictionary Dredge (Verb) means, to : 1 Clear the bed of (a harbour, river, or other area of water) by scooping out mud, weeds, and rubbish with a dredge. the lower stretch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or harbour, the dredge or dredger is necessarily fitted on to a barge, boat or ship, as the case may be. It is interesting to note that while some dictionary meanings of dredging include removal of such unwanted material from bottom of a lake, canal also, however, the definition of dredging in Section 65 (36a) of the Finance Act, 1994, restricts the scope of such activity only to a river, port, harbour, backwater or estuary. 9.6 It then appears to reason that not only are the two essentialities of the definition of dredging under Section 65 (36a) of the Act namely, removal of material and such removal related to or while excavating, cleaning etc., required to be present in tandem, but also, such activity will require the use of a boat, ship etc. equipped with a dredger, or, at the very least, there has to be use of dredging apparatus for enabling the activity. 9.7 We now intend to test our increased understanding of the nature and scope of dredging to adjudge whether the activity performed by the assessee will fall within the scope of dredging for the purpose of the Finance Act, 1994. 9.8 The projects undertaken by the assessees which have been alleged to be cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y fit into the nomenclature of a river, port , harbour, backwater or estuary for the purpose of the definition of Dredging Services in Section 65 (36a) of the Act. While assessee has certainly performed the works of deepening, widening and construction of flood protection walls etc. using cement and steel, there are no attendant contracts to dredge From the facts and records there is also no narration that boats or ships equipped with dredgers or for that matter, any dredging apparatus or equipment was used by the assessees for clearing or deepening these water bodies. 9.11 Viewed in this light, the activities of the assessee in respect of the above mentioned projects cannot surely fall within the scope of dredging services for the purpose of the Finance Act, 1994. In the event, those part of the impugned orders relating to Appeals ST/40066/2014, ST/41559/2014, ST/41748/2015 which concluded that the works performed by assessees related to the aforesaid projects fall within the scope of Dredging services and have demanded service tax under that service category cannot be sustained and will have to be set aside, which we hereby do. Appeals made in this regard are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41146/2018 dt. 13.03.2018 and S.Kadirvel [Final Order No.41504/2018 dt. 11.05.2018 in Appeal ST/446/2011] involving construction of residential complex, for TNPHCL for use of police personnel, and relying upon the CESTAT Bangalore decision in Nithesh Estates Ltd. Vs CCE ST Bangalore 2015 (40) STR 815 (Tri.-Bang.), has held that the houses so constructed rested with TNPHCL which is nothing but an extended arm of the Government and they are only meant for personal use. 10.5 Even after the negative list regime w.e.f. 1.7.2012, higher appellate forums have consistently held that services provided by contractors to Housing Boards, Local Development Authority under JNNRUM etc. there could be no service tax liability since such houses etc. were meant for residential purpose, was within exemption under Notification No.25/2012- ST. In Bharat Bhusan Gupta Company Vs State of Haryana 2016 (44) STR 195 (P H), involving the construction of houses for Below Poverty Line (BPL) category persons, the Tribunal held that the Board was a governmental authority and that the BPL houses constructed by the appellants were meant for residential purposes and hence service provided by contractors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulminated in construction of a shopping complex. It appears to reason that the municipality would lease out the shops so constructed. The shops in such complex are leased out at some level of pricing. Hence the scope and purpose of the complex would only be commercial in nature. In the impugned order dt. 28.09.2012 it is brought out that appellant had not produced any documentary evidence to the contrary. Neither have they have done so before this forum. However, we note that from para 12.02 of the related SCN dt.21.10.2010 that appellants had undertaken the construction as a composite contract and received payment from June 2005 to October 2005. This being so, in view of the settled law as laid down by the Hon ble Apex Court in the case of L T Ltd. 2015 (39) STR 913 (SC). These services will have to be treated as works construction service which cannot be exigible to service tax levy prior to 1.6.2007. For this reason, this demand cannot be sustained and is set aside. Appeal in this respect is allowed. So ordered. 11.4 Name of the Project : Sri Ram Avenue, Coimbatore Period : November 2005 to December 2005 Impugned Order : 05/2012 dt. 28.09.2012 Demand : ₹ 1,73 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : ST/41559/2014 Appellant has provided rain water harvesting system for the service recipient.On the same analogy held in para 6.7 above, we find that the service in relation to providing rain water harvesting system for the Power Grid Corporation sub-station is also an activity for a project which is being implemented in public interest through its designated special purpose vehicle specially created for creating and maintaining a power grid. Hence following the ratio of these decisions cited supra, we hold that the demand confirmed in the impugned order in respect of such projects requires to be set aside. Appeal in this regard succeeds. So ordered. 11.7 (a) Name of the Project : Repairs and Renewals of Electrical Installation in Iron and Steel Complex, Sathangadu for CMDA Period : October 2009 to March 2010 Impugned Order : 05/2012 dt. 28.09.2012 Demand : ₹ 75,662 Appeal :ST/40066/2013 11.7 (b) Name of the Project : Repairs and Renewals of Electrical Installation in Iron and Steel Complex, Sathangadu for CMDA Period : June 2010 to Sept 2010 Impugned order: 8/2013 dt. 7.10.2013 Demand: ₹ 1,92,114/- Appeal No. :ST/40066/2014 In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no construction work and only repairs and renewals of electrical installations hence the activities are rightly classifiable under Erection, Commissioning or Installation services. The appellants have relied upon the case law of Marubeni India Pvt. Ltd. Vs CST, New Delhi 2016 (45) STR 549 (Tri.- Del) wherein it has been held that adjudication beyond scope of SCN is not permissible, hence the related demand was set aside. In this case also, as the impugned order has gone beyond the scope of the SCN, having the effect of arbitrary classification of the service, the related demand of ₹ 1,71,125/- raised thereof cannot sustain and is set aside. Appeal in respect of this activity is allowed. So ordered. In respect of Appeal ST/40066/2014, the related SCN dt. 18.10.2011 proposed demand of service tax liability of ₹ 2,41,403/- under Erection, Commissioning or Installation Service (ECIS). The impugned order dt. 07.10.2013 has also confirmed on the same category. Evidently, the work of providing Fire Fighting System will come within the scope of Commissioning or Installation of equipment and falling within the fold of ECIS as defined in Section 65 (39a) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 Appeal : ST/41559/2014 The assessees have provided these impugned services to the National Institute under the Ministry of Social Justice Empowerment, Govt. of India and as such is the extension of the Government for creating awareness to serve as National Resource Centre for empowerment of such persons with multiple disabilities, surely then, these services cannot be made exigible to service tax under the Finance Act, 1994. In the event, that part of the impugned order confirming the above demand is set aside. Appeal in this regard succeeds. So ordered. 11.11 Name of works: (a) Provision of Fire Fighting system to RTC at CISF, Arakonam (b) Provision of Fire Fighting system to office of Commissioner of Police, Chennai Period : April 2011 to March 2012 Demand : Separately not quantified and is part of total demand of ₹ 10,42,668 Impugned Order No.05/2014 dt. 28.03.2014 Appeal : ST/41559/2014 The demands are not made separately but combined demand of ₹ 10,42,668/- made for the above services for provision of fire protection system. Discernably, the above services have been provided to Government or Government bodies and hence they cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of services provided to Royal Orchid Hotel, Bangalore is sustained. Appeal in that respect is dismissed. (ii) Remaining demands confirmed in the impugned order are set aside. (iii) Penalties imposed in the impugned order are set aside. 15.2 Appeal ST/40066/2014 - (i) The demand of ₹ 1,68,251/- with interest as applicable, confirmed in respect of services provided to Royal Orchid Hotel, Bangalore is sustained. Appeal in that respect is dismissed. (ii) The demand of ₹ 1,92,114/- with interest as applicable, confirmed in respect of services related to CMDA Iron Steel Complex Sathangadu is upheld. Appeal in that respect is dismissed. (iii) Demand of ₹ 2,41,403/- with interest as applicable, in respect of work related to providing fire fighting system in double basement parking in CMBT, Koyembedu is sustained and the appeal in this regard is dismissed. (iv) Remaining demands confirmed in the impugned order are set aside. (v) Penalties imposed in the impugned order are set aside. 15.3 Appeal ST/41559/2014 Demands and penalties confirmed/imposed in the impugned order are set aside and appeal is allowed in toto. 15.4 Appeal ..... 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