9911796707
TMI Blog2025 (4) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Registration, under the category "Erection, Commissioning and Installation". During verification of accounts M/s TANGEDCO, it was found that M/s Litostroj EI., Slovania and M/s Koncar Inzenjering, Croatia were rendering composite services and supply of machineries to the appellant. The Department being of the view that the work undertaken by the foreign service providers fall under the category of 'Works Contract', requested the appellant to furnish the relevant documents. On scrutiny of the documents furnished by the appellant, it was observed that the scope of work undertaken by these foreign service providers relates to commissioning of the Bulb Turbine Generating unit for Bhavani Kattalai Barrage and included design and supply of all equipments, receipt, storage, preservation, and conservation of equipments at site, erection and commissioning, supply of mandatory spares, training of appellant's personnel etc. As per the contract entered between M's TANGEDCO and the foreign companies, the service is to be provided on EPC (Engineering, Procurement and Construction) contract basis. 3. The Department was of the view that in terms of clarification issued by Central Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and thus a show cause notice 02/2013-ST (Commr) dated 05-02-2013 came to be issued proposing invoking of privos to section 73(1) to demand service tax beyond the normal period of one year, demanding service tax of Rs.1,70,31,437/- along with appropriate interest thereon and proposals to impose penalties under Section 76,77(2) and 78. 5. The appellant replied to the Show Cause Notice vide letter dated 31.05.2013 refuting the allegations therein. After due process of law, the adjudicating authority confirmed the demand along with interest and penalty vide Order in Original No.15/2014-ST as aforementioned. The appellant has preferred this appeal being aggrieved by the impugned order in original. 6. The Ld. Counsel Shri. V. Ravindran appeared and argued for the appellant. He submitted that Tamil Nadu Electricity Board (TNEB) was formed on July 1, 1957 under section 54 of the Electricity (Supply) Act 1948 in the State of Tamil Nadu as a vertically integrated utility responsible for power generation, transmission and distribution and as per the provisions under the section 131 of the Electricity Act, 2003 TNEB was restructured on 1.11.2010 into TNEB Limited; Tamil Nadu Generation and D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, without prejudice to the above submissions, that the appellant is 100% Government of Tamil Nadu owned public sector undertaking formed under Section 131 of the Electricity Act, 2003 as an Electricity Generation and Distribution Utility and its primary functions are generation and distribution of Electric power to various consumers located within the state of Tamil Nadu in terms of the provisions of the Electricity Act, 2003. Further, the activities covered by the contract is related to commissioning of the Bulb Turbine Generating unit, for generation of electricity and distribution thereof. It is submitted that at all times prior to 1.7.2012, taxable services for transmission of electricity, or for distribution of electricity were not liable for the levy of service tax as evidenced by the Govt. of India Notifications No. 11/2010-ST dated 27.02.2010 and 32/2010 ST dated 22.06.2010 and 45/2010-ST dated 20.07.2010. It is the submission of the learned counsel that since the above notifications granted complete exemption from payment of service tax on all activities for transmission and distribution of electricity there was no need for payment of Service Tax at all for the activity i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In other words, M/s Litostroj E.I Slovenia and M/s Koncar Inzenjering, croatia have rendered composite services and supply of machineries to the assesse/appellant and thus it is a Single Composite contract involving supply and service. 11. The Ld. A.R submits that the registration/payment and actual work has commenced only after 01.06.2007 after Works Contract was made a taxable service under the Finance Act, 1994 and as can be seen from Para 21 of the OIO, the registration had taken place only on 8/12/2009, PO no 316 dated 8/10/2007 was released to the foreign consortium only in October 2007 and thus the actual provision of service started only after 1/6/2007. In view of which the contention that the payment under the service head Erection, Commissioning was made before WCS came into existence is untenable. 12. The Ld. AR also contends that the CIRCULAR 128/10/2010 ST DATED 24/08/2010 and 98/1/2008 ST dated 04/01/2008, are not contradictory, but rather support classification of the impugned service under WCS only as they deal with ongoing composite and long term contracts which continues even after 1/6/2007 and were classified under respective services (namely erection, commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation services, instead of "works Contract service". Such mis-classification was clearly out of the suppression of facts of the nature of contract between the appellant and the said foreign consortium. Furthermore, mere details of invoices raised by the appellant them on their customers could not have revealed the facts relevant to the classification matter. When the suppression of the material facts has become apparent, it will in no way curtail the demand in view of the following decisions, wherein it is held that mere knowledge of the department would not curtail the period under proviso to Sec 11A of C Ex Act 1944 namely M/s Neminath Fabrics P ltd 2010 (256) ELT (369) HC Gujarat and M/s Nazareth Metal vs C. C.Ex 2006 (205) ELT 998 (tri). The Ld. A.R. submits that in the instant case, the invocation of extended period has been correctly done and in consonance with the orders in ETA Travel agency (p) Ltd Vs CCE Chennai 2007 (007) STR 0454 (Tri-Banglore and Mermaid Marine products Pvt Ltd Vs CCE Cochin 1995 (20) ELT 329 (tri LB), wherein it was held that evasion of tax does not necessarily involve concealment, even contravention of law to make duty unrealizable is evasion of duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use, "works contract" means a contract wherein,- (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out,- (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installationof electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) construction of a new residential complex or a part thereof; or (d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; 21. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as the date of commencement of services and accordingly, these services are liable to be classified as per the provisions existed on the date of payment of advance. The noticee also claims to have paid service tax but it is pertinent to note that they have taken registration only on 08.12.2009 and hence the possibility of their having remitted any service tax on the advance amount under the category of 'Erection, Commissioning or Installation Services' prior to 01.06.2007 does not arise. The noticee have also not produced any evidence of having paid any service tax amount on the advance amount, prior to 01.06.2007 under the category of 'Erection, Commissioning or Installation Service'. Thus, it can be safely concluded that the actual commencement of services was only after 01.06.2007 and the assessee started paying service tax only after 01.06.2007. Hence the classification of services is to be done as per the provisions of Section 65A of the Finance Act, 1994 on the date of commencement of service by the said foreign companies to find out the appropriate service category under which the activities are covered" The adjudicating authority has also examined the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... testing, start up, successful trial, reliability run, performance guarantee testing of the plant and handing over after satisfactory performance guarantee tests as indicated in the Tender Specification and Tender documents and pre-bid and post bid clarification and correspondence, supply of mandatory spares, supply of erection and maintenance tools and tackles etc., training of purchaser's personnel for operation and maintenance of power plant equipment at site and at the manufacturer's works (ex-India) and any other activity for safe and successful operation of the contracted equipments shall be deemed to be included in the Contractor's scope. LOI enumerated the entire list of supplies to be made under the headings of turbine and auxiliary equipment, generator & auxiliary equipment, EOT crane and other goods. The scope of supply & services indicated that erection related works at the two sites are on Turnkey basis for loading at stores, unloading at service bay, assembly, erection, testing, commissioning, trial/reliability run, conducting PG tests and handing over including storage cum-erection insurance. It also indicated that the price for the entire scope of supply, storage, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is also pertinent that the Ld Counsel has relied upon the decision of the Hon'ble Supreme Court in the case of CCE v. Larsen and Toubro reported in 2015 (39) S.T.R. 913 (SC) and has contended in para 1.5 of the written submissions that "Therefore, in the light of the law as stated above, the above cited EPC works contract dated prior to 01 June 2007, did not attract the service tax levy at all". Thus, while the learned counsel on one hand concedes that the said contract was an EPC works contract, nevertheless the classification adopted by the appellant under "Erection, commissioning or installation" service is sought to be justified on the contention that LOI was issued prior to 01.06.2007 and advance amount was paid prior to 01.06.2007 at which point in time the definition of works contract service had not been brought into effect. The contention therefore is that the definition that was applicable when the LOI was issued ought to be retained as that was the point in time the levy had arisen and the classification therefore cannot be altered subsequently. Support for the said contention is taken from the circular of the Department dated 04th January 2008 which was issued in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the counsel for the following reasons. Firstly, the categorical finding of the adjudicating authority that the work commenced only after 01-06-2007, i.e. after the date of introduction of service tax on works contract service has not been controverted. Secondly, the finding of the adjudicating authority that the appellant has taken registration only on 08.12.2009 and that therefore the possibility of the appellant having remitted any service tax on the advance amount under the category of 'Erection, Commissioning or Installation Services" prior to 01-06-2007 does not arise; has not been rebutted. On the contrary, on a perusal of the details of service tax payment of Rs.3,50,86,364/- made over the years filed by the learned counsel for the appellant, it is seen that there has been no payment of service tax on any count made prior to 01/2/2010. Thirdly, the finding of the adjudicating authority that the appellant has not produced any evidence of having paid any service tax amount on the advance amount prior to 01-06-2007 under the category of 'Erection, Commissioning or Installation Services" has also not been refuted. In fact, the appeal records too do not contain any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atural justice. The reliance placed on the CBEC Circular 98/1/2008-S.T., dated 4-1-2008 in this regard by the appellant is also thoroughly misplaced. The Circular is not validating the proposition that if classification ought to have been under a particular taxable service prior to 01.06.2007, then it cannot at all be reclassified under works contract service thereafter even after 01.06.2007, as sought to be canvassed by the Ld. Counsel for the appellant. The impugned circular merely reiterates the eligibility criterion specified in Rule 3(3) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, as the condition precedent for entitlement to exercise an option for coming within the composition scheme. 29. We also note that as per Section 65A, reproduced supra, Section 65A(1) provides that classification of taxable services shall be determined according to the terms of the sub-clauses of clause (105) of section 65. Thus, sub clause (zzzza) of Section clause (105) of Section 65 specifying taxable services of works contract has been aptly applied by the adjudicating authority while classifying the services of the consortium rendered to the appellant. We al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the submission of the Ld. Counsel that prior to 1.7.2012, taxable services for transmission of electricity, or for distribution of electricity were not liable for the levy of service tax as evidenced by the Notifications No. 11/2010-ST dated 27.02.2010 and 32/2010 ST dated 22.06.2010 and 45/2010-ST dated 20.07.2010. He submits that since the above notifications granted complete exemption from payment of service tax on all activities for transmission and distribution of electricity there was no need for payment of Service Tax at all for the activity in question, even under the erection, commissioning and installation or under the Works Contract Service. For the said proposition, the Ld. Counsel places reliance on the decisions of the Tribunal in the appellant's own case vide Final order Nos.40834 to 40836/2023 dated 22-09-2023 in M/s. Tamil Nadu Generation and Distribution Corporation Limited v. Commissioner of GST & Central Excise, Chennai, reported in 2023 (10) TMI 61-CESTAT CHENNAI, as well as the decisions of the Hon'ble High Court of Gujarat [Torrent Power Ltd. v. UoI 2019 (1) TMI 1092] and Hon'ble High Court of Rajasthan [Jodhpur Vidyut Vitran Nigam Ltd v. UoI 2021 (2) TMI 557 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not being levied according to the said practice during the period up to 26th day of February, 2010 for all taxable services relating to transmission of electricity, and the period up to 21st day of June, 2010 for all taxable services relating to distribution of electricity; Now, therefore, in exercise of the powers conferred by section 11C of the Central Excise Act, 1944 (1 of 1944), read with section 83 of the said Finance Act, the Central Government hereby directs that the service tax payable on said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period. (emphasis supplied) [Notification No. 45/2010-S.T., dated 20-7-2010] 33. It is evident from a plain reading of the aforesaid notifications that the notification No. 11/2010-S.T., dated 27-2-2010 exempts the taxable services provided for transmission of electricity. Thus, the said notification is for service providers providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1944), read with section 83 of the said Finance Act, directing that the service tax payable on said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period. In other words, the service providers who are already engaged in the services relating to transmission and distribution of electricity, which in turn presupposes the existence of already generated or produced electricity that is available for such transmission and distribution, and on whom as a practice service tax was not hitherto levied, shall not be called upon to pay the service tax liability that has arisen for the aforesaid period. Again, at the cost of repetition, it is stated that no power that is available for transmission or distribution by a service provider has even been generated, as it is only consequent to the successful commissioning of the project, by the foreign service providers and its handing over to the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." The Honourable Supreme Court has thereafter, in the concluding paragraphs of the said Judgement, held as below: "51. In Hari Chand case (supra), as already discussed, the question was whether a person claiming exemption is required to comply with the procedure strictly to avail the benefit. The question posed and decided was indeed different. The said decision, which we have already discussed supra, however, indicates that while construing an exemption notification, the Court has to distinguish the conditions which require strict compliance, the non-compliance of which would render the assessee ineligible to claim exemption and those which require substantial compliance to be entitled for exemption. We are pointing out this aspect to dispel any doubt about the legal position as explored in this decision. As already concluded in para 50 above, we may reiterate that we are only concerned in this case with a situation where there is ambiguity in an exemption notification or exemption clause, in which event the benefit of such ambiguity cannot be extended to the subject/assessee by applying the principle that an obscure and/or ambiguity or doubtful fiscal statute must receive a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ], where a similar challenge to the said Circular was made. the fact circumstances of the case laws cited by the appellant in the appellant's own case vide Final order Nos.40834 to 40836/2023 dated 22-09-2023 in M/s. Tamil Nadu Generation and Distribution Corporation Limited v. Commissioner of GST & Central Excise, Chennai, reported in 2023 (10) TMI 61-CESTAT CHENNAI, as well as the decisions of the Hon'ble High Court of Gujarat [Torrent Power Ltd. v. UoI 2019 (1) TMI 1092] and Hon'ble High Court of Rajasthan [Jodhpur Vidyut Vitran Nigam Ltd v. UoI 2021 (2) TMI 557], are entirely different from the fact circumstances of this case and are therefore not applicable in this instant appeal. The CBEC Circular No.131/13/2010 ST dated 07.12.2010 merely states in the context of supply of electricity meters for hire that the said activity is an essential activity having direct and close nexus with transmission and distribution of electricity, which is understandable as such electricity meters are used for measuring the electricity that is generated, transmitted and distributed and has no application in the instant case. 38. In view of our discussion above and in light of the Apex Court Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l nature, we are of the view that extended period of limitation cannot be invoked and hence the demand made on the appellant is sustainable only for the normal period, if any. D. WHETHER THE DEMAND MADE ON THE APPELLANT SUSTAINS OR NOT. 41. In view of our discussions above, we are of the view that the demand made on the appellant vide the impugned Order in Original No.15/2014-ST dated 17-11-2014 (OIO) will sustain for the normal period. 42. On the aspect of penalty, we note that the Honourable High Court of Karnataka has in its decision in CST, Bangalore v. Motor World, 2012 (27) STR 225 (Kar) held as under: 33. In the light of the foregoing discussion and for the reasons stated above, we answer the substantial questions of law as under :- (1) The imposition of penalty under the Act is not automatic. The ingredients mentioned in the Section should exist. In respect of Sections 76, 77 and 78 of the Act, not only the ingredients of those Sections should exist, but also there should be absence of reasonable cause for the said failure. (2) Sections 76 and 78 are mutually exclusive. If penalty is payable under Section 78, Section 76 is not attracted. Therefore, no penalty can b ..... 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