India Guniting Corporation Vs Commissioner of Central Tax (CESTAT Delhi)
Commissioner was not justified in confirming the demand of service tax under the category of ‘works contract’ for the period post June 1, 2007 even if the levy of service tax was not exempted under Notifications, since, the show cause notice that demand it service tax under the three categories namely (i) commercial or industrial construction, (ii) construction of complex and (iii) management, maintenance or repair.
FULL TEXT OF THE CESTAT JUDGEMENT
India Guniting Corporation1 has filed this appeal to assail the order dated January 31, 2018, by which the two show cause notices dated October 13, 2011 and March 25, 2015 have been adjudicated upon by the Commissioner, Central Tax, Delhi2. In regard to the first show cause notice, an amount of Rs.4,72,33,255/- has been confirmed and the remaining demand of Rs.79,96,862/- has been dropped. In regard to the second show cause notice, an amount of Rs.1,05,19,077/- has been confirmed and the remaining demand of Rs.63,08,584/- has been dropped. The Commissioner has also imposed penalty and interest. The appeal assails that part of the order passed by the Commissioner that has confirmed the demand of service tax.
2. The appellant is engaged in commercial construction and management, maintenance and repair. The first show cause notice dated October 13, 2011 for the period 2006-07 to 2010- 11 was earlier adjudicated upon by an order dated March 20, 2013. This order was assailed by the Appellant by filing Service Tax Appeal bearing number 57966 of 2013. Initially an interim order dated September 21, 2015 was passed, requiring the Appellant to furnish a detailed chart on matters enumerated in paragraph 5 of the order. The appeal was ultimately allowed by order dated October 27, 2015. The impugned order was set aside and the Adjudicating Authority was directed to scrutinise the nature of each of the work covered in the show cause notice. The demands made on ‗works contract‘ prior to June 1, 2007 were directed to be excluded. The Authority was also directed to re-examine whether any of the repairs and alteration contracts related to buildings that are being rented out to public offices so that the demand made on such contracts could also be excluded. The relevant portion of the order passed by the Tribunal is reproduced below:
“4. We find that in consequences of the decision of the Hon‘ble Supreme Court in the case of Commissioner of Central Excise and Customs, Kerala vs. Larsen and Toubro Ltd.[2015 (39) S.T.R 913 (S.C)] on taxability of works contract prior 1st June 2007 which the original authority did not have as a guide when adjudicating the show cause notices, each of the contracts undertaken by the appellant would need to be examined for taxability itself. We also find that some of the buildings for which works were undertaken by the appellant are undoubtedly rented out but these can hardly be categorized as being put to commercial lease as to bring it within the ambit of the definition of commercial or industrial construction in section 65(25b) of Finance Act, 1994. We also observe that in a few of the contracts executed for the Delhi Government and municipal bodies, consideration was yet to be received by the appellant.
5. Considering the factual matrix and the decision of the Hon‘ble Supreme Court supra, we are of the opinion that the original authority would need to have a fresh look at the claims made by the appellant. We, therefore, direct the original authority to scrutinize the nature of each of the works covered in the show cause notice for excluding demand on works contracts prior to 1 June, 2007 and to re-examine whether any of the repair and alteration contracts relate to buildings that are being rented out to public offices for exclusion from demand. The appeal, is thereby, allowed by way of remand to the original authority with the impugned order set aside.”
(emphasis supplied)
3. It needs to be noted that in the mean time a second show cause notice dated March 24, 2014 was issued to the appellant for the subsequent period from 2011-12 to 2012-13.
4. The first show cause notice that was required to be adjudicated upon pursuant to the order dated October 27, 2015 passed by the Tribunal and the second show cause notice were adjudicated upon by a common order dated January 31, 2018 passed by the Commissioner.
5. It needs to be noted that the three taxable services indicated in the two show cause notices are as follows:
(1) ’Commercial or industrial construction‘ service as defined under section 65 (25b) of the Finance Act and taxable under section 65 (105) (zzq);
(2) ’Construction of complex‘ service as defined under section 65 (30a) of the Finance Act and taxable under section 65 (105) (zzzh); and
(3) ’Management, maintenance or repair‘ service as defined under section 65 (64) of the Finance Act and taxable under section 65 (105) (zzg).
6. The Commissioner noted, in connection with the first show cause notice dated October 13, 2011, that the activities undertaken by the appellant could be divided into eight groups. These activities, including in the category of service and the taxability status, as mentioned in the show cause notice, are indicated in the following Tabular Form:
