Coastal Engineering Constructions Vs Commissioner of Central Excise & Service Tax (CESTAT Hyderabad)
The appeal before the CESTAT Hyderabad concerned the levy of service tax on activities undertaken between 2007–08 and 2009–10, particularly relating to construction of residential houses under the JNNURM scheme and execution of irrigation reservoir and drinking water projects. The department issued a show cause notice demanding service tax along with penalty, classifying the services under Works Contract Service (WCS) instead of Construction of Residential Complex Service (CRCS), under which the appellant had originally discharged tax with abatement.
The adjudicating authority confirmed the demand and imposed penalty under section 78, holding that the presence of transfer of property in goods, evidenced by payment of VAT, justified classification under WCS. It was also held that once WCS was introduced as a specific taxable category from 01.06.2007, such activities would appropriately fall within its scope and valuation would be governed by Rule 2A of the Service Tax (Determination of Value) Rules, 2006.
The appellant contested this classification, arguing that the services were correctly taxable under CRCS and that exemption should apply to residential houses constructed under the JNNURM scheme. It also claimed exemption for works relating to irrigation and drinking water projects, contending that such projects were public utility activities and not commercial in nature. Additionally, the appellant challenged the invocation of the extended limitation period and imposition of penalty, citing absence of suppression and existence of a bona fide belief.
