Case Law Details
Kumar Builders Vs Commissioner of Central Excise & Service Tax (CESTAT Chandigarh)
CESTAT Chandigarh held that activity of transportation and disposal of ash cannot be classified under taxable category of ‘Cleaning Services’. Accordingly, demand of service tax unsustainable.
Facts- Investigation by the Preventive Branch of Central Excise revealed that the appellants have provided services under the category of “Cleaning Activity”, “Maintenance or Repair”, “Management, Maintenance or Repair”, “Construction of Complex” and “Commercial or Industrial Construction” etc. and have not paid applicable service tax.
A show-cause notice was issued to the appellants and was confirmed by the Adjudicating Authority vide impugned order. CESTAT vide Final Order No.57531/2013 dated 02.09.2013 rejected the appeal filed by the appellant for non-payment of pre-deposit; on an appeal filed by the appellant, Punjab & Haryana High Court vide Order dated 04.03.2015 dismissed the order of the Tribunal and directed the Tribunal to hear the appeal without payment of pre-deposit, of duty confirmed on the “Cleaning Service”, while directing the appellants to pre-deposit the amounts in respect of “Management, Maintenance and Repair”; CESTAT restored the appeal which is before us.
Conclusion- Kolkata Bench of Tribunal in the case of Calcutta Industrial Supply Corporation has held that the appellant is engaged for transportation and disposal of ash, in the abandoned mines. The letter does not show that the appellant was engaged for cleaning of the premises. Therefore, the demand of service tax under the category of Cleaning Service is not justified.
Held that the activity undertaken by the appellants is of transportation and disposal of ash rather than cleaning of the premises as envisaged under the definition cited above. Therefore, we find that the contentions of the appellant are acceptable and therefore, the demand of service tax on this count is liable to be set aside.
Held that the appellants have undertaken mostly the repair of roads which is exempted by Section 97 as well as by Notification No.24/2009. If we consider the activity of the appellant as repair of roads and buildings, it gets categorized under “Commercial or Industrial Construction” and therefore, a show-cause notice issued under the “Management, Maintenance or Repair Service” cannot be sustained. On the other hand, if the activity is considered as repair of road, the same stands exempted. Either way the demand under this Head is liable to be set aside.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
1. M/s Kumar Builders, the appellants, having got registered, provided certain services to M/s National Fertilizers Limited, Northern Railways and M/s Ambuja Cement Limited; investigation by the Preventive Branch of Central Excise revealed that the appellants have provided services under the category of “Cleaning Activity”, “Maintenance or Repair”, “Management, Maintenance or Repair”, “Construction of Complex” and “Commercial or Industrial Construction” etc. and have not paid applicable service tax. A show-cause notice dated 24.01.2011 was issued to the appellants and was confirmed by the Adjudicating Authority vide impugned order dated 16.01.2012. CESTAT vide Final Order No.57531/2013 dated 02.09.2013 rejected the appeal filed by the appellant for non-payment of pre-deposit; on an appeal filed by the appellant, Punjab & Haryana High Court vide Order dated 04.03.2015 dismissed the order of the Tribunal and directed the Tribunal to hear the appeal without payment of pre-deposit, of duty confirmed on the “Cleaning Service”, while directing the appellants to pre-deposit the amounts in respect of “Management, Maintenance and Repair”; CESTAT vide Order dated 06.11.20 15 restored the appeal which is before us.
2. Shri G.S. Sandhe, learned Counsel appearing for the appellant submits that the demand raised is under four categories i.e. Cleaning Service (Rs.29,60,791/-); Maintenance or Repair/ Management, Maintenance or Repair Service (Rs.21,94,110/-); Construction of Complex Service (Rs.21,49,623 + Rs.1,34,681/-) and Industrial or Commercial Construction Service (Rs.49,191/-).
3. Coming to the first demand on “Cleaning Service”, the appellants submit that it is clear from the work order that the activity undertaken by the appellants is loading of ash in trucks/ Dumpers from the ash pond and transporting/ dumping/ stacking the same in the peripheral area provided by National Fertilizers Limited; the activity also included levelling and sprinkling water on the ash dumped; this activity will not fall under “Cleaning Services” as defined under Section 65(105)(zzzd). He further submits that the very same issue is decided in favour of the appellants by the Tribunal in the case of Calcutta Industrial Supply Corporation- 2019 (31) GSTL 487 (Tri. Kolkata); in additionthe service rendered cannot be treated as Cleaning Service even as per CBEC Circular No. B1/6/2005-TRU dated 27.07.2005.
4. On the demand of service tax on the alleged “Management, Maintenance or Repair Service”, learned Counsel submits that a perusal of the work orders and contracts reveal that the activity undertaken was repair of roads at Bathinda (NFL); Section 97 granted exemption to the repair of roads from the period 16th June, 2005 to 26th July, 2009, retrospectively and with effect from 27.07.2009, Notification No.24/2009-ST dated 27.07.2009 provides exemption to repair of roads.
4.1. Learned Counsel further submits that the contract agreement would reveal that the work involved was petty civil jobs in factory and township during the relevant period; learned Adjudicating Authority erred in holding that tax liability has to be examined in the light of definitions under the Act and not as per the contract; the nature of the service can only be ascertained from the terms of the contract and the actual work undertaken; the work they have undertaken was repair by way of petty civil works, like construction of wall, parking sheds etc., in the plant and township of M/s NFL; the job involved use of material also; cement was provided by M/s NFL and Sales Tax was paid on the same; the activity cannot be covered under Maintenance or Repair but can be covered under “Construction Of Complex” in the township and under “Commercial or Industrial Construction” in the Plant area; it can be seen from the definitions of “Commercial or Industrial Construction” [Section 65 (25b)] and “Construction of Complex” [Section 65 (30a)] which include repair, alteration, renovation or restoration; learned Counsel submits that the construction being for self-use by M/s NFL does not attract service tax. He submits that since the Department has raised the demand on “Management-Maintenance or Repair”, the same cannot be sustained.
5. On the issue of “Construction of Complex Service”, learned Counsel submits that the construction undertaken, of 36 units Type-I S/S Quarters (Ganghut) (10 at Rampura Phul, 8 at Atal, 10, at Barmala and 8 at Kilanwali stations) and other allied works, by the appellants for Northern Railway does not fall under this category as the work order clearly specified the number of residential units being less than twelve and not part of any complex.
5.1. On the construction under for M/s Ambuja Cement, learned Counsel submits that the work order dated 01.01.2008 mentions construction of 80 Units, Type-I (D/S Qtr. Replacement of condemned qtrs. Block No.111 (12 units), Block No.300 (3 Units), Block No. 285 (8 units), Block No.268 (19 units), Block 269 (19 units) & Block No.270 (19 units) in colony No.1 & $ at Firozpur under ADEN/I-FZR of Railways. He submits that as these units are not more than 20 at a place and have been got constructed by M/s Ambuja Cements for their personal use, no service tax can be levied as held in Khurana Engineering Works- 2011 (21) STR 115 (Tri. Ahm.) and as per Departmental clarification F.No. B 1/6/2005-TRU dated 27.07.2005.
6. Regarding the demand of service tax of Rs.49,191/- for the construction of pump house for hydrant system at Bathinda unit of M/s Ambuja Cements, he submits that demand is not sustainable as the system is erected as per the requirements of Factory Act; moreover, as the other demands are not sustainable, even if this amount is held to be payable, the appellant will be exempted under Notification No. 06/2005-ST dated 01.03.2005 for small-scale service
7. Learned Counsel for the appellants submits that extended period cannot be invoked in the case due to the facts and circumstances of the case; it is on record that the appellant has undertaken the work for Government Undertakings or Limited Companies; the appellant has not suppressed any information from the Department; the appellant was under bona fide belief that his activity is not chargeable to service tax; the issue involved is about interpretation of the scope of service tax and various judgments have been delivered in this regard; the appellants have bona fide reasons to have a different opinion that the services are not taxable; as held in the following cases, extended period cannot be invoked:
- Tamil Nadu Housing Board- 1994 (74) ELT 9 (SC).
- Continental Foundation JT. Venture- 2007 (216) ELT 177 (SC).
- Padmini Products- 1989 (43) ELT 195 (SC).
8. Shri Aneesh Dewan assisted by Shri Shivam Syal, learned Authorized Representative for the Department reiterates the findings of the OIO and submits that regarding the “Cleaning Service”, the appellant’s reliance on Calcutta Industrial Supply Corporation is not correct as the case has been appealed before the Hon’ble Apex Court but was withdrawn on monetary grounds; the Hon’ble Apex Court, while granting permission to withdraw, kept the question of law open.
8.1. Coming to the demand on “Management, Maintenance or Repair Services”, learned AR submits that Shri Makhan Lal, Proprietor of the appellant in his statement dated 01.10.2010 stated that they have been allotted these work orders for maintenance and repair work of civil jobs like those of civil buildings, roads in the factory and colony and therefore, they are correctly classified under “Management, Maintenance or Repair Service” and the service tax has been correctly confirmed.
8.2. Coming to the demand on “Construction of Complex Service”, learned AR submits that the Adjudicating Authority has rightly held that the legal provision exempts such construction done by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use; however to avail this exemption, the building has to be constructed by such person by directly engaging any other person for designing or planning of the layout, whereas in the instant case, the appellant has been engaged by M/s NFL or M/s Ambuja Cements, who cannot be said to be persons who got the houses constructed for own purpose. He submits that the judgment of CESTAT in the case of Khurana Engineering (supra) relied upon by the appellants will not be of any help to the appellants as the appeal in this case before Hon’ble Gujarat High Court was withdrawn on monetary grounds and therefore, the issue has not attained finality.
8.3. Coming to the service tax on hydrant systems for the pump house, learned AR submits that the Adjudicating Authority has rightly held that pump house is constructed to house Fire hydrant system, with in the premises of M/s Ambuja Cements, which is certainly an industrial premises; that all activities within that premises relate to industrial activities of the service recipient; that Fire Hydrant system installed in that industrial premises is certainly for use in the activities being carried out in these premises; that the steps taken to prevent accidents in these premises are directly related to industrial activities being carried out by the service recipient i.e. M/s Ambuja Cements and thus held that service provided by the appellant is taxable.
9. Learned Authorized Representative submits on the issue of limitation that the appellant in spite of having got registered under service tax, neither paid service tax nor filed periodical returns, required under the statutory provisions of law; the appellants submitted that they acted under the bona fide belief that no tax was liable to be paid by them and they have not suppressed any information from the department with an intention to evade the service tax; the Adjudicating Authority opined that the plea of the appellant is untenable in view of the fact that though they got registered under service tax w.e.f 24.03.2006, but neither paid any service tax nor filed ST-3 Returns; even if the appellant had a bona fide belief that no service tax was required to be paid by him, filing ST-3 Returns showing the correct particulars was required under the law; in case the appellant was under any doubt, he could have obtained legal opinion for clarification; thus there can be no excuse of ignorance even though the ignorance of law is no excuse; the Adjudicating Authority therefore held that since there is a clear violation of the statutory provisions with an intention to evade the payment of appropriate service tax, extended time limit of five years is invokable.
10. Heard both sides and perused the records of the case. Having gone through the rival submissions, we would like to address the issues as raised by the learned Counsel for the appellant and the learned Authorized Representative, demand wise.
11. Coming to the demand of “Cleaning Service”, we find that the appellants have simply transported the ash from one premises of the factory and dumped the same in other premises designated for the The definition of “Cleaning Services” under Section 65(105)(zzzd) is as follows:
[(24b)] “cleaning activity” means cleaning, including specialized cleaning services such as disinfecting, extermination or sterilizing of objects or premises, of –
(i) commercial or industrial buildings and premises thereof; or
(ii) factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and premises thereof, but does not include such services in relation to agriculture, horticulture, animal husbandry or dairying;]”
12. A plain reading of the definition gives to understand that the activity covered by the above definition is not transportation as is done by the appellant; understandably, all types of cleaning are not covered by this definition; we find that Kolkata Bench of Tribunal in the case of Calcutta Industrial Supply Corporation (supra) held that : it is seen from the letter dated 03.02.2004 of DVC that the appellant was awarded tender for excavation of ash from different fields of ash ponds of DTPS, DVC, Waria. Nuisance free transportation and disposal of ash in abandoned mines of ECL. It appears that the purpose of the tender is for disposal of ash in the abandoned mines of ECL. The appellant is engaged for transportation and disposal of ash, in the abandoned mines. The letter does not show that the appellant was engaged for cleaning of the premises. Therefore, the demand of service tax under the category of Cleaning Service is not justified.
12.1. We find that the facts of the cases are identical. In the instant case too, the activity undertaken by the appellants is of transportation and disposal of ash rather than cleaning of the premises as envisaged under the definition cited above. Therefore, we find that the contentions of the appellant are acceptable and therefore, the demand of service tax on this count is liable to be set aside.
13. On the issue of demand of service tax under the Head “Management, Maintenance or Repair”, we find that the appellant’s claim is two-fold. On the one hand, they claim that most of the activity undertaken by them is repair of roads and petty civil works like construction of a wall here and there and that even if the activity is considered as repair, it is more akin to “Commercial or Industrial Construction” or “Construction of Complex” than to “Management, Maintenance or Repair” as per the definitions during the relevant periods which is extracted as below:
“Section 65 (25b) [“commercial or industrial construction “J means-
(a) construction of a new building or a civil structure or a part thereof; or
(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;]”
“Section 65 (30a) “construction of complex” means-
(a)construction of a new residential complex or a part thereof; or
(b) completion and finishing services in relation to residential complex 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; or
(c) repair, alteration, renovation or restoration of, or similar services relation to, residential complex;]
14. On-going through the above, we find that the appellant’s contention has a force; the service “Management, Maintenance or Repair” is of general nature and could belong to any activity of repair whereas the activity undertaken by the appellant is with relation to roads and buildings, which specifically covers the activity of the We find that as per provision of Section 65A, specific description is to be preferred to a generic description. Moreover, we find that the appellants have undertaken mostly the repair of roads which is exempted by Section 97 as well as by Notification No.24/2009. If we consider the activity of the appellant as repair of roads and buildings, it gets categorized under “Commercial or Industrial Construction” and therefore, a show-cause notice issued under the “Management, Maintenance or Repair Service” cannot be sustained. On the other hand, if the activity is considered as repair of road, the same stands exempted. Either way the demand under this Head is liable to be set aside.
15. The impugned order confirms demand of service tax under the Head “Construction of Complex”. The appellant’s claim that the construction undertaken by them is not more than 20 units at a place and as such cannot be considered as construction of residential complex within the definition contained under Section 65(91a) and that the same are constructed by the Northern Railway or M/s Ambuja Cements for their own use and as per the definition as well as the Circular of the Board, residential units constructed for own use are not liable to service tax. On the other hand, the Revenue contends that appellants have not given any proof to show that the units are less than 20 in a complex and that the definition of personal use cannot be extended to a number of households got constructed by Northern Railway or M/s Ambuja Cements.
16. We find that Section 65 (91a) of the Finance Act, 1994 defines Residential Complex” as follows:
“residential complex” means any complex comprising of-
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.
Explanation. For the removal of doubts, it is hereby declared that for the purposes of this clause,
(a) “personal use” includes permitting the complex for use as residence by another person on rent or without consideration;
(b) “residential unit” means a single house or a single apartment intended for use as a place of residence;]”
17. We find that learned Commissioner finds that no documentary evidence like layout plan or some other document to show the complex-wise number of units constructed has been produced by the noticee; the contracts available with the Department are for more than 12 units each; though the noticee claim that units were not constructed in the same premises but in different locations, no documentary evidence has been produced thereof.
17.1. We find that the argument of the Department is based on the claim that the appellants have not submitted any proof regarding the construction of houses. We find that this approach is not correct. It is the Department who is alleging that the appellant has rendered taxable services; therefore, it is incumbent on the Department to prove the liability of the appellant with documentary proof; it is not open for the Department to rely upon absence of proof on the part of the appellant in their defence. The Department had made no efforts whatsoever to find out whether the said complexes constructed by the appellants fulfilled the criteria of “Residential Complex” by having 12 or more units, a common area and anyone or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system. We are of the considered opinion that without doing so, allegation of construction of residential complex by the appellant has no force of law or facts thereof. For this purpose alone, the show-cause notice and the impugned order are not sustainable as far as the demand on Construction of Complex Service is concerned.
18. Regarding the claim of construction of the households for personal use and thus being exempted, by the appellants. Department is of the view that it cannot be said that Northern Railway and M/s Ambuja Cements have got constructed houses for their use by giving contract to the appellants and that the exemption would be applicable only to persons who get the houses constructed for their own use. In this regard, we find that Hon’ble High Court of Karnataka in the case of Commissioner C.E& S.T, Bangalore-II Vs Nithesh Estates Limited- 2018 (17) GSTL 414 (Kar.) held that:
“18. The „Residential Complex‟ in question was undertaken to be constructed by the respondent assessee M/s. Nithesh Estates Limited for ITC Limited under the Contract dated 1-4 -2006. It is equally undisputed before us that the construction activity in question was in its entirety sub-contracted by M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited. There is no material on record or evidence to indicate that any part of construction activity in question was undertaken by the respondent assessee M/s. Nithesh Estates Limited itself. The fact of subcontract of the entire „Residential Complex‟ in question by the respondent assessee M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited is not disputed by the Revenue. It is also not disputed that due Service Tax on the payments made to the subcontractor M/s. L & T Limited stood paid to the Government.
19. The Central Board of Excise and Customs (C.B.E. & C.) for the pre-amendment period prior to 1-7-2010 has issued the aforesaid Circular No. 108/2/2009-S.T., dated 29-1 -2009 clarifying this position, that in such cases, where the ultimate owner (M/s. ITC Limited in the present case) enters into a Contract for construction of a „Residential Complex‟ with the Promoter/Builder/Developer (M/s. Nithesh Estates Limited in the present case) which itself provides service of Design, Planning and Construction and after such construction, the ultimate owner receives such property for „Personal use‟, then such activity would not be subjected to Service Tax, because this case would fall under the „Exclusion Clause‟ provided in the definition of „Residential Complex‟.
20. However, in such a situation, if the Service of any person like the Contractor or a similar Service Provider (M/s. Larsen & Toubro Limited in the present case) is received, then such a person (M/s. L & T Limited, in the present case) would be liable to pay the Service Tax.
21. In view of this clear position of law indicated by the C.B.E. & C. itself, we are of the considered opinion that the Revenue cannot be allowed to argue against the legal position rightly explained by the C. B. E. & C. itself which can certainly be invoked and applied by this Court for interpreting the provisions of law on the principles of interpretation of ContemporeneaExpositio and the Central Board of Excise and Customs or the highest Administrative body of the respondent Department itself has interpreted the provisions that the construction activities of this nature where Bi-parte or Tri-partite Agreements are entered into is clearly indicated in the said Circular, which clearly and rightly hold the sub-contractors liable to pay the Service Tax as it is the Sub-contractor who actually undertakes the construction activity.
22. In view of the undisputed factual matrix of the present case, that the sub-contractor M/s. Larsen and Toubro Limited has duly discharged the obligations to pay the Service Tax in the present Contract, we are at a loss to understand how the Revenue could again demand the Service Tax from the respondent assessee M/s. Nithesh Estates Limited, the Principal Contractor or the Developer, who did not undertake any construction activity in the present case.
23. In our opinion, the Learned Tribunal was perfectly justified and correct in applying the Circular, dated 24- 5-2010 also, while holding that if the Government of India Department could be treated as using the „Residential Complex‟ in question constructed by NBCC for its „personal use‟, how another Corporate body like M/s. ITC Limited in the present case could be denied the benefit of that type of user of „Residential Complex‟ to be occupied by its Managerial Staff. The law does not envisage any such distinction among the Private Sector Corporate Entities and the Departments of Government or Government Companies or Undertakings.
24. The present case of Revenue, therefore, appears to have emanated on a misconceived audit objection raised by the internal auditors of the Department.
25. The Learned Tribunal on the basis of relevant facts and evidence available before it, in our opinion, therefore, has rightly concluded that the respondent assessee was not liable to pay any Service Tax on the „Residential Complex‟ constructed through the subcontractor, M/s. L and T Limited in the present case and such finding of facts recorded by the Learned Tribunal based on relevant material and evidence, in our opinion, does not give rise to any substantial question of law in the present case.
26. In view of the aforesaid, all the three proposed substantial questions of law suggested by the Revenue need not be separately answered, as we have come to the conclusion that no substantial question of law would really arise in the present case including the question of extended period of limitation under Section 73(1) of the Finance Act, 1994. When the levy of Service Tax on the respondent Assessee itself is held to be illegal, the question of availability of extended period of limitation for levying such Service Tax does not arise.
19. Regarding the demand of service tax on the construction of Fire Hydrant System at the Bathinda unit of M/s Ambuja Cements, we find that demand has been raised under “Industrial or Commercial Construction”. The appellant’s claim that it is the requirement of the Factories Act, we find that the appellants have not shown any provision in the law to the extent that the activity undertaken by them is for performance of a statutory duty and to the effect that the same is exempted. Therefore, we find that the appellant’s claim is not acceptable on this count. However, their claim on small-scale exemption is acceptable as, in view of the above, the demands under other Heads have been held not maintainable.
20.Coming to the issue of limitation, the appellants have taken the plea that they have not suppressed any material fact with intent to evade payment of tax; the activity undertaken by them to Public Sector Undertakings, Northern Railways and M/s Ambuja Cements are in the public domain; they had a bona fide doubt as to the applicability of tax and as such, suppression cannot be alleged. On the other hand the learned authorised Representative submits that having obtained registration and having rendered services to PSUs and Railways, the appellants should have been aware of the provisions of service Tax and in case of doubt they should have approached the department for clarification. However, in view of the discussion as above, we find that as no part of the demand is sustainable. The issue of limitation is inconsequential. Hence, we do not find it necessary to give findings on the same.
21. In the result, the appeal is allowed with consequential relief, if any, as per law.
(Pronounced on 31/07/2023)
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