Patel Construction Co Vs C.C.E. & S.T.-Rajkot (CESTAT Ahmedabad)
CESTAT find that Appellant claims that most of demands have been raised under the wrong category of services hence not sustainable. We also find that in the present matter service tax demand has been confirmed by the Learned Commissioner on the activity related to the drainage line/ pipe line under ‘Erection, commissioning/installation services. However as per the Larger Bench decision in the case of M/s Lanco Infratech Ltd. supra the said activity of laying pipelines is not covered under the ‘erection, commissioning/ installation service. Appellant herein also claimed that Learned Adjudicating authority (AA) wrongly confirmed the demand under the head of cleaning services, whereas their activity is not covered under the scope of cleaning services. We also find that the appellant claimed that renting of immovable property services become taxable service on 01.06.2007 and they had collected the amount of rent by raising bills during the period FY 2005-06 and 2006-07 before the levy of such service. However such facts require verification.
We have also observed that the submission of the learned Counsel as well as submission made in the appeal memorandum that the adjudicating authority has not dealt with issue of service provided under the category of ‘construction of complex service services in proper perspective. Appellant claimed that they had not constructed any building or part thereof, having more than 12 residential units. Further the bunglow constructed by the appellant at KPT colony for use by the employee of M/s Kandla Port Trust is for personal use hence not taxable. We find that the issue needs to be remanded back to the adjudicating authority for re-appreciation of the claim of the appellant.
In view of above facts and circumstances of the case, we are of the view that this is a fit case for remand the matter to Learned Adjudicating authority for re-consideration of the overall case.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appeal is directed against the impugned Order-In-Original No. 56/Commr/2012 dated 03.10.2012 passed by the Commissioner, Customs &Central Excise, Rajkot.
02. The brief facts of the case are that during the course of audit of financial records of the Appellant by the officers of Central Excise, Rajkot, it was observed that the Appellant has also shown value of service charged against exempted services in their ST-3 returns filed for services under the taxable category of ‘Commercial or Industrial Construction Service.’ On being asked, appellant informed that they had earned the said income against service provided viz. ‘Commercial or Industrial Construction Services’ and ‘Renting of Immovable Property’ Services and contended that the said income was on account of providing services to Kandla Port Trust which they believed to be exempted from the payment of Service tax, as per the Notification No. 25/2007-ST dated 22.05.2007. As regard renting of immovable property, they stated that they had allowed other parties to use their warehouse for storage and warehouse of the goods and charged rent against the same and paid service tax from FY 2008-09 onwards under the category of ‘Renting of Immovable Property’. Verification and scrutiny of the records revealed that the so called exempted services shown in their ST-3 returns actually pertained to various services provided by them to Kandla port and their residential colony which are classifiable under ‘Commercial or Industrial Construction Services’, ‘Erection, Commissioning & Installation Services’, ‘Construction of Complex Services’, ‘Dredging Services’ , ‘ Cleaning Activity Services’ , ‘Supply of Tangible goods Services’ and ‘ Storage & Warehousing Services’. It appeared that the Appellant by showing the payment received against such services under ‘Commercial & Industrial Construction service’ tried to take the undue benefit of Notification No. 25/2007-ST dated 22.05.2007. As such the benefit of exemption provided under the said Notification was not available to the services provided by the Appellant to Kandla Port Trust. Further services provided by the appellant for storage/ warehouse of goods of other persons, covered under the category of ‘Storage and warehouse services’, which has been taxable from the year 2002. It was alleged that the appellant by wrongly showing various taxable service provided by them under exempted service category had not paid the Service tax amounting to Rs. 62,89,128/-during the period from 2005-06 to 2009-10. Accordingly, show cause notice dated 15-04-2011 was issued proposing the Service tax demand along with interest and penalty. The Adjudicating authority vide impugned order confirmed the demand of service tax along with interest and penalty. Aggrieved by the impugned order present Appeal has been filed.
03. Shri Amal Dave, Learned Counsel appearing on behalf of the appellant submits that the Learned Commissioner has confirmed Service tax on the amount of Rs. 16,17,443/- which is the amount received by the Appellant from the Kandla Port Trust for constructing Watch Tower. The activity done by the Appellant is squarely covered under exemption Notification No. 25/2007-ST dated 22.05.2007, whereas exemption has been given to any person which does an activity in relation to the construction of port or other port. The Commissioner has denied the exemption on the ground that the activity done by the appellant falls under the exclusion clause whereby the exemption is not available when the services are provided in relation to finishing, repair, alternation, renovation, restoration, maintenance etc. in relation to the existing port. The activity undertaken by the appellant is a completely new construction and hence when the construction is new it cannot be said that such activity is in the nature of finishing/ repair, alternation etc. of the existing part and hence the demand is not sustainable.
3.1 He also submits that Learned Commissioner has confirmed the demand of Service tax of Rs.9,66,262/- on the activity of replacement of central underground drainage line along National Highway on the grounds that such activity falls under the definition of erection, commissioning/installation services. However such confirmation is completely erroneous. The activity of laying pipelines for transmission of water for sewage disposal undertaken for government undertaking is in nature of Commercial or Industrial Construction Service and the activity of laying pipelines if done for government undertaking is covered under the exclusion clause to Section 65(25b) of the Finance Act inasmuch as such activities are not commercial in nature. Therefore, the Commissioner could not have confirmed the demand under the head of erection, commissioning or installation services. Since the appellant undertook the activity of laying down the Central underground drainage line for Kandla Port trust which is a State Government enterprise, the activity was not commercial in nature and hence even otherwise could not be taxed under the category of commercial –industrial construction services. However, the Commissioner has confirmed the demand under the head of erection, commissioning or installation services and hence when the service tax is confirmed under the wrong category of service, the demand is even otherwise not sustainable. He placed reliance on decision of M/s Lanco Infratech Ltd. – 2015(38)STR 709.
3.2 He further submits that appellant constructed residential colony of kandla Port Trust. The purpose of residential colony was for residence of the employee of Kandla Port Trust. The Commissioner confirmed the demand of Rs. 21,53,044/- under the category of construction of residential complex services without considering the explanation to Section 65(90a) of the Finance Act whereby there is an exclusion clause to eligibility of the activity of constructing the residential complex, if it is indented for personal use. The word personal use including permitting the complex for use as residence by another person on rent without consideration. It is a settled legal position that when a residential complex is constructed for residence of the employee, then it is exempt from the payment of service tax. The Commissioner has erroneously confirmed the demand on the construction activity undertaken by the appellant and hence all the demand is not sustainable. He placed reliance on the following decisions:-
