We are unable to comprehend the resort to Railways Act, 1989 for a broader understanding of expression ‘railways’ in the absence of permissible referral in section 65(105)(zzzza) or (zzp), or, for that matter, anywhere in section 65, of Finance Act, 1994. In the absence of such authority, it is the common parlance understanding that should have been adopted. Even if a conscientious disposal of the allegations did prompt such recourse, it should have been appreciated by the adjudicating authority that statutes are framed with distinct objectives and that the definitions contained therein cannot have application de hors the operative provisions of such statutes. The distinction between ‘government railways’ and ‘non-government railways’, that is the pivot of the conclusions in the impugned order, has been embodied in Railway Act, 1989 as that is the statutory basis for the structure and composition of railway administration. To read down any distinction, other than that as enacted, would be a foray into impermissible, and unknown, territory.
The ‘constructions’ excluded from taxability under both the entries in section 65(105) of Finance Act, 1994 are, plainly, unqualified. The legislative intent, therefore, cannot be circumscribed by encroachment, or restrictive interpretation, ventured upon by tax authority.
This breach of jurisdiction by the adjudicating authority does, for that very reason, not find favour with us.
FULL TEXT OF THE CESTAT JUDGEMENT
The grievance of M/s NMC Industries (P) Ltd against order-in-original no. 38/Pr. Commr/ST-II/PK/2015-16 dated 19th August 2015 of Commissioner of Service Tax, Mumbai-II, which has confirmed recovery of service tax amounting to ₹ 53,67,337/- under section 73 of Finance Act, 1994, along with interest thereon under section 75 of Finance Act, 1994, besides imposing penalty of like amount under section 78 of Finance Act, 1994, is the non-consideration of their claim of exclusion from taxability as provider of ‘works contract service’ and ‘commercial and industrial construction service’ for the period from 2009-10 to 2012-13.
2. It is common ground that the demand pertains to five projects undertaken by the appellant which, admittedly, relate to enabling of locomotives to travel over specified stretches. Of these projects, it has been held in the impugned order that, while the construction of a railway siding track works at Dronagiri for M/s Hind Terminals Pvt Ltd in 2009-10 was chargeable to tax under section 65 (105) (zzzza) of Finance Act, 1994 as provider of ‘works contract service’, the projects contracted with M/s ACC Ltd, M/s Utkal Alumina International Ltd, M/s Utility Energytech & Engineers Pvt Ltd and M/s Bulk Cement Corporation (India) Ltd were liable to tax under section 65(105)(zzq) of Finance Act, 1994, as provider of ‘commercial and industrial construction service’, for the entire period of dispute. The manner in which the show cause notice, and the impugned order, appears to have segregated the two activities is, to our mind, questionable in the light of the findings therein and settled judicial precedent. The first of the impugned projects was noticed as having discharged liability of Value Added Tax, levied by the state government concerned, and, by reference to one of the legs for identification of ‘works contract’ in Explanation appended to section 65(105)(zzzza) of Finance Act, 1994, arrived at the conclusion that this service had been rendered. For the other projects, it would appear that the reference to ‘service tax’ in the respective contracts led to the conclusion of taxability under the alternative entry on the presumption of non-taxability under Value Added Tax. Contesting the dichotomous application of taxing entry for that which are similar projects, Learned Counsel for appellant placed reliance on the decision of the Tribunal in Siemens Ltd v. Commissioner of Service Tax, Mumbai [2017-TIOL-43-CESTAT-MUM]. Learned Authorised Representative submitted that, if the applicability of this decision is affirmed, the adjudicating authority should be afforded an opportunity to examine the contracts once again in fresh proceedings.
3. The Hon’ble Supreme Court, in Commissioner of Central Excise & Customs, Kerala v. Larsen & Toubro Ltd [2015-TIOL-187-SC-ST], has distinguished the components in the second leg of the elaboration of ‘works contract’ from identical entries in section 65(105) that existed prior to incorporation of tax on ‘works contract service’ to restrict the taxability under the earlier provisions to services simpliciter. It is difficult to conceive of the impugned projects having been rendered sans materials and, thereby, failure to evaluate for coverage under ‘works contract’ is a glaring charm that lies unbridged. While the adjudicating authority may not have had the benefit of the judicial wisdom articulated in re Larsen & Toubro, the blindsided approach to classification of the service sought to be taxed under section 65(105)(zzzza) of Finance Act, 1994 may not deserve tolerated discard. A careful and balanced perusal of the taxing entry would make it apparent, from the applicability of the Explanation therein restricted to the ‘sub-clause’, that ‘works contract’, envisaged for levy of service tax does not constitute the whole of that which is taxable, as ‘deemed sale’, by states empowered under List II of Seventh Schedule to the Constitution of India. Tax paid, or contracted to be paid, is no basis for identifying the ‘deemed sale’ enumerated in Article 366 (29A) of the Constitution of India. Furthermore, with that segregated exclusion from the taxing power vested with the Union, the service component, if any, of such ‘deemed sale’ alone could be subject to levy under Finance Act, 1994. It was, therefore, incumbent upon the adjudicating authority to ascertain the extent to which the impugned projects are taxable in accordance with law before evaluating the applicability of section 73 of Finance Act, 1994. We cannot condone such disregard of law by permission to re-open the dispute as sought by Learned Authorised Representative.
4. Be that as it may, we find that the determination of this dispute is limited to the exclusion from tax, under either one of the entries resorted to in the impugned order, claimed as available to railway construction. The submissions made by both sides on this aspect alone shall be considered by us. It is, again, not in dispute that the projects pertained to ‘railway construction’; however, according to the adjudicating authority, who placed reliance on the definitional distinction between ‘government railways’ and ‘non-government railways’ in Railway Act, 1989 and through circuitous reasoning derived from selective rejection of the lexical meanings of some of the expressions in the definition, the exclusions intended by Parliament could not be extended to private operations.
5. According to Learned Counsel for the appellant, the exclusions in the two taxing entries did not encompass any stated, or implied, qualification that could be assumed to empower the adjudicating authority to distinguish ‘railway construction’ in the manner recorded in the impugned order. He placed reliance on the decision of the Tribunal in Afcons Infrastructure Ltd v. Commissioner of Central Excise, Mumbai-II [2013-TIOL-1225-CESTAT-MUM] which has held that
‘4. The learned Commissioner (AR) appearing for the Revenue reiterates the findings of the adjudicating authority and submits that in para 3.12 the learned adjudicating authority has noted that:
“the Central Government, while examining the scope of the term ‘Railways’ in the context of the request for Service Tax exemption for Commercial or Industrial Construction Service in respect of Monorail projects, has taken a view that the term ‘Railway’ does not include Monorail and consequently exclusion from levy of Service Tax leviable to railways is not available in respect of Monorail projects.”
4.1 In para 3.4 of the impugned order, the adjudicating authority has noted that DMRC is a company formed under the Company’s Act, 1956 and declared mission to operate on sound commercial lines obviating the need for government support, which indicates that DMRC is a commercial organization and, therefore, the construction service provided in respect of DMRC undoubtedly falls within the scope of Construction of Civil Structure provided to a person primarily in Commerce and is also used for commerce.
4.2 He also refers to para 3.13 wherein reference has been made to Section 66D(o) of the Finance Act, 1994 effective from 1-7-2012 where in respect of service of transportation of passengers by railways, distinction has been made among Metro, Monorail or Tramway which also would indicate that Monorail and Tramways are different from railways as commonly understood.
5.1 The definition of ‘Commercial and Industrial Construction Service’ as provided in Section 65(25b) excludes such activities relating to roads, ports, railways, dams, bridges, tunnels etc. There is no distinction between a monorail or metro rail or any other kind of rail and, therefore, the term ‘railways’ used therein has to be given its widest meaning to include all types of railways and all types of railway lines. Therefore, the distinction sought to be made by the adjudicating authority is not sustainable in law.
5.2 Secondly, we do not find any basis for the conclusion drawn by the learned adjudicating authority by referring to some decision of the Government while examining the scope of the terms ‘railways’ in the context of certain tax exemptions. There is no evidence before us to show that the Government examined the matter and came to such a conclusion nor is there any circular or notification issued by the Government in this regard. In the absence of any such decision which is in the public domain, we are unable to accept the contention raised by the Revenue in this regard and reject the same totally. In other words, the law has to be interpreted as it stood, as held by the Hon’ble Apex Court in the case of Doypack Systems Pvt. Ltd. [1988 (36) ELT 201 (S.C.)] wherein it has been held that the notings in the Government files are not relevant for interpretation of the statutes and the statute has to be interpreted by the wordings explicitly used therein and if there is no ambiguity in the language used therein, there is no need to refer to the notings in the Government file. On that ground also, the observation of the adjudicating authority has no bearing to the facts on hand and has to be rejected.’
and, in a near similar dispute pertaining to ‘road construction’, the decision of the Tribunal in Rajendra Singh Bhamboo v. Commissioner of Central Excise & Service Tax, Jaipur-I [2019 (22) GSTL 278 (Tri-Del)] to the effect that
‘7. On perusal of the above definition, it would reveal that construction of roads is excluded from the purview of such taxable service. The definition of taxable service does not specify the type of roads, whether private or public for the purpose of consideration of such exclusion clause. Since the definition is specific to service provided in respect of road only, in our considered view, it cannot be interpreted that only construction of public roads should get the benefit of exclusion provided in such definition clause. In other words, irrespective of the purpose of construction of the road, whether for public utility or for the utility of organization concerned for their use, the benefit of exclusion clause provided in the definition under [Section] 65(25)(b) of the Act should be available, for non-levy of Service Tax. Since there is no ambiguity in plain reading of the definition and in view of the admitted fact that the appellant had constructed roads for different commercial entities/ organization, the benefit of the exclusion provided in the definition clause should be available to it.’ to reinforce the submission.
6. Learned Authorised Representative urged us to endorse the proposition of the adjudicating authority that the exclusions were intended to ensure that the said tax was levied from all commercially oriented construction apparent in the description of the taxable service.
7. We cannot concur with the Learned Authorised Representative as the conclusion of the adjudicating authority lacks legal soundness. We are unable to comprehend the resort to Railways Act, 1989 for a broader understanding of expression ‘railways’ in the absence of permissible referral in section 65(105)(zzzza) or (zzp), or, for that matter, anywhere in section 65, of Finance Act, 1994. In the absence of such authority, it is the common parlance understanding that should have been adopted. Even if a conscientious disposal of the allegations did prompt such recourse, it should have been appreciated by the adjudicating authority that statutes are framed with distinct objectives and that the definitions contained therein cannot have application de hors the operative provisions of such statutes. The distinction between ‘government railways’ and ‘non-government railways’, that is the pivot of the conclusions in the impugned order, has been embodied in Railway Act, 1989 as that is the statutory basis for the structure and composition of railway administration. To read down any distinction, other than that as enacted, would be a foray into impermissible, and unknown, territory.
8. The ‘constructions’ excluded from taxability under both the entries in section 65(105) of Finance Act, 1994 are, plainly, unqualified. The legislative intent, therefore, cannot be circumscribed by encroachment, or restrictive interpretation, ventured upon by tax authority. In Commissioner of Sales Tax, Uttar Pradesh v. Modi Sugar Mills Ltd [1961 AIR 1047], the Hon’ble Supreme Court has held that
‘11…… In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the birds of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot import provision in the statute so as to supply any assumed deficiency.’
9. This breach of jurisdiction by the adjudicating authority does, for that very reason, not find favour with us. Our conclusion is, therefore, consistent with the stand of the Tribunal in the decisions cited by Learned Counsel for the appellant.
10. In the circumstances, we have no hesitation in setting aside the impugned order and allowing the appeal.
(Order pronounced in the open court on 05/03/2020)