Case Law Details

Case Name : H.P. State Electronics Development Corporation Ltd. Vs Commissioner of Central Excise, Chandigarh (CESTAT Delhi)
Appeal Number : Stay Order No. ST/S/549-553 of 2012 CUS
Date of Judgement/Order : 06/05/2012
Related Assessment Year :
Courts : All CESTAT (609) CESTAT Delhi (193)

CESTAT, NEW DELHI BENCH

H.P. State Electronics Development Corporation Ltd.

v/s.

Commissioner of Central Excise, Chandigarh

STAY ORDER NOs. ST/S/549-553 of 2012 CUS

APPLICATION NOS. ST/STAY/176, 423-426 OF 2011

APPEAL NOs. ST/87, 216-219 of 2011

Date of Pronouncement- 6 MAY 18, 2012

ORDER

Mathew John, Technical Member

When the cases were called, none appeared on behalf of the appellants. When the case was posted for hearing on 15-11-2011 also none had appeared for the appellants. So the records of the case were gone through with the help of Ld. A. R. for Revenue.

2. There are five appeals being decided in this proceeding. All of them are from the same appellant and regarding the same service but for different periods as detailed under:

S. No.  Appeal No. Period Tax involved
1.  C-87/2011 2004-05 237973
2.  C-219/2011 2005-06 135821
3.  C-216/2011 2006-07 412309
4.  C-217/2011 2007-08 671788`
5.  C-218/2011 2008-09 362735

3. The Appellants were registered during the above period for providing service under the head for “Business Auxiliary Service”. During the audit of their books, it was seen that the appellants were providing services described by them to be ‘industrial site preparation’ and receiving payments for such services but were not paying service tax on such activities. From investigations it was seen that the appellants were providing service in relation to civil and electrical work and LAN cabling work as per the specific requirements for installing computers and other electronic gadgets at the site of different organizations.

4. Revenue was of the view that the Appellants should have registered for providing service under the category of “Erection Commissioning and Installation” defined under section 65(39a) of Finance Act, 1994 and paid service tax on the same. Accordingly a show cause notice was issued for recovering service tax not paid. A show cause notice issued on 22-10-2009 to recover such tax has been adjudicated vide the impugned order confirming tax amounts as above along with interest. In addition penalties are imposed under sections 77 and 78 of the Finance Act, 1994.

5. Service tax was imposed for the first time on 10-09-2004 defining the taxable activity as under:

’39(a) “erection commissioning or installation” means any service provided by a commissioning and installation agency in relation to erection, commissioning or installation of plant, machinery or equipment.’

6. The above definition was replaced with the following definition with effect from 16-06-2005:

(39a) “erection, commissioning or installation” means any service provided by a commissioning and installation agency, in relation to,-

 (i)  erection, commissioning or installation of plant, machinery or equipment; or

 (ii)  installation of –

(a)  electrical and electronic devices, including wirings or fittings therefor; or

(b)  plumbing, drain laying or other installations for transport of fluids; or

(c)  heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or

(d)  thermal insulation, sound insulation, fire proofing or water proofing; or

(e)  lift and escalator, fire escape staircases or travelators; or

(f)  such other similar services’

7. The appellants submit that the adjudication order is issued considering that the same definition was prevailing through 2004-05 to 2008-09 and does not take note of the changes made on 16- 06-05. Only on this date the activity of installation of electrical and electronic devices, including wirings or fittings therefor was brought under levy and therefore there is no question of any liability arising prior to that date on preparing any site for installation of computers. The Appellants further submits the impugned activities were in the nature installing false ceilings, air-conditioners, electrical wiring, wiring for LAN etc. required for installing computers and such activity is in the nature of civil works.

8. It is further argued that the appellant themselves were not doing the activity but was only an intermediary. They were inviting tenders, short listing contractors and watching the interests of their clients ensuring proper and timely providing of services and the bills were routed through them. They submit that they work like a PWD. The appellants contests that the term erection commissioning or installation is commercially understood as assembling, integrating various parts and components and making a particular machine operational in industrial sense and they did not do any such activity.

9. The Ld. AR for Revenue submits that the appellants were doing activities in relation to installation of computers which are “equipment” and as per section 65(39a), any service in relation to erection or commissioning of any equipment was liable to tax from 10-09-2004.The appellants did not take out registration or pay service tax but adopted their own interpretation of the entry and therefore the demand for the entire period is appropriately made and the penalties also are properly imposed. Further he argues that a part of any service like construction activity may be outsourced and for that reason the liability to pay tax does not go away. It cannot be that in a construction service provided by an agency like National Building Construction Corporation can be considered as service provided by only the persons who soils their hand like a mason. If the appellants have received the service of any sub-contract as input service they can take Cenvat Credit for service tax if any paid by them. But the service tax liability for a work planned, monitored, supervised and billed by the appellant cannot be put on the sub-contractors.

10. We have considered arguments on both sides. In the case of computers there is hardly any activity for installing or commissioning. The activity of site preparation is commonly understood to be different from an activity of installing computer. Computers need hardly any Commissioning and if at all such activity is required it is to be done by software developers. So the interpretation canvassed by appellants that site preparation is different from installation and commissioning has some merit. When this position is seen together with the position that Revenue found it necessary to include the type of activity done by the appellant in the scope of installation and commissioning by amendment to section 65(39a) with effect from 16-06-2005 we are inclined to accept the contention of the appellant that their activities were not covered by the entry as was in existence prior to that date. So we hold that there cannot be any liability for service rendered prior to that date l6-06-2005.

11. However we do not see any merit in the argument of the appellants that they were only an intermediary and not doing the work themselves and hence their activities did not amount to any service. Any service provided in relation to installation of electrical and electronic devices, including wirings or fittings, became taxable from 16-06-05. The activities of short listing the sub-contractors, supervising their work to ensure that it is executed as per specification, are in fact work done relation to such activity and taxable. It is also to be noted that the customer is making payment to the appellants and not to the persons who carried out the physical labour for such work. Accepting the arguments of the appellants will result in a situation where service tax on construction activity will have to be collected from the masons and carpenters and not from the building contractors. The laws do not warrant such an interpretation. The correct position is that the workmen or sub-contractors were providing service to the appellants and appellants in turn were providing service to the persons who gave them the contract. Of course if the individuals doing the work were paying service tax the appellants would have been eligible for credit of tax paid on such input service. Therefore we see prima facie merit in the argument of the Revenue for the period from 16-06-05.

12. So the appellants are directed to make a pre-deposit of Rs. 8 lakhs within 8 weeks of receipt of the order for admission of appeal. Subject to such pre-deposit, pre-deposit of balance dues arising from impugned order is waived and its collection stayed during the pendency of the appeal.

13. Compliance to the above order is to be reported on 27-7-2012. If the order is not complied with, the appeal will be dismissed without further notice to the appellant.

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