Invocation of extended period of limitation unjustified if issue involved is purely interpretational

Yash Corporation Vs Commissioner of Central Excise & ST (CESTAT Ahmedabad)

CESTAT Ahmedabad held that the issue involved is of pure interpretation of legal provisions and classification of services therefore, in absence of any no mala fide intentions and suppression of facts with intention to evade payment of service tax, extended period of limitation cannot be invoked.

Facts- On the basis of information that various contractors are providing services to Gujarat State Police Housing Corporation Ltd. (M/s GSPHCL), are not paying Service tax on the taxable services provided by them to M/s GSPHCL, an enquiry was initiated against the contractors. Appellant was one such contractor to whom Work Orders were given by M/s GSPHCL for installation of electric lighting systems/D.G. Sets, etc.

The Work order received were including supply of material required for execution of the work and hence the same were in the nature of composite contract for supply of goods and services. It was alleged that the work done or services provided by appellant is classifiable as taxable service under the category of “Erection, Commissioning or Installation Services^‟ for the period upto 31.05.2007 and under the category of ^„Works Contract Service^‟ for the period 01.06.2007 onwards and not under the ^„Maintenance or Repair Service^‟ as classified by the appellant.

Accordingly, a detail Show Cause Notice 19.10.2012 was issued proposing to service tax demand under works contract services and Erection Commissioning or Installation Service along with interest and also for imposing penalty. After due process of law, the adjudicating authority vide impugned order confirmed the service tax demand that has been raised in the Show Cause Notice. The adjudicating authority also imposed penalty in regard to the demands confirmed. Aggrieved by the impugned order, the appellant is now before this Tribunal.

Conclusion- Held that appellant carried out laying of electrical cable, fitting of electrical poles, wiring works and also street lighting works, erection of overhead lines etc. in villages of Various Nagarpalikas, Gram Panchayatas, Taluka Panchayats and also for others. It appears that the said activity of appellant are relating to transmission of electricity and distribution of electricity and are exempted retrospectively as per Notification No. 45/2010-S.T., dated 20-7-2010.

Held that in the facts of the present case that firstly the issue involved is of pure interpretation of legal provisions and classification of services therefore, it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax. It is also on record that the Appellant have represented the matter before department during the investigation of case. This clearly shows that there is no suppression or willful misstatement on the part of the Appellant. The Appellant in the present matter has also provided all the details/documents/records related to the disputed activity before department. In this circumstances charge of suppression or willful misstatement do not survive against the Appellant. Thus extended period of limitation is not invokable in the present matter.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The present appeal is filed by the appellant against the Order-in-Original No. AHM-EXCUS-003-COM-15-16 22.07.2015 passed by the Commissioner of Central Excise, Ahmedabad -III.

2. Briefly stated the facts of the case are that on the basis of information that various contractors are providing services to Gujarat State Police Housing Corporation Ltd. (M/s GSPHCL), are not paying Service tax on the taxable services provided by them to M/s GSPHCL, an enquiry was initiated against the contractors. Appellant was one such contractor to whom Work Orders were given by M/s GSPHCL for installation of electric lighting systems/D.G. Sets, etc. During the course of enquiry, statements of Shri Sitaram Ishwarbhai Patel, Proprietor was recorded. From the copies of works orders, financial accounts and other documents submitted by the appellant and details of work done narrated by Shri Sitaram Ishwarbhai Patel, it appeared that appellant was engaged in providing work relating to installation of various electrical equipments /lighting systems, laying cables, etc to their various clients. The Work order received were including supply of material required for execution of the work and hence the same were in the nature of composite contract for supply of goods and services. It was alleged that the work done or services provided by appellant is classifiable as taxable service under the category of “Erection, Commissioning or Installation Services^‟‟ for the period upto 3 1.05.2007 and under the category of ^„Works Contract Service^‟ for the period 01.06.2007 onwards and not under the ^„Maintenance or Repair Service^‟ as classified by the appellant. Accordingly, a detail Show Cause Notice 19.10.2012 was issued proposing to service tax demand under works contract services and Erection Commissioning or Installation Service along with interest and also for imposing penalty. After due process of law, the adjudicating authority vide impugned order confirmed the service tax demand that has been raised in the Show Cause Notice. The adjudicating authority also imposed penalty in regard to the demands confirmed. Aggrieved by the impugned order, the appellant is now before this Tribunal.

3. Shri Bishan Shah learned Chartered Accountant appeared and argued for the appellant. He submits that the services were mainly provided to Government Departments and the work undertaken related to Government Buildings either meant for residential or non-commercial purpose apart from public utilities.

4. He submits that Appellant has provided services to Gujarat State Police Housing Corporation for electrification of Jail and Residences of police The services rendered to Gujarat State Police Housing Corporation are not taxable. The services rendered by the appellant are to Government Agencies and are for purposes which are not for commerce or Industry or any other business or profession. He placed reliance on the following decisions.

(a) Ample Construction vs. CCE Rajkot ^–STA/12006/2014

(b) DH Patel vs. CCE, Surat -2023(4) TMI 920

(c) RD Contractor vs. CCE Anand – 2023(2) TMI 946

(d) Aravindra Electricals vs. CCE Chandigarh – 2018(9) TMI 86

5. He also submits that the appellant is engaged in laying of wires generally and therefore the services rendered by appellant is not taxable as per the Circular 123/5/2010 24.05.2010 and Circular No. 62/11/2003 2 1.08.2003. He also placed reliance on following decisions.

(a) CCE Vs. H.M. Satyanarauan Engineers -2018 (8) TMI 736

(b) Bansal Electric Works Vs. CCE & ST Noida -(2017) 3 GSTL 65

6. He argued that the show cause notice was issued on 22.10.2012 and covers period 2007-08 to 2011-12. The present issue is interpretational in nature, therefore the extended period is wrongly invoked in the present matter. He placed reliance on following decisions.

(a) Shanti Construction vs. CCE Rajkot – 2023 (3) TMI 14

(b) JS Katari vs. CCE, Rajkot – 2022 (11) TMI 633

(c) Infinity Infotech Parks vs. Union of India – (2014) 36 STR 37

7. Shri P. Ganesan, learned Superintendent (AR) supported the findings in the impugned order.

8. We have carefully considered the submission made by both the sides and perused the records. We find that the case of revenue is that the electrical installation works undertaken by the appellant during the disputed period is to be classified under the Works Contract Services and under the Erection, Commissioning or Installation Services. As per the learned Commissioner for the period prior to 01.06.2007, the services rendered by the appellant are squarely covered under clause (ii)(a) of Section 65(39a) of the Finance Act 1994 and as such are appropriately classifiable under the ^„Erection, Commissioning or Installation Services. Accordingly, she confirmed the service tax demand of Rs. 26,117/- under ^„Erection, Commissioning or Installation Services.^‟ She further observed that after 01.06.2007 appellant’s activity covered under Works Contract Service and confirmed the Service tax demand of Rs. 55,94,435/-. For the purpose of ascertaining the taxability and classification of services it is necessary to analyze the definition of both the services. We firstly reproduce the definition of “Erection, Commissioning or Installation Services” defined under Section 65(39a) taxable under Section 65(105)(zzd) of the Finance Act, 1994 (the Act).

Section 65 (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, equipment or structures, whether pre-fabricated or otherwise; 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 services͖ “

From the above definition it is clear that wiring & fittings works are covered under the above taxable services. However appellant argued that in view of the clarification issued by the Board vide Circular No. 62/11/2003- S.T., dated 21-8-2003, their activity would not be covered under the said service. We also find force in argument of Appellant and find that as regard the Commissioning and Installation Services Board has clarified as under : –

1. Commissioning or installation :

1.1 Commissioning or installation of plant, equipment or machinery by a commissioning or installation agency, is chargeable to service tax. A doubt has been raised as to whether the services like a plumber putting up a water tank, fitting pipes and tubing, an electrician putting up electric wire and fittings, installation of booster motors, air conditioners, water filters, hand-pumps, water heaters etc. will be chargeable to service tax.

1.2 As commonly understood, the activity of installation means the act of putting an equipment, machinery or plant into its place and making it ready for use. The activity of installation will start after erection which would refer to putting up civil structures. Commissioning of a plant would mean operationalising an installed plant/equipment/machinery. In this backdrop it is clarified that putting up a water tank, piping, electric wiring, in a residential premises etc. would not be covered in the definition of taxable service and thus, would not be taxable. However, installing a booster pump, air-conditioner, water filter, water heater etc. would be covered in the definition and be taxable, as all these things are machinery or equipment.

The above board Circular has clarified that putting up electric wires and fitting in residential premises would not be covered in the definition of taxable service and thus not liable to tax. In the present matter it is undisputed fact that appellant has provided the services to Gujarat State Police Housing Corporation for electrification of Jail and residence of Police Officers. We further find that the as per Board Circular No. 123/5/2010-TRU, 24.05.2010 laying of electric cables is not taxable under erection, commissioning & installation services. At Para 2 – (ii), it has been clarified that under Erection, Commissioning and Installation Service, if an activity does not result in emergence of an erected, installed and commissioned plant, machinery, equipment or structure or does not result in installation of an electrical or electronic device (i.e. machine or equipment that uses electricity to perform some other function) the same is outside purview of taxable service of Erection, Commission and Installation Service. Further, in Para (iii) by C.B.E. & C. Circular a table has been given explaining the tax status of the activities wherein at Serial No. (1) Laying of cables under/alongside road have been stated as not a taxable activity. It is admitted fact that the appellant have done electrification works and has also laid cables under or alongside road and external wiring alongside the road, erected electrical poles both for wiring and street lights and all these work are exempted under Serial No. (2) in Para (iii) of the aforementioned C.B.E. & C. Circular dated 24.05.2010.

Hence, considering the submission of appellant in this matter, we find that the impugned service tax demand is not sustainable.

9. We further find that with effect from 0 1.06.2007 the ^„Works Contracts Services^‟was introduced by Section 65(105)(zzzza) of Finance Act, 1994. That entry reads as under :

Taxable service means any services provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. — For the purposes of this sub-clause, “works contract” means a contract wherein, —

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out, —

(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

(c) construction of a new residential complex or a part thereof; or

(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects͖”

From the above definition of Works contract we find that only erection, commissioning or installation of electrical and electronic devices are covered under the above entry whereas appellant are engaged in works of electrical light fittings, laying of cables, earthing works, fitting of poles, electric wiring, etc. In the present matter revenue nowhere provided any invoices or any documents by which it can be concluded that the appellant are engaged in erection, commissioning or installation of electrical and electronic devices. Therefore we hold that the Service tax demand in the present matter is not sustainable under works contract service on appellant^‟s activity.

10. Without prejudice, we also find that appellant carried out laying of electrical cable, fitting of electrical poles, wiring works and also street lighting works, erection of overhead lines etc. in villages of Various Nagarpalikas, Gram Panchayatas, Taluka Panchayats and also for others. It appears that the said activity of appellant are relating to transmission of electricity and distribution of electricity and are exempted retrospectively as per Notification No. 45/2010-S.T., dated 20-7-2010. The said notification is reproduced for easy reference.

Whereas, the Central Government is satisfied that a practice was generally prevalent regarding levy of service tax (including non-levy thereof), under Section 66 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as ‘the Finance Act’), on all taxable services relating to transmission and distribution of electricity provided by a person (hereinafter called ‘the service provider’) to any other person (hereinafter called ‘the service receiver’), and that all such services were liable to service tax under the said Finance Act, which were not being levied according to the said practice during the period up to 26th day of February, 2010 for all taxable services relating to transmission of electricity, and the period up to 21st day of June, 2010 for all taxable services relating to distribution of electricity;

Now, therefore, in exercise of the powers conferred by Section 11C of the Central Excise Act, 1944 (1 of 1944), read with Section 83 of the said Finance Act, the Central Government hereby directs that the service tax payable on said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period.

11. The Tribunal in the case of CCE, & C, Nashik v. S.Z. Dhanwate Engineering Works [2016-TIOL-106-CESTAT-MUM], dated 04.12.2015, has clarified above notification by mentioning as follows :

“3. It is his submission that while disposing the appeal filed by the assessee in respect of the remission of service tax under “manpower recruitment and supply agency” services for recruiting and supply of manpower to M/s. Maharashtra State Electricity Distribution Company (MSEDL)/NTPS Nashik by the assessee, this Bench had set aside the demand relying upon the retrospective amendment carried out by Notification No. 45/2010-S. T., dated 20-7-2010. It is his submission that Revenue is of the view that the said Notification would apply only to the services provided in relation to “transmission and distribution of electricity” and not, to those relating to ‘power generation and supply of electricity”. It is his submission that ‘Power Transmission and distribution’ is different and ‘Power Generation’ is different.

4. We have considered the submissions made by Learned D.R.

5. The application for Rectification of Mistake is devoid of merits as we find that by Notification No. 45/2010-S.T, Central Government had retrospectively exempted all the services rendered to the transmission and distribution of electricity provided for the period 26-2-2010 upto 21-6-2010. The words used in the Notification are “for the services relating to transmission and distribution of electricity” and undisputed facts are that NTPS Nashik are engaged in ‘‘power generation and supply of electricity”. The supply of electricity cannot take place except by way of transmission and distribution. In view of this, we find that there is no error in order dated No. A/1 005/15, dated 15-4- 2014. Accordingly the application for Rectification of Mistake is dismissed.”

Similar view has been taken by the Tribunal in P. Ashok Kumar v. CCE & ST, Guntur vide Final Order No. A/30745/2016, dated 22-8-2016 of CESTAT, Hyderabad, and Shri Ganesh Enterprises v. CC & ST, Hyderabad-III in 2014 (35) S.T.R. 348 (Tri.-Bang.). By following the ratio laid down by the Tribunal supra, we are of the view that the service tax is not liable in the instant case on this ground also.

12. As regard the limitation issue argued by the appellant, we find that in the facts of the present case that firstly the issue involved is of pure interpretation of legal provisions and classification of services therefore, it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax. It is also on record that the Appellant have represented the matter before department during the investigation of case. This clearly shows that there is no suppression or willful misstatement on the part of the Appellant. The Appellant in the present matter has also provided all the details/documents/records related to the disputed activity before department. In this circumstances charge of suppression or willful misstatement do not survive against the Appellant. Thus extended period of limitation is not invokable in the present matter.

13. We are also unable to find any proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation. Hon’ble Supreme Court has delivered the judgment in the case of Larsen & Toubro dated 20 August, 2015, prior to which there was no clear ruling that services which involved supply or deemed supply of goods could only be classified under Works Contract Service. The appellant had been classifying its services under ^„Maintenance or Repair Service^‟/ Business Auxiliary Services and paying service tax on only service components and they have also paid applicable VAT on supply of goods. Appellant are also filing ST-3 returns and Revenue never objected to it and, therefore, the appellant could have reasonably believed it to be the correct head and continued to file returns accordingly and paying Service tax. Once the returns are filed, if Revenue was of the opinion that the self-assessment of service tax and the classification was not correct, it could have scrutinized the returns and activity of appellant and issued notices within time. The show cause notice was issued on 19.10.2012 for the period covered 2007-08 to 2011-12, which is clearly beyond the normal period of limitation. Therefore, demand is time barred and, therefore, cannot sustain. For the same reason, the penalties imposed upon the appellant also cannot be upheld.

14. In view of above discussion and finding, we hold that the impugned order is required to be set aside and we do so. The appeal is allowed with consequential reliefs, if any, in accordance with law.

(Pronounced in the open court on 12.09.2023)