Novel Engineering & Technical Works Pvt. Ltd. Vs Commissioner of C.G.S.T. and Central Excise (CESTAT Kolkata)
Summary: The Customs, Excise and Service Tax Appellate Tribunal, Kolkata considered two connected appeals arising from the same adjudication order, one filed by M/s. Novel Engineering & Technical Works Pvt. Ltd. and the other by the Revenue. The assessee was engaged in Commercial and Industrial Construction Service, Works Contract Service, Site Preparation Service and Business Auxiliary Service and had undertaken construction and renovation of railway lines for M/s. Haldia Energy Ltd. (HEL) and M/s. West Bengal Power Development Corporation Ltd. (WBPDCL). A Show Cause Notice dated 18.09.2017 proposed Service Tax of Rs.5,67,98,134/- including Cess, interest and penalties. The adjudicating authority confirmed Rs.3,99,33,158/- with interest and equal penalty, while dropping the remaining demand of Rs.1,68,64,976/-.
The assessee challenged the confirmed demand and the Revenue challenged the portion dropped by the adjudicating authority. The principal confirmed demand of Rs.3,96,05,317/- related to Works Contract Services for railway-line construction, modification and renovation. The assessee relied upon Notification No. 25/2012-ST dated 20.06.2012 and the decision in Mahendra Kumar Anchalia v. Commissioner of CGST&CX, Kolkata. The Tribunal held that the exemption under Sl. No. 14 of Notification No. 25/2012-ST was available not only to new railway lines but also to modification and renovation work falling within the definition of “Original Work” under Explanation 1 to Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006. It accordingly set aside the entire Rs.3,96,05,317/- demand. The Tribunal also considered a further demand of Rs.3,27,841/- relating to transportation and dumping of ash silo inside the plant. Following Marshall Corporation Ltd. v. Commissioner of C.G.S.T. and C.Ex., Kolkata, it held that the activity was an essential part of the production process and was not a service activity liable to Service Tax, and therefore set aside this demand as well. In relation to the Revenue’s appeal against the dropped demand, the Tribunal upheld the exclusion of free-issue materials from taxable value by following the Supreme Court’s decision in Commissioner of Service Tax v. Bhayana Builders Pvt. Ltd.
