Case Law Details
Arvindra Electricals Vs Commissioner of Central Excise & ST (CESTAT Chandigarh)
Whether Electrical Contractor is exempt from service Tax under mega exemption Notification No. 25/2012-ST issued dated 20.06.2012.
Yes, In the case of M/s. Arvindra Electricals Vs Commissioner of Central Excise & ST, Chandigarh it has been decided that services provided by by electrical contractor to to government organisations or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession was exempt from payment of duty. Such as supply of transformers, sub-stations, high tension wires, low tension wires, street lights, DG Sets, electricity poles, HDPE pipes, feeder pillars, switches etc. and other ancillary electrical equipment’s. Demand of service tax is not sustainable under ‘Erection, Commissioning and Installation Services’.
As per Entry No. 12 of Mega exemption notification No. 25/2012 ST dated 20.06.2012 :
Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
Service provided by Electrical Contractor will fall under the service of any other Original works.
because as per service tax definition of Original works includes ;
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
(iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise;
Full text of the CESTAT Judgment
Hon’ble Mr. Ashok Jindal, Member (Judicial) Hon’ble Mr. Anil G. Shakkarwar, Member (Technical) Final Order No. 62732/2018 Per : Ashok Jindal The appellant is in appeal against demanding service tax of Rs. 5,87,98,625/- along with interest and imposing various penalties on the appellant.
2. The facts of the case are that the appellant was engaged in providing the service of Erection, Commissioning or Installation services falling under Section 65(105) (zzd) of the Finance Act, 1994 before 01.07.2012 and falling under Section 65B (44) of the Act with effect from 01.07.2012. The appellant is providing services of Erection, Commissioning or Installation without payment of due service tax and without observing the legal formalities as required under Section 67, 68 and 70 of the Act read with Rule 6 and 7 of the Service Tax Rules, 1994. Investigation was started against the appellant and preliminary investigation indicated that appellant is engaged in providing Erection, Commissioning or Installation services to various parties and charging hefty amounts as consideration but was not discharging its service tax liability properly. Therefore, the investigation was conducted on 20.05.2014 and the appellant submitted copies of work contracts, copies of balance sheets for the assessment year 2010-11 to 2012-13 and Form 26AS for the assessment year 2010-11 to 2013-14 and submitted that they are not liable to pay service tax. From the documents supplied it was observed that the appellant were engaged in the supply and installation of electric works, laying/ shifting of High Transmission lines, street lightning system etc. as is evident from the work contracts supplied by the appellant. As per the work orders furnished by the appellant they have provided their services to various clients including M/s. Uttar Haryana Bijli Vitran Nigam, Shri Guru Granth Sahib World University, M/s. H.P. Singh & Others, M/s. Greater Mohali Area Development Authority, M/s. Punjab Small Scale Industries & Export Corporation Limited etc. The details of various contracts have been enumerated as under:-
On the basis of further investigation, it was held that appellant is liable to pay service tax on their activities. Consequently, the show cause notice was issued to demand service tax on the figures shown in the balance sheet and Form 26AS provided by the appellant for the period 2010 to 2014-15. The matter was adjudicated and demands were confirmed on the basis of the figures obtained from the balance sheet and Form 26AS along with interest and various penalties were also imposed. Against the said order, the appellant is before us.
3. Ld. Counsel for the appellants submits that they are engaged in selling electrical equipments to various government and private institutions as well as carrying out installation thereof. He submits that appellant is a contractor and bids for supply of transformers, sub-stations, high tension wires, low tension wires, street lights, DG Sets, electricity poles, HDPE pipes, feeder pillars, switches etc. and other ancillary electrical equipments to various government and private bodies across the state of Punjab, Haryana and UT Chandigarh. It is his submission that the show cause notice has discussed only work orders executed by the appellant, therefore demand cannot be made beyond the show cause notice. But, while taking value of taxable services, department has taken the figures i.e. highest of the gross receipt in balance sheet, gross receipt as per Form 26AS or gross receipt as per letter of appellant dated 21.09.2015. It is his submission that the demand confirmed on gross amount is erroneous inasmuch as the gross value involved in above 11 contracts was Rs. 1,68,02,739/-. It is further submitted that for the period prior to 01.07.2012 was in negative list regime and the appropriate classification of the works executed by the appellant is Works Contract service. The appellants are supplying the said goods along with service, therefore merit classification under Works Contract service whereas, demand has been confirmed under ‘Erection, Commissioning and Installation Services’. Therefore, for the period prior to 01.07.2012 demand of service tax is not sustainable against the appellant in the light of decision in the case of Larsen & Toubro Limited vs. State of Karnataka – 2014 (303) ELT 3 (SC). He further submitted that all the 11 contracts are not taxable in terms of CBEC Circular No. 123/05/2010-TRU dated 24.05.2010. For the period post 01.07.2012, it is the submission of the ld. Counsel that the appellant has provided the services to M/s. Uttar Haryana Bijli Vitran Nigam, Shri Guru Granth Sahib World University, M/s. Greater Mohali Area Development Authority, M/s. Punjab Small Scale Industries & Export Corporation Limited etc. are the government authorities and the appellant is exempted from payment of service tax under Clause 12 of mega exemption notification No. 25/2012 ST dated 20.06.2012. Therefore, they are not liable to pay service tax for the works executed for the above said organisations. It is further submitted that there is no allegation in the show cause notice that the said service recipients are not government authorities or the works contract was executed by appellant for electrical structures which were used for business and profession. With regard to two contracts executed for non-governmental organisations namely Guru Granth Sahib University and M/s. H P Singh and others, these contracts were completed before 01.07.2012, i.e. before amendment to negative list regime and completion certificates have also been issued to that effect that these works were completed before negative list regime. In that circumstance, the said contracts were not taxable under the heading of ‘Erection, Commissioning and Installation Services’. It is further submitted that the show cause notice has been issued by invoking extended period of limitation.
As there is no specific allegation of fraud, collusion etc. against the appellant, therefore, demands are not sustainable against the appellant. In view of the above, it is prayed that impugned order is to be set-aside.
4. On the other hand ld. AR submitted that for the period post 01.07.2012, under negative list regime, the appellant was liable to pay service tax for the services provided by them. Furthermore, in the case of private or government organisation, the appellant has provided service and they are liable to pay service tax.
5. Heard the parties and considered the submissions. On careful consideration of the submissions made by both sides, we find that in this case, demand is sought to be confirmed under the category of ‘Erection, Commissioning and Installation Services’. It is fact on record that the appellant has provided the services in question along with material. Therefore, the classification of the services is Works Contract as per the decision of Hon’ble Apex Court in the case of Larsen & Toubro (supra) wherein the Hon’ble Apex Court held that any service provided along with material falls under the category of Works Contract, therefore, prior to 01.07.2012, the service tax liability is not sustainable against the appellant under the category of ‘Erection, Commissioning and Installation Services’. For the period post 01.07.2012, in terms of exemption notification No. 25/2012 ST dated 20.06.2012, the services provided to government organisations or a local authority, by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession was exempt from payment of duty. Admittedly, the appellant is providing the said services to government organisation namely M/s. Uttar Haryana Bijli Vitran Nigam, Shri Guru Granth Sahib World University, M/s. Greater Mohali Area Development Authority, M/s. Punjab Small Scale Industries & Export Corporation Limited are not engaged in any commerce, industry or any other business or profession. In that circumstance, in terms of notification No. 25/2012 ST dated 20.06.2012, the services provided to these organisations under contracts mentioned at Serial No 1 to 12 (except serial No. 2 and 3) are exempted from payment of duty.
With regard to services provided to Guru Granth Sahib University and M/s. H P Singh and others, we find that work was completed before the negative list regime and the service has been provided by the appellant along with goods. In that circumstance, in the light of the decision of Hon’ble Apex Court in the case of Larsen & Toubro (supra), merit classification of the said services under Works Contract, therefore, demand of service tax is not sustainable under ‘Erection, Commissioning and Installation Services’.
6. With regard to limitation, we find that there is no specific allegation against the appellant that they have not paid the service tax with intent to evade payment of service tax. In fact, the appellant was providing services to the organisations which are not engaged in any commerce, industry or any other business or profession. Therefore, we hold that extended period of limitation is not invokable.
7. In view of the above analysis, we hold that the demands are not sustainable. Accordingly, the impugned order is set-aside. In result, the appeal is allowed with consequential relief, if any.
(Order dictated and pronounced in the open court)
Author Bio
Very Nice Article & it helps very much to all professionals since, now a days, Service Tax Department issuing notices to various dealers for apparent short payment of service tax on the basis of 26AS.
Congratulations to writer of Article & best wishes from readers. Keep writing such articles which helps Professional Faculty on current issues.