M/s. Shriram EPC Ltd. Versus Commissioner of GST & Central Excise Chennai
Service Tax
2018 (11) TMI 1083 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 14-9-2018
Appeal Nos. ST/410/2011 and ST/41631 to 41633/2014 – Final Order Nos. 42412-42415/2018
Service Tax
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
Shri N. Viswanathan, Advocate for the Appellant
Shri A. Cletus, Addl. Commissioner (AR) for the Respondent
ORDER
Per Bench
Brief facts are that the appellants are engaged in supply, erection and commissioning of sewage treatment plant, PVC pipe line for water supply projects to Water and Sewage Board. They obtained service tax registration for various services. In the course of audit of accounts, it was noticed by the department that appellants have not paid service tax for the following services from 1.4.2008 that is engineering, procurement, erection and commissioning of sewage treatment plant and implem
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demand along with interest and also imposed penalties. Hence these appeals.
2. On behalf of the appellant Shri N. Viswanathan assisted by Shri R. Ravikumar submitted that the said works of erection and commissioning of sewage treatment plant, water treatment plant would fall under works contract service with effect from 1.6.2007. However, such services are provided in respect of non-commercial activities to the Government / Municipal bodies and therefore would fall under the exclusion clause of clause (b) of Section 65(105)(zzzza) of Finance Act, 1994 and therefore the said services are not subject to levy of service tax. The Commissioner in the said order for the period from 1.4.2008 to 31.3.2009 has confirmed the demand and refused to apply the decision in Lanco Infratech Ltd. – 2014 (34) STR 384 (Tri. Bang.) stating that the said decision was only an interim order. However, later the Larger Bench of the Tribunal in the case of Lanco Infratech Ltd. Vs. Commissioner of Central Excise
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sub-clause (b) of said section would apply. He submitted that the work was awarded by EPC/turnkey projects which involves designing, execution and handing over and therefore cannot be said that such activities merely because they are in the nature of EPC projects would fallout of the exemption provided in clause (b) of works contract service.
2.2 He also relied upon the decision of the Tribunal in the case of Jyoti Buildtech (P) Ltd. – 2017 (3) GSTL 116 and argued that in the said case, the Tribunal has granted the exemption and set aside the demand in respect of erection and commissioning for services rendered for water treatment plant, sewage treatment plant and sewage works.
3. The ld. AR Shri A. Cletus supported the findings in the impugned order. He adverted to the definition of works contract in section 65(105)(zzzza) and argued that the explanation clarifies the meaning of works contract. As per sub-clause (b) of the said explanation, only a pipe line or conduit which is not u
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ax for the reason that the service of construction of water treatment plant and sewage treatment plant etc. were rendered to Government / Municipal bodies / Board and therefore are not of a commercial nature. It is the case of the department that since the projects were turnkey projects, it would fall under sub-clause (e) of the explanation to the definition of works contract service and that the said section does not exempt constructions which are not intended for commerce or industry. The ld. Counsel has put forward the arguments based on the decision in Lanco Infratech Ltd. (supra) stating that the exemption given to construction activities which are not commerce or industry envisaged in clause (b) has to be read along with clause (e) of the said explanation. The turnkey projects are only in the nature of contract which takes in all the works of design, engineering, procurement etc. In Lanco Infratech Ltd. (supra), the Larger Bench of the Tribunal had analyzed the issue and held tha
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rly, in Ramky Infrastructure Ltd., the Tribunal had held that such activities of construction of canals / pipelines or conduits undertaken for the Government / Government bodies would not attract levy of service tax being for non-commercial and non-industrial purpose.
5.2 The decision of the Larger Bench of Tribunal in Lanco Infratech Ltd. (supra) was approved by the jurisdictional High Court in the case of Indian Hume Pipes Co. Ltd. – 2015 (40) STR 214 (Mad.) wherein the services rendered by the assessee for laying of long distance pipelines to enable State Water Supply and Drainage Board for supply of water to the public was held to be non-commercial or non-industrial and therefore not taxable.
5.3 The Tribunal in the case of Jyoti Buildtech (P) Ltd. (supra), had occasion to analyze the demand of service tax on erection, commissioning and installation service on water treatment plant, sewage treatment plant etc. The Tribunal in the said decision followed the decision in the case of
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construction of sewage pumping station, water treatment plants, sewage treatment plant and sewage works. The SCN further observes that the appellant assessee had pleaded that the works of laying of pipelines for sewage etc. are not for commerce and trade and as such the same is exempted from service tax in terms of provisions of Explanation (ii)(b) of Section 65(105)(zzzza) of the Finance Act, 1994. The appellant contested the show cause notice and the same was adjudicated and the proposed demand confirmed observing, that applying the principle of classification as provided under sub-section (2) of Section 65A, sub-clause (ii)(b) of Section 65(105)(zzzza) of Finance Act, 1994, provides the most specific description of services of laying drains or pipes. Accordingly, it was held that services of laying pipelines and conduits is a taxable service as defined under “works contract” vide clause (ii)(a) of Explanation to Section 65(105)(zzzza) of Finance Act, 1994 and the appellant is liabl
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period of limitation is not invocable.
4. The ld. AR for Revenue relies on the impugned order.
5. Having considered the rival contentions, we are satisfied that the issue now stands settled by the Larger Bench of this Tribunal in M/s. Lanco Infratech Ltd. (supra) and also confirmed by order of the Hon'ble Madras High Court (supra) in Indian Hume Pipes Ltd. wherein it has been held that such works executed by the appellant in the nature of sewerage works, laying of pipe and for water supply falling under Explanation (ii)(b) fall under the definition of “works contract service” and were also exempted under the classification commercial and industrial construction service prior to 1-6-2007, as explained by the Larger Bench. Further, we find that the issue is wholly interpretational and thus the longer period of limitation is not invocable under the facts and circumstances. Accordingly, we allow the appeal setting aside the impugned order, except the demand for normal period, if any, i
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