Commissioner Of Central Goods And Service Tax, Jaipur Earlier Known As Commissioner Of Central Excise And Service Tax, Commissionerate Jaipur-II, Versus Jatan Construction Private Limited
Service Tax
2018 (8) TMI 629 – RAJASTHAN HIGH COURT – 2019 (24) G. S. T. L. 552 (Raj.)
RAJASTHAN HIGH COURT – HC
Dated:- 20-7-2018
D.B. Central/excise Appeal No. 136/2018
Service Tax
MR. KALPESH SATYENDRA JHAVERI AND MR. INDERJEET SINGH JJ.
For Appellant(s) : Mr. Siddharth Ranka
For Respondent(s) : None
Judgment
1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal filed by the assessee-respondent herein and set aside the order passed by CIT (A) as well as the original authority.
2. Counsel for the appellant has framed the following substantial question of law:
(i) Whether the ld. CESTAT was right in law in extending the benefit of exemption to the “Turnkey Projects” which is available to t
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ce Tax Registration No.AAACJ3635PST001 and paying Service Tax on the Construction work carried out them for the private companies.
3.1 An intelligence was received by the Directorate General ofCentral Excise Intelligence (DGCEI), Ahmedabad Zonal Unit (AZU), Ahmedabad that M/s. Jatan Construction are indulging in evasion of service tax by non payment of service tax on the taxable services provided by them in the construction work carried out by them for the National Building Construction company of India, which were covered under the taxable category of 'Works Contract Service', as defined under Section 65(105) (zzzza) of the Finance Act, 1994. Therefore, simultaneous searches were carried out at the premises of M/s Jatan Construction, situated at “Jatan”, Todarmal Marg, Ajmer and its branch office situated at 17/28, Parth Bungalow, Opp. Karanvati Club, Nr. Shalby Hospital, Ramdevnagar, Ahmedabad as per the provisions of Section 82 of the Finance Act 1994 under respective Panchnamas, w
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oration of India Ltd. i.e. NBCC (hereinafter referred to as NBCC):
a. Construction of new civil and allied works for Post-Graduate Girls Hostel at Sardar Vallabhbhai National Institute of Technology Surat. The work was started in the month of February 2009 and the value of work executed is Rs. 5177.00lacs. (i.e. Rs. 51.77 crores).
b. Construction/modernization of 300 beded Hospital at ESIC, Jaipur. This work was started in year June 2009 and is under execution. The value of the work contracts is Rs. 7500.00 lacs (i.e. Rs. 75 Crores.
3.3 The counsel for the appellant has contended in the light of averments made in memo of appeal which reads as under:
6. That the show cause notice dated 10.09.2012 was adjudicated by the ld. Commissioner, Central Excise Commissionerate, Jaipur II, i.e., the ld. Adjudicating Authority, after considering the totality of facts and circumstances of the case, evidence available on record, submission of the assessee respondent made in writing and orally dur
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ound that the VAT on works contract is included in the total amount of the cheque which meets the basic condition no.1 of works contract service;
(4) the assessee had used their own equipment, resources, manpower and made procurements to carry out construction activity independently.
Hence the ld. Adjudicating Authority held that their activity was covered under Turnkey Projects under clause (e) of the said definition of works contract service. The adjudicating authority also observed that there is no specific exemption to such construction projects under works contract service and therefore, the consideration received by the assessee in respect of above two construction works is liable to service tax under the category of works Contract service.
Applicable interest and penalty was also levied.
3.4 He has also taken us to definition of taxable services defined under Section 65(105)(zzzza) of the finance Act, 1994 which reads as under:
“Taxable service” means any service provided
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w 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 apart 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) projects;
3.5 Counsel for the appellant has also taken us through the finding of the first authority observing as under:
9. Result of Investigation:
9.1 Investigation conducted by DGCEL, Ahmedabad against M/s. Jatan Construction P. Ltd., Ajmer as discussed in the foregoing paras, reveals that M/s Jatan Construction P. Ltd. has been engaged in the business of execution of civil construction projects, under works contract. During the course of the search, it was found that in the financial year 2008-09 to 2011-12. M/s Jatan Construction P. Ltd., Aj
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during personal hearings.
The issues before me to decide is (I) whether assessee is sub contractor of M/s. National Building Construction Corporation Ltd. (NBCC) (II) whether construction activity of P.G. Hostel at SVNIT Surat and ESIC Hospital at Jaipur falls under the category of Works Contract Service. (III) whether service provided by assessee to NBCC is liable to service tax or not? (VI) whether demand is hit by limitation?
17.2 Before deciding the issues, it is necessary togo into the background of the case. As stated in the brief facts, the officers of the DGCEI Zonal Unit, Ahemdabad, acting on the intelligence, searched the office premises of the assessee at Ajmer and Ahemdabad on 18.7.2011 and resumed certain documents/records. Investigation conducted in the matter revealed that assessee has not paid service tax on two projects. The investigating team observed that two projects being constructed on behalf of NBCC i.e. construction of P.G. Hostel at SVNIT Surat and ESIC Hospi
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nfirmation and acceptance in full”. In this letter the contract was for construction of P.G. Hostel at SVNIT, Surat. The cost of the said project was revised vide letter dated 12.3.2010. Similar letter No. NBCC/GM-RBG (E&I) ESIC/Jaipur/2009/1110 dated 3.3.2009 was for contract for construction of Hospital Building including internal services, External electrical, Fire Fighting, at Jaipur.
17.4 From the above letters, it is evident that assessee made contracts for construction of above two projects with M/s NBCC and raised running account bills to M/s NBCC, who made payments. I find that assessee acted as per terms and conditions specified in their letter of agreement and provided specific services as required by M/s NBCC. I find that assessee acted as sub-contractor of M/s. NBCC.
17.5 Now the question would arise as to under which service the construction activity undertaken by the assessee for two projects will be classified. Whether it is commercial and industrial construction or w
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referred. It is also requested to mobilize immediately your site personnel plant and equipments and other resources so that work can be started as per schedule.” I find that nature of contract, their terms and conditions, the running account bills raised by the assessee for payments of the work done, the annual payment details with cheque numbers, which shows the amount for VAT on work contract, all these facts leads to the conclusion that the activity undertaken by them fall under works contract service. I draw my inferences from the definition of service given under section 65(105) (zzzza) of the Finance Act 1994 for works contract which reads as “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.
17.6 Explanation- For the purpose of this subclause, “works contract” means a contract wherein
(I) transfer of property in goods involved i
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cluding engineering, procurement and construction or commissioning (EPC) projects.
4. He contended that the Tribunal has seriously committed an error in taking a view inspite of the decision of Banglore Tribunal in Ramky Infrastructure Ltd. vs. Commr. Of Service Tax, Hyderabad reported in 2013 (29) STR 33 (Tri. Bang.) wherein it has been held as under:-
10.1 Whether, in the case of each of the two JVs, the service provided to the Government of Andhra Pradesh is classifiable as “WCS” has to be determined from the nature of the relevant contracts as understood by the parties thereto as also from the scope of the works executed under the contracts Of course, this exercise has to be undertaken with reference to the definition of “works contract” embodied in Explanation to Section 65(105)(zzzza) of the Finance Act, 1994.
10.12 The definition of “commercial or industrial construction service” excludes services provided in respect of certain specified it
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ed by the learned Special Consultant for the Department, there is no room for any intendment or assumption or presumption and, where the words of the statute are plain and clear, there is no room for applying any of the principles of interpretation. In this context, the reliance placed by the Special Consultant on the decision of the Apex Court in Grasim Industries case is found to be apposite.
10.13 Clause (e) of the definition of works-contractturnkey projects including engineering, procurement and construction or commissioning (EPC) projectsclearly conveys the legislative intent underlying the definition of “works contract” in relation to turnkey projects. It does not exclude EPC projects for irrigation, nor does it discriminate between EPC projects for commercial/industrial purposes and those for non-commercial/non-industrial purposes, nor between EPC projects of Government departments/agencies and private entities. What does not figure in the plain language of the entry cannot be
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