2019 (1) TMI 381 – CESTAT HYDERABAD – TMI – Construction services – commercial or industrial construction services – construction of Onshore Terminal (OT) for the purpose of receiving, processing/purification and transportation of natural gas – exemption from payment of Service Tax – Section 65 (A)(2B) of the Finance Act, 1994 – extended period of limitation – Jurisdiction – Held that:- There are no merits in the appellants arguments, as they have themselves applied for and got Centralized Registration with Hyderabad Commissionerate-II, and the Commissionerate has jurisdiction to issue the demand even when the services are provided outside territorial jurisdiction of Hyderabad Commissionerate-II, which comes out clearly from statement of Mr. Udaybhasker, that they have been granted Centralized Registration even for A.P. & Chattisgarh. Further it is not in dispute that all the records and accounts relating to RIL project are maintained by appellant at its Hyderabad office – Thus the ju
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wipe and control access system; permanent warehouses; administrative buildings; accommodation buildings; health centre; construction of road; widening of road; construction of flyover as also construction of civil works for comprehensive protected water supply.
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The submission of the appellant that the Act does not prescribe a mechanism for taking such composite contracts is not correct as, provisions of Section 65A of the Finance Act, 1994, provides necessary statutory guidelines for determining, not only specific taxable category, but also its classification as taxable or non-taxable services. The submission of the appellant on this point seeks to give the word “classification” an unduly narrow meaning. Thus, the conclusion as to non-taxability of a composite service can be arrived at only in a situation where it is established that essential character of composite contract is imparted. The argument of appellant, it seems, that essential character of composite contract is impart
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head CICS or were non-taxable services as noted herein above. Since both sides are unanimous in contending that the contract is a composite contract and indivisible one, not amendable to being broken down in to its separate components attracting different tax classifications, it was necessary for the adjudicating authority to have examined which of the two taxable services i.e. ECIS or CICS imparted the essential character to the contract as a whole. It seems that no such exercise has been conducted by the adjudicating authority.
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In a pure service contract which is based on cost plus model, as is in the instant case, the essential character of the service rendered can be derived from details of the man hours spent for each activity along with the cost of such manpower. This aspect needs consideration to determine the essential character of the service rendered under the composite contract on the aforesaid basis.
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Extended period of limitation – Held that:- We are not examin
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e purpose of receiving, processing/purification and transportation of natural gas extracted from the Godavari Basin; the gas would be brought through the pipelines to the site i.e., the OT at Gadimoga for necessary processing and onward transmission and transportation to the customers. The agreement entered by appellant with RIL on 18.10.2006 narrates the reasons for entering into such agreement and the scope of work to be undertaken by the appellants was under: 1. Construction of onshore Terminal & Infrastructure work 2. Construction of Civil works for comprehensive Protected Water Supply Scheme (CPWS) Scheme at Gadimoga village. 3. Haul Road work. 4. Access Bridge to Workman Colony 5. Flyover Bridge 6. Road widening work 7. Other Common and infrastructure facilities The appellants were required to execute the above work and RIL was to provide with all the machinery and equipments. Appellant had registered themselves as service tax payer but did not pay the tax under an impression
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nder: EXTENDED PERIOD IS NOT INVOKABLE A.1 In para 29 and 30 (Page 396 of the Part-II of the Paper Book) of the Order-in-Original the invocation of extended period has been confirmed on the following counts: 1. The appellants mi-declared taxable services under the head exempted Services in ST-3 Returns. 2. The appellants have not disclosed the exemption notification for availing such exemption. 3. The appellants have knowingly camouflaged the value received from OT project along with host of other projects for which they have claimed exemption. 4. The appellants have not sought any opinion from the department on the taxability of the present transaction. 5. The appellants did not disclose the activity undertaken by them at the OT in reply to letter dated 21.2.2007. 6. The audit conducted in October 2007 was a routine affair. A.2 In this regard, the appellants submit as follows: Bonafide Belief that the said service does not come under the purview of Commercial or Industrial Constructio
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mitted list of various contractors undertaking the aforesaid activity and the amounts paid to them. A.6 Simultaneously, investigation was also started by Visakhapatnam Commissionerate in 2007 itself. A.7 Further, AG Audit was also undertaken during the month of October 2007, wherein contract and other related documents were sought by the department. The appellants duly submitted the contract along with other relevant documents. Even though all the relevant documents were available with department, DGCEI erroneously delayed the issuance of show cause notice and eventually issued the present show cause notice on 31.7.2008 by invoking extended period. Deficiency in the prescribed format of return form will not amount to non-disclosure on the part of the appellants A.8 In absence of any column in ST-3 Returns for declaring amount in relation to non-taxable services, the appellants bonafidely declared the services provided to RIL under the category of Commercial or Industrial Construction S
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t whether in this case the Tribunal has failed in its duty expected from it to be performed in law. It is not fair to read only one paragraph of the order under appeal or by picking out some sentences therefrom. To read the order in appeal in such a manner and consider the finding in isolation would be unjust and unfair. The Commissioner (Appeals) in this case held that the assessee was expected to perform certain duty and that is of full disclosure of facts. In the present case, the assessee was visited with a show cause notice of 9th December, 2005. That followed a show cause notice of 9th September, 2003, which was issued in the normal period of one year and duly adjudicated by an order dated 27th February, 2004. The second show cause notice, invoking the larger period (December, 2002 to March, 2003) alleged suppression and misdeclaration by the assessee, which was also the allegation in the earlier show cause notice and duly adjudicated. In such a factual backdrop, the Commissioner
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r of Customs and Central Excise -[1998 (101) E.L.T. 549 (S.C.)]. The Tribunal relied upon it because the principle enshrined therein had application to the case at hand. Meaning thereby, it did not blindly follow this principle. The principle is, when all the facts necessary to be disclosed by the assessee have been disclosed and there cannot be any allegation of suppression, then, the extended period of limitation cannot be invoked. On facts, it found no suppression in this case. That is what the Commissioner (Appeals) also found. It is, therefore, the endorsement of the Commissioner s finding and conclusion. …Emphasis Supplied. A.10 Reliance is also placed upon the following decisions: 1. Cement Marketing Co. of India Ltd., Vs ACST, [1980 (6) ELT 295 (SC)] (page 28-29 of the compilation) 2. Pahwa Chemicals Pvt. Ltd., Vs CCE, [2005 (189) ELT 257 (SC)] (page 30 of the Compilation) 3. Commissioner Vs Meghmani Dyes, [2013 (288) ELT 514 (Guj.)] (page 31-37 of the compilation) There
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of abatement Notification 1/2006-ST dated 1.3.2006 must be extended to the appellants. B.2 Relevant part of the Notification No. 1/2006-ST dated 1.3.2006 is reproduced as under: Effective rate of service tax for specified services- Percentage of abatements In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of the description specified in column (3) of the Table below and specified in the relevant sub-clauses of clause (105) of section 65 of the Finance Act, specified in the corresponding entry in column (2) of the said Table, from so much of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5)
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tax on input services, used for providing such taxable service, has been taken under the provisions of the CENVAT Credit Rules, 2004; or (ii) the service provide r has availed the benefit under the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 12/2003-Service Tax, dated the 20th June, 2003[G.S.R. 503 (E), dated the 20th June, 2003]. …… B. 3 The appellants have fulfilled all the conditions of the Notification No. 1/2006-ST dated 1.3.2006. The same are explained in the ensuing paras. i) The services provided by the appellants are classified as Commercial or Industrial Construction Service by department themselves. ii) The services provided by the appellants are not merely completion and finishing services. iii) From 1.4.2006, the appellants are maintaining separate books of account and have not availed or utilized any CENVAT so far used in Commercial or Industrial Construction Service . There is no dispute from department on
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ercial or Industrial Construction Service . Some credit taken in relation to Erection, Installation or Commissioning Service . However, it has been clarified by Hon ble CESTAT that the bar of exemption shall not apply in relation to such cases if separate books of account or contract has been maintained. B.5 Reliance is placed upon Bharat Heavy Electricals Ltd., Vs. CCE, 2014 (34) STR 430 (T) (page 65-68 of the compilation) wherein it was held that even if there are more than one contract, abatement under the said Notification can be claimed for any one of the contract. 4.2 A plain reading of the Notifications clearly shows that the condition relating to non-availment of CENVAT credit on inputs/input services applies to case where CENVAT credit is taken either on the input or input service , then the abatement under the aforesaid Notifications would not be available. In a case where the CENVAT credit on input/input service is not taken then the benefit of abatement would be available.
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contract. In other words, there is no stipulation in the Notification that the option to avail/non-avail CENVAT credit has to be exercised uniformly in respect of all the contracts executed by the assessee. It is for the assessee to choose which formulation he wants to follow in a given contract. B.6 There is no condition in the Notification No. 1/2006 ST dated 1.3.2006 which remotely even suggests that the benefit of the Notification shall be applied only in the cases wherein the contract in question is a composite contract of supply of material as well as the supply of services. In fact, this was the argument by the department before Hon ble Supreme Court in CST Vs. Bhayana Builders (P) Ltd., [2018-TIOL-66-SC-ST], that the abatement is given to utilize the cost of material used in such transactions and the free supply of material is also liable to be included. Negating the contention of the revenue, the Hon ble Apex Court held that the above argument of the department is not support
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f goods, the said notifications were issued for the convenience of the assessees. According to the Revenue, the purpose was to bifurcate the component of goods and services into 67% : 33% and to provide a ready formula for payment of service tax on 33% of the gross amount. It was submitted that this percentage of 33% attributing to service element was prescribed keeping in view that in the entire construction project, roughly 67% comprises the cost of material and 33% is the value of services. However, this figure of 67% was arrived at keeping in mind the totality of goods and materials that are used in a construction project. Therefore, it was incumbent upon the assessees to include the value of goods/material supplied free of cost by the service recipient as well otherwise it would create imbalance and disturb the analogy that is kept in mind while issuing the said notifications and in such a situation, the AO can deny the benefit of aforesaid notifications. This argument may look to
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of goods or materials which are supplied by the service recipient. It also makes it clear that valuation of gross amount has a causal connection with the amount that is charged by the service provider as that becomes the element of taxable service . Thirdly, even when the explanation was added vide notification dated March 1, 2005, it only explained that the gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of construction service. Thus, though it took care of the value of goods and materials supplied by the service provider/assessee by including value of such goods and materials for the purpose of arriving at gross amount charged, it did not deal with any eventuality whereby value of goods and material supplied or provided by the service recipient were also to be included in arriving at gross amount gross amount charged . 19.Matter can be looked into from another angle as well. In the case of Commissioner, Central Excise a
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t, no question of any exemption would arise. It is clear from the above that the service tax is to be levied in respect of taxable services and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added. B.8 The abatement is not only given in the cases wherein the composite contract is involved but also to take care of situation wherein there could be a possibility of distortion of the CENVAT credit scheme. B.9 One example of the above situation is abatement in case of goods transport agency services. In case of goods transport agency services, the very same notification allows the abatement of 75% of the gross amount charged. The basic purpose of granting the abatement in case of goods transport agency is to take care of the proper functioning of the credit scheme. The legislature is aware that goods transport agency sector is an unorganized sector and many of the people do not
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ment of CENVAT credit. After introduction of Notification 1/2006, the appellants are maintaining separate books of account and have not availed or utilized any CENVAT so far used in Commercial or Industrial Construction Service . Some credit taken in relation to Erection, Installation or Commissioning Service . B.11 Hence, the benefit of Notification No. 1/2006-ST has to be extended to the appellants. CONSTRUCTION SERVICE IS NOT THE PREDOMINANT ACTIVITY UNDERTAKEN BY THE APPELLANTS IN THE PRESENT TRANSACTION. HENCE, THE ACTIVITY CANNOT BE CLASSIFIED UNDER COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICES . SECTION 65A(2)(b) OF THE FINANCE ACT, 1994 IS ONLY APPLICABLE ON TWO OR MORE TAXABLE SERVICE AND NOT IN CASE WHERE IN NON-TAXABLE SERVICES ARE ALSO INVOLVED. C.1 Section 65A(2)(b) of the Finance Act, 1994 reads as under: Section 65A. Classification of taxable services. – (1) For the purposes of this chapter, classification of taxable services shall be determined according to the terms o
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of the show cause notice dated 31.7.2008, the department has analyzed whether the activity undertaken by the appellants can be covered under Works Contract Service , Erection, Commissioning or Installation Services or Commercial or Industrial Construction service and then came to conclusion that it is covered under Commercial or Industrial Construction service by applying Section 65A(2)(b) of the Finance Act, 1994 on the assumption that construction is the predominant activity in the present matter. Accordingly to the department, the present activity is not a works contract as it does not involve any transfer of property in goods, it is not Erection, Commissioning or Installation Services as it has not been rendered by a commissioning and installation agency. C.3 The activity undertaken by the appellants in the present matter is a turnkey contract comprising of engineering, erection, installation, commissioning, electrical, mechanical, instrumental, construction, etc. There is no justi
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description. Sub-clause (b) states that a composite service, consisting of a combination of different services, which cannot be classified in the manner provided in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable. (iv) As the activity of planning and scheduling on the one hand and of organising and arranging (tour) on the other, are not distinct and separate taxable services enumerated in different sub-clauses of Section 65(105), the instrument of instructions/clarifications in Section 65A would be of no direct relevance. In any event, organising or arranging of tours is indisputably a service provided to tourists and not a service provided by the assessees to themselves. C.5 In the present case, the transaction many of the items involve non-taxable services such as 1. fabrication work, 2. construction of roads, 3. residential complex, 4. guest house for personal use, 5. water suppl
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s such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is – (i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;] [Emphasis supplied] D.2 Section 65(25b) of the Finance Act, includes only those construction services that are rendered for construction of a new building , civil structure , pipeline or conduit . D.3 The prese
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tures such as pipes, equipments, machineries, etc. In any case, majority of the work is fabrication of the pipes. Hence, the terminal as a whole cannot be considered as a building . D.6 Further, the terminal constructed by the appellants is not a Civil Structure . The term Civil Structure in common parlance refers to a structure wherein cements and bricks are used. Whereas the terminal in the present case, is an engineering structure or a non-civil structure comprising of pipes, equipment, machineries, roads, etc. Therefore, the said activity is not on civil structure. D.7 Also, the activity in the present case is not construction of a pipeline or conduit . As admittedly, the appellants has constructed the terminal as a whole and is not concerned with the laying of pipeline from the terminal to the end users and the said activity is not forming part of the present dispute. It is the terminal that has been constructed and therefore there is no construction of pipeline or conduit per se.
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JECTS INVOLVING ENGINEERING, PROCUREMENT AND CONSTRUCTION OR COMMISSIONING IS ENUMERATED AS A TAXABLE SERVICE, IN ANY OF THE OTHER HEAD SUCH COMPOSITE ACTIVITY IS NOT SOUGHT TO BE TAXED. FURTHER, VIVISECTION OF THE CONSTRUCTION ACTIVITY IS ALSO NOT POSSIBLE IN ABSENCE OF ANY MACHINERY PROVISION. E.1 As per the averments made in the show cause notice, there is no doubt as to the fact that the present activity undertaken by the appellants is a composite service contract. The activity undertaken by the appellants in the present matter is a turnkey contract comprising of engineering, erection, installation, commissioning, electrical, mechanical, instrumental, construction, etc. E.2 In this regard, reference can be made to the definition of works contract service under Section 65 (105) (zzzza) of the Finance Act, 1994 which expressly provides for inclusion of turnkey projects under its ambit. The relevant portion is reproduced as under: (zzzza) Taxable service means – any service provided o
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ing 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) projects . …Emphasis supplied. E.3 Unlike works contract, the other taxable category will not include a composite activity of engineering, procurement and construction or commissioning, in absence of any specific inclusion, turnkey contracts cannot be taxed under the category of Commercial or Industrial Construction Services. E.4 In any case, present contract is a composite contract wherein vivisection is not possible in absence of any machinery provision and accordingly, the demand under Commercial or Industrial Construction Services is not sustainable.
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ice . F.4 Section 65(25b) of the Finance Act, 1994 excludes services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams from the ambit of Commercial or Industrial Construction Service . The services provided by the appellants to the customer viz. M/s Reliance Industries Limited are in the course of development of a transport terminal . Hence, the same are excluded from the levy of service tax. The services provided by the appellants are in relation to of construction of transport terminal . F.5 Since the term and expression transport terminal has not been defined under the Finance Act, 1994 the same has to be understood in their ordinary or commercial parlance. F.6 The meaning of the term terminal as defined in the following dictionaries: a) Chambers 21st Century Dictionary an installation at the end of a pipeline or at a port where oil is stored and from where it is distributed. ETYMOLOGY: 19c in adj sense 1; 15c in obsolete heraldic sense
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y, Hofstra University is as under: Terminal. Any location where freight and passengers either originates, terminals, or is handled n the transportation process. Terminals are central and intermediate locations in the movements of passengers and freight. They often require specific facilities to accommodate the traffic they handle {emphasis supplied}. F.8 The Supreme Court in the case of Central India Spinning, Weaving & Manufacturing Co. Ltd., Vs. Municipal Committee, Wardha Air 1958 SC 341(page 144-154 of the compilation) has observed the meaning of terminal in page 347 as under: The word terminal could refer either to the terminal of the goods or the termini of the Municipality. It is clear that the word terminal refers not to the destination or origin of the goods but to the terminal of the Municipal limits. Terminal means end, boundary; situated at or forming the end or extremity of something; situated at the end of a line of railways; forming or belonging to a railway terminus
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nduit . The onshore terminal is nothing but a transport terminal for transportation of gas through pipelines. F.12 In the present case, the major facilities at the onshore terminal of M/s Reliance Industries Limited at Gadimoga, near Kakinada and its purpose in brief are as under: Description of the facility Purpose of the facility Slug catchers Removal of bulk water Production separator Separating water and MEG Inlet gas heater To heat the gas Gas dehydration package Removal of water MEG Regeneration Recirculation of MEG F.13 The above facilities enable the terminal to carry out processing of natural gas; such processing being activities undertaken to make the said gas transportable. Using the above facilities, the terminal receives gas from the offshore facilities, dehydrates (removal of moisture, free water and MEG) the gas to make it suitable for onward transportation (meeting sales specifications) and feeding the gas into the cross-country transportation pipeline. F.14 All gas tra
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nol) so as to avoid formation of ice when transported from the terminal through underwater pipelines. Water and unwanted particles, if any present in the gas, would be removed with the help of appropriate facilities installed at the onshore terminal. At present, there are no facilities at the offshore or onshore terminal for removal of Sulphur, Hydrogen Sulphide & other impurities from the offshore gas. Since the offshore gas is about 99% pure, such a requirement is not envisaged. Hence, the gas is found in its purest form and does not require any treatment or storage at the Onshore terminal. F.17 Assuming whilst denying that the onshore terminal is considered as a gas processing plant, there is not dispute about the fact that the said facility would be used for transportation of gas through long distance pipelines after processing. Once this is the admitted position, merely because gas is being processed at the said onshore terminal, the same would not take the onshore terminal ou
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tes, terminates, or is handled in the transportation process. Thus, it can be a place where either the transportation of goods/passengers originates , or where the transportation of goods/passengers terminates or a place where goods/passengers are handled. Unidirectional movement of goods/passengers will not make any difference. 2. Further, nowhere in the said Article, it has been mentioned that there has to be arrival of passengers or freight from different destinations and dispersal to different destinations. Such inference has been wrongly derived from the said article as the terms used in originates , terminates , or handled and not originates , terminates , and handled . The term or cannot be used as and for the purposes of interpretation. 3. Concept of transport terminal is exhaustive, it cannot be limited to Airports, railways, bus terminals, etc. There are number of articles including that of Dr. Jean Paul Rodrigue and Dr. Brian Slack that specifically state that transportation
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Y ONLY TO GOVERNMENTAL OR PUBLIC WORKS G.1 The means clause covers only commercial constructions and hence the exclusion of roads, airports, railways, transport terminals, bridges, tunnels and dams should necessarily be commercial roads , commercial airports , commercial railways , commercial transport terminals , commercial bridges , commercial tunnels and commercial dams , because the exclusion is of the items which were included by the means clause. G.2 Even assuming that the transport terminal constructed by the appellant is not for public use or benefit , the exclusion in no manner specifies that it would apply only to Governmental or public works . Even assuming the appellant s activities are not for the purpose of public utility they would still be eligible to the benefit of the exclusion under Section 65(25b) of the Finance Act, 1994. G.3 In Afcons Infrastructure Ltd., Vs. CSE, 2015 (38) STR 194 (T) (page 286-290 of the compilation), construction of viaduct and stations of Delh
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veway in a petrol pump and paid service tax on the same. Subsequently, they filed an application for refund on the grounds that they had paid it wrongly for the construction of road which is exclude from the category of Commercial and Industrial Construction as defined under clause (25b) of the Section 65 of the Finance Act, 1994. While allowing the said exclusion to them, the Hon ble CESTAT observed as follows: 7. After carefully considering the submissions made by both the sides we find that it is an admitted fact by both the sides that the construction of road does not require payment of service tax. The Revenue s only appeal is that construction of driveway cannot be equated with the construction of road in as much as such driveway was not for public utility purpose but the same was in connection with the petrol pump owned by the owner. In this connection we find that the Board s Circular No. B1/6/2005-TRU dated 27-7-05 is to the effect that – if the contract for construction of co
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onstruction of road only. …Emphasis Supplied. G.6 Reference is also made on Board s Circular No. B1/6/2005- TRU dated 27.7.2005 (Page 311-314 of the Compilation). THE EXCLUSION FROM LEVY OF SERVICE TAX IS AVAILABLE TO TRANSPORT TERMINAL BECAUSE IT IS AN INFRASTRUCTURE PROJECT AND NOT BECAUSE IT IS A PUBLIC UTITLITY . THE PRINCIPLE OF NOSCITUR A SOCIIS AS WELL AS THE EJUSDEM GENERIS IS NOT APPLICABLE IN THE PRESENT CASE. H.1 The principle of Noscitur a sociis is not applicable because the said principle is applicable when two or more words which are susceptible of analogous meaning are coupled together; in such a case the two or more words are understood to be used in their cognate sense. They take colour from each other, that is, the more general is restricted a sense analogous to the less general. In the current case, the words used in the definition of Commercial or Industrial Construction are roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or oth
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ppellants rely on Para 6.4.1 of TRU letter DOF No. 334/1/2007-TRU dt 28.02.2007, extracted below: Works contract in respect of specified infrastructure projects namely roads, airports, railways, transport terminals, bridges, tunnels and dams are specifically excluded from the scope of levy . H.5 it is clear from the above circular of the Board, that the Board and the Department itself has understood/ visualized these only as infrastructure projects. H.6 The above Para issued in the context of the Works contract service would apply in all fours to their case. This is because both under the definition of Commercial or Industrial Construction service as well as works contract service , exclusion is available to roads, airports, railways, transport terminals, bridges, tunnels and dams. H.7 In view above, the onshore terminal being constructed by RIL being an infrastructure project, the services rendered by the Appellant is not liable to tax. THE INFRASTRUCTURAL FACILITIES ARE ANCILLARY AND
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the workmen. Therefore, the aforesaid activity undertaken by the Appellants would not be liable to service tax under taxable head of commercial or industrial construction service as defined under the Finance Act, 1994. I.4 Without prejudice, a major portion of the infrastructure facilities being constructed by the Appellants are: Construction of Civil works for comprehensive Protected Water Supply Scheme (CPWS) Scheme at Gadimoga village, Haul Road work, Access Bridge to Workman Colony, Flyover Bridge, Road widening work etc. I.5 The said infrastructure projects would independently be excluded from the levy of service tax under excluded categories of road , bridge , dam etc. I.6 Without prejudice, the said infrastructure facilities being construed by the Appellants are merely incidental and ancillary to the onshore terminal. It is well settled that incidentals will never determine or decide the classification. In fact, the said incidentals will not influence or alter the classificatio
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nder Chapter V of the Finance Act within such local limits as it may assign to them as also specify the taxable service in relation to which any such Central Excise Officer shall exercise his powers. Vide CBEC Notification 14/2002-CE(NT), the jurisdiction of Hyderabad II Commissionerate has been specified as within the district of Hyderabad. Therefore, according to the said notification, Hyderabad II Commissionerate has no jurisdiction over Kakinada, a port located on the Godavari river near Bay of Bengal. In this regard, we rely on the following decisions: 1. M.S. Engineeers India Pvt. Ltd., Vs CCE, 2014-TIOL-269- CESTAT-DEL (Page 391-394 of the Compilation) 2. Vihar Aahar Pvt. Ltd., Vs. CST, 2013-TIOL-534-CESTAT-AHM (Page 395-396 of the Compilation) 3. CCE Vs. Integral Construction Company- 2010 (17) STR 380 (Tri.-Bang.) (Page 397-398 of the Compilation) 4. Inox Leisure Limited Vs. CST, 2016 (42) STR 497 (T) affirmed by Supreme Court in 2016 (44) STR J276 (SC) (Page 399-405 of the Co
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nts duly submitted the contract along with other relevant documents. Even Though all the relevant documents were available with department, DGCEI erroneously delayed the issuance of show cause notice and eventually issued the present show cause notice on 31.7.2008 by invoking extended period. N. No penalty is imposable under Section 78 of the Act as there was no suppression of facts or intention on the part of the Appellants to evade payment of duty; In any case, penalty under both Section 76 & 78 not payable. Reliance is placed upon CST Vs. Motor World – 2012 (27) STR 225 (Kar.) (Page 408-422 of the Compilation). O. Without prejudice, Appellant is entitled to waiver of penalties under Section 80 of the Act. DEPARTMENT APPEAL NO. ST/314/2009. The Assessee is entitled to claim the benefit of cum tax. P. The Order-in-Original has rightly allowed the benefit of cum tax on the count that the Appellant was not collecting any service tax in all the cases of demand of service tax. The cum
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Kakinada and as all records are maintained in Hyderabad hence the jurisdiction of Hyderabad Commissionerate cannot be called in question. He would submit that the argument of the Senior Counsel, OT constructed by L&T is a transport terminal and hence excluded from the purview of commercial or industrial construction services is totally wrong as the OT at Kakinada cannot be characterized as transport terminal as indicated in the exclusion clause of definition of the commercial or industrial construction services and OT is nothing but an industrial plant meant to produce compressed natural gas and hence, the said onshore terminal is nothing but a refinery/plant with various processing facilities whereas the gas is received along with impurities is totally baseless. The natural gas cannot be transported directly from the gas field to the prospective buyer through a pipeline without being treated for impurities. After explaining us the entire process, Learned Counsel requested time for
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ons filed on 11/9/2018 on behalf of Revenue. The suppression aspect has been clearly brought out in these submissions. In the light of the internal correspondence it is clear that the concerned officials were of the view that L&T was liable to pay the ST for the construction of OT for RIL but were forced to claim waiver from tax as RIL held a contrary view. Hence, L&T cannot claim any bonafide belief that ST was not payable. (iii) Bid document of May 2006 did not contain any mention about tax exemption for the subject services rendered by L&T. The subject clause was introduced only in the Contract dated 18/10/2006. Legal opinion from Shri K. Vaitheeswaran was obtained on 23/10/2006 i.e. after the signing of the contract. (iv) Legal opinion of Shri K. Vaitheeswaran dated 23/10/2006 also clearly indicates that he was of the view that activities within the OT were significant and services in relation to the construction of OT could be a matter of dispute. Shri. Purushottam has
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o August 2007, L&T did not even make the Department aware of the Contract. L&T suppressed the fact of nonpayment of ST to the Jurisdictional officer from 6/2006 to 8/2007 and this act of deliberate default did not get obliterated by the production of contract. Significantly, this period covers the period for which SCN was issued beyond the normal period. Hence, the demand is not hit by limitation. 3. Point No. 2: L&T is entitled to the benefit of notification no.1/2006. Submissions: In view of the order of the LB of the Tribunal in the case of M/s Bhayana Builders P Ltd., Vs. CST [2013-TIOL-1331-CESTAT-DEL LB] affirmed by CST Vs. Bhayana Builders P Ltd., [2018-TIOL-66-SCST], appellant s submissions have considerable force. However, the quantum of benefit to be allowed should be subject to verification by the department. Claims as to non-availment of benefit under 12/2003 and of CENVAT credit would also require to be verified by the original authority. 4. Point No. 3. Constr
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ntract in question was a simpliciter service contract since all materials were provided by RIL. It was not a turn-key project for this reason. (ii) Nevertheless, the service rendered by L&T was in the nature of a composite service comprising more than one service. It was a combination of different services such as, civil construction, laying of pipes, erection, commissioning and installation of equipments. (iii) Since L&T is essentially an engineering organization and is better placed to judge which of the activities predominate over others, in terms of work content (i.e. man hours spent) as well as cost the department has accepted the view and practice of classification adopted by them. Essential character and predominance have been regarded for this purpose as synonymous with each other. (iv) There is no authority to say that if certain activity falls in the excluded category provisions of section 65 A(2)(b) is not applicable. Such exclusions do not vitiate the nature of the
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2.4.1 to 2.4.9 of written submissions filed on 1/9/2018 on behalf of Revenue. These submissions have dealt with all the points raised by the appellants. (ii) RIL has obtained licence under the Factories Act and also under the C Ex Act as a manufacturing unit. This is an admission of the fact that what happens in the OT is not mere movement of gas through pipeline. OT is the premises where a complex manufacturing process is carried out. (iii) The pipelines from the sub-sea facility end at Pig receivers. Thereafter, the well fluids are subject to a complex process of manufacturing gas which have to satisfy stringent quality/specifications and other bye products. The manufactured gas is significantly different from the input, namely, well fluids. No pipeline runs through the OT. Thus, no movement of goods through a running pipeline is incident in the present case. (iv) The decision of the Mumbai Bench of the Hon ble Tribunal in the case of Afcons Infrastructure is squarely applicable as
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arge the liability at the instance of RIL. (iii) L&T willfully mis-declared the taxable services under the head exempted services in the ST-3 services. By indicating the relevant notification as 1/2006 they misled the department to believe that they were discharging tax on 33% of the value of the total project cost. (iv) There was deliberate default on the part of L&T; hence, penal provisions are clearly attracted. (v) Interest liability is similarly attracted as the tax demand is correct and legally justified. 10. Point No. 9: Department s Appeal is liable to be dismissed. Submissions: (i) In terms of clause 8 A (f) of the contract, ST has been taken to be inapplicable and such tax if found applicable later would be paid by RIL. From this provision it emerges that ST was independent of and over and above the contract amount. Given the above facts the amount received by L&T under the contract cannot be regarded as a cum-tax amount. Hence, the abatement allowed by the adjudi
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anted Centralized Registration even for A.P. & Chattisgarh. Further it is not in dispute that all the records and accounts relating to RIL project are maintained by appellant at its Hyderabad office. Thus the jurisdiction of Hyderabad Commissionerate cannot be questioned. 7. On perusal of the contracts, we find that it is undisputed fact that the contract awarded to appellant is a composite one involving construction, erection, commissioning and installation of plant equipment, structure, instrumental, electrical, etc.,; it is nobody s case that services rendered under contract can be bifurcated activity wise for the tax implication; Revenue Authorities as well as the appellants were unanimous in their submissions that the entirety of the contract is to be taken as a single indivisible contract and taxability thereof or otherwise should be decided. In terms of contract, appellant was to construct a gas processing plant with certain alloyed facilities called as OT. 8. The appellant
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services. It has been submitted that in the absence of there being a mechanism prescribed under the Finance Act for taxing such contracts, involving both taxable and non-taxable services the entirety of the contract could not be exigible to tax. We are unable to agree with this rather novel proposition urged on behalf of the appellant. The submission of the appellant that the Act does not prescribe a mechanism for taking such composite contracts is not correct as, in our view provisions of Section 65A of the Finance Act, 1994, provides necessary statutory guidelines for determining, not only specific taxable category, but also its classification as taxable or non-taxable services. The submission of the appellant on this point seeks to give the word classification an unduly narrow meaning. Thus, we are of the view that conclusion as to non-taxability of a composite service can be arrived at only in a situation where it is established that essential character of composite contract is im
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. The reason for excluding the service from the head Erection Commissioning or Installation Services , was that the appellant was not a Commissioning and Installation Agency . The allegation in the notice is that activity of appellant is CICS, Strenuously challenged by appellant contending that the essential character of the composite service was that of ECIS services, we need to look in to that before coming to a conclusion. 11. The appellant has contended that applying the essential character test in terms of Section 65A(2)(b), to the contract awarded to it, the service would be aptly classified under the head of ECIS and not under the head of CICS/WCS. It has been contended that in any ECIS contract, construction is imperative for the purchase of commissioning and installing the plant, machinery, equipment. Reliance in this regards has been placed on CBEC clarification issued pursuant to the Finance Bill 2004-05 being introduced explaining the scope and ambit of Erection services wh
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ection charges would be taxed as part of this category of service. 12. It has to be noted that many a times parties to contract choose to give to describe a contract is not determinative of its true character, as in the case in hand the contract is titled as one for Construction of onshore terminal and associate facilities is not determinative of its essential character. Even, as per CBEC clarification (as is in paragraph 11), even ECIS contract may involve some element of civil construction activity necessary for erecting and installing equipments and machines. To us it is clear that on standalone basis some of the services provided herein, were in the nature of ECIS services, while some others, again on a standalone basis, were either construction services falling under the head CICS or were non-taxable services as noted herein above. Since both sides are unanimous in contending that the contract is a composite contract and indivisible one, not amendable to being broken down in to it
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mitted that in a pure service contract which is based on cost plus model, as is in the instant case, the essential character of the service rendered can be derived from details of the man hours spent for each activity along with the cost of such manpower. In our view this aspect needs consideration except in appeal No. ST/30275/2016, to determine the essential character of the service rendered under the composite contract on the aforesaid basis. 14. Insofar as appeal No. ST/30275/2016 is concerned, the demand has been confirmed under the head WCS. This demand is unsustainable, as admittedly the contract awarded to appellant, is a pure service contract and does not involve any transfer of property in the goods involved in the execution of the contract, which is a prerequisite for taxing any service under the head WCS. The fact that the contract is a pure service contract not involving any transfer of property in the goods involved in the execution of the contract is evident from para 10
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on remand, if the adjudicating authority arrives at a conclusion, by applying the essential character test, that the services rendered under the contract were taxable under the head of CICS, would the issue as to whether the Onshore terminal is a transport terminal or otherwise arise. We direct that in case the adjudicating authority on remand concludes that the contract is aptly classifiable under the head of CICS and not ECIS, he would also consider whether the Onshore Terminal can be termed as a transport terminal or not. In doing so the adjudicating authority would take into account the ratio laid down by the co-ordinate bench of this tribunal in the case of AFCONS (supra) as also the submissions that the appellant may urge. 16. The assesse has also claimed benefit of exemption in terms of Notification No. 1/2006-ST dated 1.3.2006 and has also cited the judgement of the Apex Court in the case of Bhayana Builders (supra). We agree that in case the adjudicating authority comes to a c
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