CESTAT upholds Penalty for Non-payment of Service Tax falls under category of ‘Erection, Commissioning and Installation’ on Ground of Absence of Conclusive Evidence [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the penalty imposed for non-payment of service tax which falls under the category of erection, commissioning, and installation on the ground of absence of conclusive evidence. 

Senthil Engineering Works, the appellant assessee had carried out erection and installation-related work and the assessee appealed against the order passed by the original authority for confirming the service tax liability for the services rendered by the assessee under the category of ‘Erection, Commissioning and Installation’ under Section 65 (39a) of the Finance Act 1994. 

M.N. Bharathi, the counsel for the assessee contended that the activity is ‘manufacture’ was not eligible to service tax but only to Central Excise duty and the activity performed by the assessee cannot be construed as that of erection, commissioning, and installation as the same pertains to the erection, commissioning, and installation of plant, machinery, equipment or structure, and other activities like wiring, plumbing, ventilation duct, thermal insulation. 

Ananda Lakshmi Ganeshram, the counsel for the revenue contended that the activities of the assessee are taxable services carried out as per a works contract and cannot be termed as manufacture and the service tax liability for the services rendered by the assessee correctly falls under the category of ‘Erection, Commissioning and Installation’ under Section 65 (39a) of the Finance Act. 

The Bench observed that the assessee had failed to pay the service tax and also had failed to report the provision of service in their periodical returns and the fact that these activities were suppressed from the department to evade payment of tax has substance and not inclined to interfere with the imposition of penalty or issue of Show Cause Notice invoking the extended time limit. 

The two-member bench comprising P.Dinesh (Judicial) and Ajit Kumar (Technical) upheld the penalty imposed on the assessee and remanded the matter back to the lower authority to determine the value of the taxable service afresh allowing cum-tax benefit and by not including the value of goods. 

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