The Chennai bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable under commercial or industrial construction service for construction service based on work contracts before 1.06 .2007.
M/s. Devi Constructions, the appellant had entered into a contract with M/s. Indian Oil Corporation Ltd., for construction of Dykes, Internal Roads and other civil miscellaneous works at the marketing terminals at Trichy and Sankari as part of the Chennai – Trichy – Madurai Pipeline Project and executed the work, for which they received an amount of Rs.94,41,467.91/- as payment for execution of the said work during the period from July 2006 to March 2007.
The Revenue was of the view that the above service would fall under “Commercial or Industrial Construction Service” as per Section 65(25b) of the Finance Act, 1994 and chargeable to Service Tax under Section 66 of the Finance Act, 1994 read with Section 65(105)(zzq) ibid. with effect from 10.09.2004 and that the gross value collected by the appellant for rendering such services about M/s. Indian Oil Corporation Ltd. would attract Service Tax.
The Revenue had noticed that the appellant had not included the amount of Rs.94,41,467.91/- in the taxable value for the purpose discharging Service Tax, which prompted the issuance of Show Cause Notice dated 17.10.2007 proposing to demand Service Tax of Rs.3,81,360/- under the provisions of Section 73(1) of the Finance Act, 1994, along with applicable interest under Section 75 and penalty under Sections 76, 77 and 78 of the Act.
During adjudication proceedings, the Assistant Commissioner of Central Excise, confirmed the demand for Service Tax along with interest, as proposed, along with penalty under Sections 77 and 78 ibid. Appeal before the first appellate authority was rejected the same vide impugned Order-in-Appeal.
Smt. Radhika Chandrasekhar, submitted at the outset that the issue involved in the case on hand pertains to the period before 01.06.2007 i.e., before the insertion of Section 65(105)(zzzza) in the Finance Act, 1994, and that the same has been settled by various judicial fora, including the order of this Bench of the CESTAT in the assessee’s case for a different period in Devi Constructions v. Commissioner of Central Excise, Salem. Per contra, Shri P.R.V. Ramanan supported the findings of the lower authorities.
The Tribunal observed that the Judgement of Tribunal in Appellant’s case “The appellant is engaged in the execution of works contract and entered into a contract with M/s. Indian Oil Corporation Ltd. in respect of dykes, internal roads and other civil miscellaneous work in their marketing terminals at Trichy and Sankari. They had discharged service tax for the disputed period under commercial or industrial service concerning the construction of dykes even though the activity fall under the category of works contract which became taxable with effect from 1.6.2007. A show cause notice was issued alleging that the appellant is liable to discharge service tax on the entire amount since the activity is classifiable under the category of construction services. Both the authorities below confirmed the demand along with interest and also imposed penalties. Hence this appeal.”
Since there is no evidence to suggest that the service rendered by the appellant was not under works contract and the two-member bench comprising Mr P Dinesha, Member (Judicial) and Mr M Ajit Kumar, Member (Technical) held that there is no liability to pay tax under “Commercial or Industrial Construction Service” during the period under dispute which is before 01.06.2007. The CESTAT set aside the order and allowed the appeal.
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