The two member bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ), Chandigarh, has set aside the service tax demand imposed on services related to commercial and industrial construction services, noting that the appellant provided services to organizations not engaged in commerce, industry, or any other business or profession, and therefore, the extended period of limitation was not applicable.
The appellant was found to have provided Construction or Renovation services, as well as Management, Maintenance & Repair services, as outlined under Sections 65(105)(zzq) and 65(105)(zzg) of the Finance Act. These services were rendered to the Punjab Mandi Board without the appellant registering for service tax, paying the appropriate service tax, or filing the necessary service tax returns, all in violation of Sections 67, 68, and 69 of the Act, in conjunction with Rules 4, 6, and 7 of the Service Tax Rules, 1994.
As a result of these alleged violations, two show cause notices were issued. The first notice, dated April 23, 2012, demanded service tax of ₹3,78, 685 for the period from October 1, 2006, to March 2011. The second notice, dated October 5, 2012, demanded ₹4, 55,477 for the period of 2011-2012. These notices sought the recovery of service tax under Sections 73(1) and 73 of the Act, with penalties proposed under Sections 76, 77, and 78 of the Finance Act.
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The Original Authority, after due process, confirmed a service tax demand of ₹2, 06,417, along with interest, out of the proposed ₹3, 78,685. This adjustment was made by vacating the demand related to the construction of roads and by allowing the benefit of cum Service Tax. Penalties under Sections 77(1), 77(2), and 78 of the Finance Act were also imposed. Similarly, the adjudicating authority confirmed a service tax demand of ₹4, 12,944, along with interest, from the proposed demand of ₹4, 55,477, again allowing the benefit of cum Service Tax. Penalties under Sections 76, 77(1), and 77(2) of the Finance Act were imposed as well.
The appellant, dissatisfied with both orders, appealed to the Commissioner (Appeals), who partially allowed the appeals, confirming service tax amounts of ₹1,70,116 in case ST/50101 of 2014 and ₹1,36,271 in case ST/50102 of 2014. Consequently, the present appeal was filed.
Mr. Om Prakash, representing the appellant, argued that the impugned order is unsustainable in law, claiming it was issued without proper appreciation of the facts, legal principles, and binding judicial precedents on similar issues. He contended that the appellant’s work, involving the construction of platforms such as dry brick flooring at Purchase Centers of Market Committees in Punjab, did not result in the construction of a new building or civil structure.
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He further argued that the service provided did not fall under the definition of Commercial or Industrial Construction as defined under Section 65(105)(25b) of the Finance Act. Instead, he asserted that the service was a Works Contract Service under Section 65(105)(zzzz) of the Finance Act, which was not taxable before June 1, 2007.
The bench, consisting of Judicial Member S.S. Garg and Technical Member P. Anjani Kumar, found that the service provided by the appellant fell under the definition of Works Contract Service. This conclusion was based on a certificate from the Punjab Mandi Board dated April 9, 2013, which indicated that the work allotted to the appellant included the cost of materials, with no materials supplied by the Board itself. Consequently, the bench cited the Supreme Court’s judgment in Larsen and Toubro Ltd. v. State of Karnataka ruling that the appellant was not liable to pay service tax under Commercial or Industrial Construction Service, both before and after June 1, 2007.
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The bench also noted the absence of any specific allegations against the appellant regarding intent to evade service tax payments. Given that the appellant provided services to organizations not engaged in commerce, industry, or any other business or profession, the bench held that the extended period of limitation was not applicable.
In its final opinion, CESTAT determined that the impugned order was not sustainable in law and subsequently set it aside, allowing the appeals with any consequential relief as per the law.
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