The Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ), Principal Bench, New Delhi, has ruled that works contract services provided before July 1, 2012, are liable to service tax, when not used for commercial or industrial purposes. This decision was made in the service tax appeal filed by ETA Engineering Private Limited against the Commissioner of Central Excise-Delhi-I, bringing clarity to the classification and taxability of such services under the Finance Act, 1994.
The appellant, ETA Engineering Private Limited, provided installation and commissioning work for air conditioning systems at the AIIMS Rishikesh hospital complex through a main contractor, M/s JMC Projects (India) Limited. While the Original Adjudicating Authority dropped the demand for services provided to the Delhi Metro Rail Corporation ( DMRC ), the service tax demand for services rendered to AIIMS Rishikesh for the period before July 1, 2012, was partly confirmed.
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The appellant, represented by Shri Bimal Jain, contested this decision, arguing that their services should be classified under “works contract service”, which should be exempt from service tax for the period before July 1, 2012.
The appellant argued that the services provided to AIIMS Rishikesh were works contract services and should not attract service tax for the period before July 1, 2012. They asserted that their services involved a combination of goods and services, thus qualifying for exemption under relevant notifications.
The respondent revenue, represented by Shri Jayakumari contended that the services provided by ETA Engineering were classifiable as “erection, commissioning, and installation services” and were taxable before July 1, 2012. It was also argued that the services did not qualify for exemption and that the extended period of limitation was applicable due to the clear tax liability.
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The two-member bench comprising Mr. Raju (Technical Member) and Dr. Rachna Gupta (Judicial Member) confirmed that the services provided by ETA Engineering, which included designing, supplying, erection, testing, and commissioning of the entire HVAC system, fell under the definition of “works contract service” as per Section 65(105)(zzzza) of the Finance Act, 1994. This classification encompasses contracts involving the transfer of property in goods, which are subject to VAT, and services related to installation and commissioning of plant, machinery, or equipment.
The bench noted that the works contract service definition explicitly included services such as heating, ventilation, and air conditioning. Therefore, these services were taxable, and there was no exemption applicable to them for non-commercial use before July 1, 2012. The benefit of exemption granted under the mega notification no. 25/2012-ST dated June 28, 2012, was applicable only after July 1, 2012.
The CESTAT dismissed the appellant’s claim that the extended period of limitation should not be invoked due to the issue being a matter of interpretation. It was held that there was no ambiguity in the taxability of the services for the period before July 1, 2012, as the services were clearly covered under the taxable category of works contract services.
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The bench also concluded that the appellant’s reliance on earlier Tribunal decisions and CBEC instructions did not support their case for exemption or misclassification. In result, the CESTAT dismissed the appeal and confirmed the taxability of works contract services provided for non-commercial purposes prior to July 1, 2012. It was clarified that the nature of the recipient, whether commercial or non-commercial, does not exempt such services from tax liabilities if they fall under the specified taxable categories.
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