2013 (9) TMI 517 - AT - Service Tax

Appellant's Commercial Construction Services Claim Denied under Finance Act; Penalty Upheld

The Tribunal determined that the appellant's activities constituted Commercial or Industrial Construction services, as per the Finance Act, due to the ... Industrial or Commercial Construction Service - Site Formation and Clearance, Excavation, Earthmoving and Demolition Service - construction of civil structure - abatement under Notification No. 15/2004 (as amended) - extended period for service tax assessment and invocation of penaltyIndustrial or Commercial Construction Service - Site Formation and Clearance, Excavation, Earthmoving and Demolition Service - construction of civil structure - Whether the activities carried out by the appellant fall within Industrial or Commercial Construction Service or within Site Formation and Clearance, Excavation, Earthmoving and Demolition Service. - HELD THAT: - The Tribunal examined the contracts and scope of work (reproduced in para 7.1 of the impugned order) and found the works comprised layout and levelling, construction of culverts, earthen bunds with clay puddles, stone pitching with cement grouting, construction of pumping station, canal cum jetty with RCC floor, office and staff quarters, main gate and related protection and extension works. While some site formation and excavation preceded construction, those activities were preparatory to and part of civil construction. The services therefore do not fall within the exclusion for site formation, excavation or works relating to repairing/renovating water sources, and instead constitute construction of civil structures used for commercial supply of water. Accordingly the activities are covered by the definition of Industrial or Commercial Construction Service and not by Section 65(97a) category. [Paras 6]Activities held to be Industrial or Commercial Construction Service and taxable as such.Abatement under Notification No. 15/2004 (as amended) - value of goods and material supplied or provided - Whether the appellant is entitled to abatement under Notification No. 15/2004 (as amended) reducing taxable value to 33% of gross amount. - HELD THAT: - Notification 15/2004 permits service tax on 33% of gross amount where the gross amount includes value of goods and materials supplied or provided by the service provider. It was undisputed that land and electricity were supplied free to the appellant; accordingly the Tribunal accepted the Commissioner's finding that the appellant could not claim the abatement benefit where such supplies were not included in the gross amount for the purpose of the Notification. [Paras 7]Claim for abatement under Notification No. 15/2004 denied.Extended period for service tax assessment and invocation of penalty - penalty under section 78 of the Finance Act - Whether the extended period for assessment was properly invoked and whether penalty under section 78 was justified. - HELD THAT: - The Tribunal noted that the appellant failed to disclose value, did not obtain registration and did not file returns. In view of these omissions the Tribunal held that invocation of the extended period for assessment was proper and that consequential penalty under Section 78 of the Finance Act was warranted. [Paras 8]Extended period correctly invoked and penalty under Section 78 sustained.Final Conclusion: The appeal is dismissed; the Commissioner's order confirming service tax, interest and imposing penalty is upheld, and the cross objection is disposed of accordingly. Issues:1. Whether the activities of the appellant fall under Industrial or Commercial Construction Service or Site Formation and Clearance, Excavation Earthmoving & Demolition Services.2. Eligibility of the appellant for abatement under Notification 15/2004.3. Validity of the invocation of the extended period by the Commissioner.Issue 1:The appellant, a 100% Export Oriented Unit for cultured pearls, was found to have shown income from 'Construction Receipts' in their Profit and Loss Account. The Department alleged that the appellant provided Commercial or Industrial Construction Service, demanding service tax. The appellant argued that their activities primarily involved excavation, soil stabilization, and reservoir maintenance, not falling under Industrial or Commercial Construction Service. The Revenue contended that the activities constituted Industrial or Commercial Construction services due to the extensive civil construction involved. The Tribunal found that the agreements executed by the appellant indeed required extensive civil construction work, including various construction activities related to reservoirs and other structures. The Tribunal concluded that the appellant's activities fell under the category of Commercial or Industrial Construction service as defined under the Finance Act.Issue 2:The appellant claimed eligibility for 67% abatement under Notification 15/2004, which allows for a reduced service tax payment if the gross amount includes the value of goods and materials provided. However, as the appellant received free land and electricity, they were deemed ineligible for the abatement. The Tribunal upheld this decision, stating that the appellant could not benefit from the abatement due to the provision of land and electricity without cost.Issue 3:The appellant challenged the invocation of the extended period by the Commissioner, arguing that they had not disclosed the value, registered, or filed returns. The Tribunal found that the Commissioner was justified in invoking the extended period due to the appellant's lack of disclosure and compliance. Consequently, the appellant was held liable for penalties under Section 78 of the Act. The Tribunal upheld the Commissioner's decision and dismissed the appeal, affirming the penalty under Section 78.This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's findings on each matter, preserving the legal terminology and significant details from the original text.