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of <h1>Border Outposts (BOP) construction not taxable under 'Erection Services' - Tribunal ruling.</h1> <h3>M/s. Mackintosh Burn Ltd. And 50 Others Versus Commissioner of Customs, Central Excise & Service Tax, Shillong</h3> M/s. Mackintosh Burn Ltd. And 50 Others Versus Commissioner of Customs, Central Excise & Service Tax, Shillong - 2016 (42) S.T.R. 161 (Tri. - Kolkata) Issues Involved:1. Classification of services under 'Erection, Commissioning or Installation Services.'2. Interpretation of the term 'structure' within the context of service tax.3. Applicability of service tax on construction activities for Border Outposts (BOP).4. Invocation of extended period of limitation and imposition of penalties.5. Relevance and binding nature of CBEC circulars on service tax interpretation.6. Distinction between commercial and non-commercial construction services.Issue-wise Detailed Analysis:1. Classification of Services under 'Erection, Commissioning or Installation Services':The appeals challenge the classification of activities related to the construction of Border Outposts (BOP) under 'Erection, Commissioning or Installation Services' as defined under Section 65(39a) read with Section 65(105)(zzd) of the Finance Act, 1994. The appellants argue that their activities do not fall under this category, as they primarily involve civil construction rather than the erection, commissioning, or installation of plant, machinery, equipment, or structures. They contend that the term 'erection' should be read in conjunction with 'commissioning' and 'installation' and not as a standalone activity.2. Interpretation of the Term 'Structure' within the Context of Service Tax:The appellants argue that the term 'structure' in the context of 'Erection, Commissioning or Installation Services' should not include border fencing. They refer to various dictionary definitions and legal principles, such as 'ejusdem generis,' to support their claim that 'structure' should be interpreted in the context of plant, machinery, and equipment, and not civil structures like border fencing. The tribunal agrees with this interpretation, noting that the term 'structure' should be read in the context of the words it accompanies, and that border fencing does not fit within this context.3. Applicability of Service Tax on Construction Activities for Border Outposts (BOP):The tribunal examines whether the construction activities for BOPs, including border fencing, fall under the taxable category of 'Erection, Commissioning or Installation Services.' It concludes that these activities are primarily civil construction and should be classified under 'Commercial or Industrial Construction Services' as defined under Section 65(25b) read with Section 65(105)(zzq) of the Finance Act, 1994. Since the services rendered are non-commercial in nature, they are excluded from the scope of taxable commercial or industrial construction services.4. Invocation of Extended Period of Limitation and Imposition of Penalties:The appellants argue against the invocation of the extended period of limitation and the imposition of penalties, citing that they are public sector undertakings with no intent to evade tax. They also refer to clarifications from the Ministry of Home Affairs and the Department of Border Management, which indicate that the activities were part of a centrally sponsored scheme and not subject to service tax. The tribunal finds merit in these arguments, noting that the appellants' activities were non-commercial and part of government projects, thus not warranting the invocation of the extended period or penalties.5. Relevance and Binding Nature of CBEC Circulars on Service Tax Interpretation:The appellants rely on CBEC circulars (No. 80/10/2004-ST dated 17.09.2004 and No. 123/5/2010-TRU dated 24.05.2010) to argue that their activities do not fall under 'Erection, Commissioning or Installation Services.' The tribunal acknowledges the binding nature of these circulars on the department and uses them to interpret the scope of the taxable service. It concludes that the circulars support the appellants' position that their activities are not taxable under the disputed category.6. Distinction between Commercial and Non-Commercial Construction Services:The tribunal emphasizes the distinction between commercial and non-commercial construction services, noting that the appellants' activities were for national interest and not for commercial purposes. It refers to judgments and circulars that clarify the non-taxability of non-commercial construction services. The tribunal concludes that the appellants' activities, being non-commercial, are not subject to service tax under the disputed category.Conclusion:The tribunal sets aside the impugned orders and allows the appeals, concluding that the activities related to the construction of BOPs, including border fencing, do not fall under the taxable category of 'Erection, Commissioning or Installation Services' and are not subject to service tax. The tribunal also finds that the extended period of limitation and penalties are not applicable in this case.
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