2017 (9) TMI 937 - AT - Service Tax

Taxability of Greenhouse Construction Pre vs. Post 1-5-2006: Tribunal Upholds Extended Limitation Period

The tribunal ruled that the construction of greenhouses was not taxable under 'Erection, Commissioning, and Installation Services' before 1-5-2006 but ... Erection, Commission and Installation Services - Construction of Green House - it is contended that greenhouse falls under the category of plant or equipment - Held that: - The greenhouse is a building on ground and is enclosed a structure. The said structure contains ventilation and window/doors. In view of the above, it is apparent that a greenhouse would fall under the category of building. Greenhouse is used for commercial production of crops, vegetables, fruits and other agriculture produce. As a result, use of greenhouse is industrial in nature. In these circumstances, it cannot be denied that the said greenhouse would fall under the definition of plant - appellants are engaged in the activity of installation of plant (greenhouse), and therefore the appellants are liable to pay services on the said activity. Extended period of limitation - Held that: - appellant were aware of the service tax liability - the document cannot be relied as it is unsigned is misplaced as the said document was recovered from the appellant's own premises - extended period of limitation is rightly invoked. Various other issues have not been examined in the impugned order - matter is remanded to the adjudicating authority to consider all aspects - appeal allowed by way of remand. Issues Involved:1. Taxability of the activity of constructing greenhouses under 'Erection, Commissioning, and Installation Services' prior to 1-5-2006.2. Applicability of extended period of limitation.3. Classification of contracts as works contracts.4. Abatement of material portion in erection and commissioning services.5. Basis of demand calculation (accrual vs. receipt basis).Issue-wise Detailed Analysis:1. Taxability of Greenhouse Construction:The appellants argued that their activity of constructing greenhouses, which are primarily used for agricultural purposes, should not be categorized under 'Erection, Commissioning, and Installation Services' prior to 1-5-2006. They contended that greenhouses are neither plant, machinery, nor equipment, and thus, were not covered under the service tax net before the amendment on 1-5-2006. The tribunal examined the historical amendments to the definition of 'Erection, Commissioning, and Installation Services' and noted that the inclusion of structures, whether pre-fabricated or otherwise, only came into effect on 1-5-2006. Therefore, the tribunal concluded that the activity of constructing greenhouses would not fall under the taxable service category prior to this date. However, from 1-5-2006 onwards, the activity was taxable as the definition was expanded to include structures.2. Applicability of Extended Period of Limitation:The appellants challenged the invocation of the extended period of limitation, arguing that there was confusion regarding the applicability of service tax versus excise duty on their activities. They claimed to have provided all necessary details to the authorities and contended that the invocation of the extended period was unjustified. The tribunal, however, found that the appellants were aware of their service tax liability, as evidenced by documents recovered during the investigation that included service tax in their pricing. The tribunal upheld the invocation of the extended period, stating that the appellants had not demonstrated a bona fide belief that they were not liable for service tax.3. Classification of Contracts as Works Contracts:The appellants argued that some of their contracts were in the nature of works contracts, which included the supply of materials, and therefore, should not be subject to service tax prior to the introduction of works contract service. The tribunal noted that the Revenue had countered this argument by presenting separate invoices for sale and services, indicating that the contracts were not composite works contracts. The tribunal directed the adjudicating authority to verify the facts and determine whether the contracts in question were indeed works contracts.4. Abatement of Material Portion in Erection and Commissioning Services:The appellants contended that they were entitled to abatement of the material portion in the erection and commissioning services. The tribunal observed that this issue had not been adequately addressed in the impugned order and remanded the matter to the adjudicating authority for reconsideration, ensuring that the appellants' claims regarding abatement were properly examined.5. Basis of Demand Calculation (Accrual vs. Receipt Basis):The appellants argued that the demand was incorrectly calculated based on balance sheet figures, which were on an accrual basis, whereas service tax should be levied on a receipt basis. The tribunal acknowledged this discrepancy and directed the adjudicating authority to reassess the demand, taking into account the correct basis for calculating service tax liability.Conclusion:The tribunal set aside the impugned order and remanded the matter to the adjudicating authority to address the issues of contract classification, abatement of material portion, and the basis of demand calculation. The tribunal upheld the taxability of the activity from 1-5-2006 onwards and the invocation of the extended period of limitation. The appeal was allowed by way of remand for further examination and proper adjudication of the outstanding issues.