2020 (7) TMI 2 - AT - Service Tax

Tribunal rules in favor of appellant on service tax demands for construction services at toll plazas

M/s GMR Infrastructure Limited Versus Commissioner of Central Excise & Service Tax Bangalore-IV

M/s GMR Infrastructure Limited Versus Commissioner of Central Excise & Service Tax Bangalore-IV - TMI Issues Involved:1. Taxability of construction services for toll plazas, administrative buildings, and restrooms.2. Reversal of Cenvat credit under Rule 6(3) of Cenvat Credit Rules (CCR).3. Alleged double availing of Cenvat credit.4. Disallowance of Cenvat credit on various input services.5. Imposition of penalties under Section 78 and Section 77(2) of the Finance Act.6. Classification of services under the correct service tax category.Issue-wise Detailed Analysis:1. Taxability of Construction Services for Toll Plazas, Administrative Buildings, and Restrooms:The appellant contended that the construction of toll plazas, administrative buildings, and restrooms is part of road construction and thus exempt from service tax. The Tribunal accepted this argument, noting that these structures are integral to the road and have no separate commercial existence. The Tribunal referenced Board’s Circular No. 80/10/2004-ST and several case laws, including *Larsen and Toubro Limited Vs. Union of India* and *Archi-structural Constructions India P. Ltd. Vs. CCE, Coimbatore*, to support the view that such constructions are part of an indivisible contract and not taxable separately. Consequently, the demand for service tax on these constructions was set aside.2. Reversal of Cenvat Credit under Rule 6(3) of CCR:The appellant had reversed the proportionate Cenvat credit amounting to Rs. 1,94,46,310/- as required under Rule 6(3A) of CCR before the issuance of the show cause notice. This reversal, along with the interest of Rs. 24,69,859/-, was acknowledged by the Tribunal, and the demand was appropriated accordingly.3. Alleged Double Availing of Cenvat Credit:The Tribunal noted that the appellant had reversed the amount of Rs. 7,58,737/- alleged to be taken twice before the issuance of the show cause notice. This amount was also appropriated in the adjudication order, and the appellant did not dispute this reversal.4. Disallowance of Cenvat Credit on Various Input Services:The Tribunal examined the disallowance of Cenvat credit amounting to Rs. 5,81,31,723/- and Rs. 3,39,24,751/- for different periods. The appellant argued that the input services in question (e.g., advertising, air travel, banking, advisory, manpower recruitment, security, and works contract services) were used in providing output services and thus eligible for credit under Rule 2(l) of CCR. The Tribunal found that these services were indeed used in providing output services and therefore eligible for credit. The Tribunal also noted that the appellant had already reversed Rs. 59,43,283/- of the disputed credit. The Tribunal found the Commissioner’s disallowance of banking and financial services to be erroneous and allowed the credit.5. Imposition of Penalties under Section 78 and Section 77(2) of the Finance Act:The Tribunal found no evidence of suppression, fraud, or intent to evade tax by the appellant. The appellant had maintained proper books of accounts, filed regular returns, and reversed or deposited substantial amounts during the audit. The Tribunal concluded that the extended period of limitation was not applicable, and penalties under Section 78 and Section 77(2) were not warranted. Consequently, these penalties were set aside.6. Classification of Services under the Correct Service Tax Category:The Tribunal addressed the classification issue, where the Revenue classified the services under 'construction service' (Section 65(105)(zzq)), while the appellant argued for 'works contract service' (Section 65(105)(zza)). The Tribunal found that the appellant had executed works contracts involving materials, and thus the services should be classified under 'works contract service.' The penalty imposed under Rule 15(3) of CCR was also set aside.Conclusion:The Tribunal set aside the service tax demands, except for the undisputed portions, and ruled that the extended period of limitation was not applicable. All penalties were also set aside, and both appeals were allowed with consequential benefits.