2022 (7) TMI 1183 - AT - Service Tax

Tribunal sets aside orders, finds appellants not liable for service tax, deems demands time-barred.

Heena Enterprises and MK Enterprises Versus Commissioner of Central Excise & ST, Surat-I

Heena Enterprises and MK Enterprises Versus Commissioner of Central Excise & ST, Surat-I - TMI Issues Involved:1. Liability to pay service tax under 'Erection, Commissioning or Installation' services.2. Classification of services as 'Commercial or Industrial Construction Service'.3. Fabrication of steel structures and its taxability.4. Applicability of Business Auxiliary Service exemption.5. Fabrication of Hulls/Parts of body of Ships for ABG Shipyard Ltd.6. Limitation period for service tax demand.7. Jurisdiction of the Commissioner of Central Excise, Surat.Detailed Analysis:1. Liability to Pay Service Tax under 'Erection, Commissioning or Installation' Services:The demand for service tax was based on the appellants' Annual Report/Audit Report, which described their business as Erection and Commissioning Contractor. However, the show cause notice did not examine individual sub-contracts or work contracts to determine if they met the definition of 'Erection, Commissioning or Installation' under Section 65 (39a) of the Finance Act 1994. The tribunal found that the activities undertaken by the appellants, such as fabrication of structural items for flyovers, bridges, and railways, did not fall under this category as they were part of civil construction and excluded from service tax.2. Classification of Services as 'Commercial or Industrial Construction Service':The appellants argued that their activities fell under 'Commercial or Industrial Construction Service' as defined in Section 65 (25b) of the Finance Act 1994, which excludes services related to bridges, railways, and airports from the tax net. The tribunal agreed, noting that fabrication of beams, struts, and pylons for bridges and railways is part of civil construction and thus not taxable. This was supported by judgments such as Jagdish Prasad Agarwal v. CCE and Pioneer Fabrications P. Ltd v. CCE.3. Fabrication of Steel Structures and Its Taxability:The appellants' fabrication of steel structures using clients' raw materials was considered a job-work activity and not liable to service tax under 'Erection, Commissioning and Installation'. The tribunal cited several decisions, including Hazi Ap Bava & Co v. CCE and Neo Structo Construction Ltd v. CCE, which held that such fabrication is not taxable as it amounts to manufacturing excisable goods.4. Applicability of Business Auxiliary Service Exemption:Even if the job work activity was considered a service, it would fall under 'Business Auxiliary Service' as per Section 65 (19) (v) of the Finance Act 1994 and was exempted by Notification No. 8/2005-ST dated 1-3-2005. The tribunal found that the appellants met the conditions for this exemption, and there was no demand for service tax under this category in the show cause notice.5. Fabrication of Hulls/Parts of Body of Ships for ABG Shipyard Ltd:The tribunal found no evidence that the appellants undertook fabrication work for ABG Shipyard Ltd, as the show cause notice did not show any receipt of payments from ABG Shipyard. The demand was based on payments made to another firm with a similar name. Therefore, the service tax demand on this ground was not sustainable.6. Limitation Period for Service Tax Demand:The show cause notices dated 21-4-2010 demanded service tax for the period October 2004 to March 2009, which was beyond the one-year limitation period specified in Section 73 (1) of the Finance Act 1994. The tribunal found no evidence of suppression of facts or intent to evade tax, and the appellants' belief that no service tax was payable was reasonable and bona fide. Therefore, the larger period of limitation of five years was inapplicable, making the demand time-barred.7. Jurisdiction of the Commissioner of Central Excise, Surat:The tribunal noted that while the Commissioner of Central Excise, Surat, may have jurisdiction to demand tax for services provided outside his jurisdiction after the appellants obtained registration in 2007, the tax demand was not sustainable on merits and limitation. Thus, the issue of jurisdiction was of academic importance, and no conclusive finding was given.Conclusion:The tribunal set aside the impugned orders, concluding that the appellants were not liable to pay service tax under the categories mentioned, and the demands were time-barred. The appeals were allowed with consequential reliefs in accordance with the law.