2024 (8) TMI 1277 - AT - Service Tax

Government building maintenance services exempt from service tax under Section 98 retrospective exemption 2005-2012

CESTAT New Delhi held that appellant's services were exempt from service tax liability. The tribunal classified appellant's activities as Works Contract ... Classification of services as Works Contract Services (WCS) or Erection, Commissioning, or Installation Services (ECIS) - whether the works carried out by the Appellant fall under the definition of 'Original Works' or not? - exemption N/N. 25/2012-ST dated 20.06.2012 - Management, Maintenance & Repair service. Classification of services as Works Contract Services (WCS) or Erection, Commissioning, or Installation Services (ECIS) - whether the works carried out by the Appellant fall under the definition of 'Original Works' or not? - exemption N/N. 25/2012-ST dated 20.06.2012 - HELD THAT:- A perusal of the SCN indicates that the department had gathered intelligence that the appellant was executing contracts with different Government agencies and providing taxable services, but not discharging his service tax liability. During investigations, the appellant was asked to submit requisite documents/details for verification such as ST-2, ST-3 returns, copies of contract/work orders executed in respect of maintenance & repair services, Erection & Commissioning Services & Works Contract Services, Balance Sheets, ITR, and other details for the financial years 2007-08 to 2011-12 - the department concluded their investigations purely on the basis of the documents submitted by the appellant. The argument of the Ld Counsel does not carry much weight in the light of repeated instances of non-cooperative attitude displayed by the appellant. This submission of the Ld. counsel cannot be accepted. A perusal of the said notice makes it clear that the department has sought to classify the activity as Erection & Commissioning and/or Works Contract. This factual issue would have been clear had the appellant shared the details of the contracts and work orders with the department - as per section 65(105)(zzzza), Works Contract means a contract wherein, there is transfer of property in goods involved which is leviable to VAT, and such contract includes, inter alia, erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or construction of a new residential complex or a part thereof; or completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or turnkey projects including engineering, procurement and construction commissioning (EPC) projects etc. The taxable service provided by the appellant prior to 01.07.2012 will be exempted under clause (b) of the definition of works contract service - the demand for the period 1.07.2012 to 31.03.2013 is liable to be dropped as the same is squarely covered by the exemption contained in Notification no. 25/2012-ST dated 20.06.2012. Management, Maintenance & Repair service - HELD THAT:- The firefighting equipment installation is exempted from service tax, in view of the fact that the same was undertaken in Government buildings which are non-commercial, hence it is agreed with the submissions of the ld counsel that maintenance services provided to government buildings is covered by the retrospective amendment provided by Section 98 from 16.6.2005 till 28.05.2012. Consequently, the demand for its maintenance is also exempted. The appellant was not liable to service tax on the provision of services to PWD/CPWD. Accordingly, the impugned order is set aside - Appeal allowed. Issues Involved:1. Vagueness and arbitrariness of the Show Cause Notice (SCN).2. Classification of services as Works Contract Services (WCS) or Erection, Commissioning, or Installation Services (ECIS).3. Taxability of services rendered by way of installation and commissioning of firefighting equipment.4. Exemption of services provided to non-commercial government buildings.5. Demand under Management, Maintenance & Repair (MMR) services.6. Incorrect computation of service tax demand.Issue-wise Detailed Analysis:1. Vagueness and Arbitrariness of the Show Cause Notice (SCN):The appellant argued that SCN I issued by the Department was vague and arbitrary as it failed to specify the category of service under which the demand was proposed. The tribunal found that the appellant did not cooperate with the investigation by not submitting requisite documents. The department had to conclude their investigations based on limited documents provided by the appellant. Therefore, the tribunal held that the SCN was not vague or arbitrary given the appellant's non-cooperative attitude.2. Classification of Services as Works Contract Services (WCS) or Erection, Commissioning, or Installation Services (ECIS):The appellant contended that the impugned order classified the service as WCS, whereas the demand was under ECIS. The tribunal noted that the department sought to classify the activity as both ECIS and/or WCS. The tribunal held that mentioning a wrong provision or non-mentioning of a provision does not invalidate an order if the authority had the requisite jurisdiction. Therefore, the tribunal upheld the finding that the appellant had provided Works Contract Services.3. Taxability of Services Rendered by Way of Installation and Commissioning of Firefighting Equipment:The appellant argued that the installation of firefighting equipment is non-commercial and hence not taxable. The tribunal found that the definition of works contract includes the installation of plant, machinery, equipment, structures, etc., and the commercial/non-commercial nature is not a requirement. However, since these activities were undertaken for the Public Works Department (PWD) and Central Public Works Department (CPWD), which are non-commercial in nature, the tribunal held that the services provided by the appellant prior to 01.07.2012 were exempted under clause (b) of the definition of works contract service.4. Exemption of Services Provided to Non-commercial Government Buildings:The appellant argued that the demand for the period 01.07.2012 to 31.03.2013 should be dropped as the services are exempted under Notification No. 25/2012-ST dated 20.06.2012. The tribunal agreed with this contention and held that the demand for this period is liable to be dropped.5. Demand Under Management, Maintenance & Repair (MMR) Services:The appellant contended that maintenance charges received for services rendered to non-commercial government buildings are not liable to service tax due to retrospective exemption provided by Section 98 of the Finance Act, 1994. The tribunal agreed and held that maintenance services provided to government buildings are covered by the retrospective amendment, exempting the demand for its maintenance.6. Incorrect Computation of Service Tax Demand:The appellant argued that the department wrongly took the opening value of debtors in the year 2011-12, and with the introduction of Point of Taxation Rules 2011, service tax is payable on an accrual basis. The tribunal did not specifically address this issue in detail but set aside the impugned order, effectively addressing the appellant's concerns.Conclusion:The tribunal concluded that the appellant was not liable to service tax on the provision of services to PWD/CPWD. Consequently, the impugned order was set aside, and the appeal was allowed. The tribunal pronounced the order in the open court on 23.08.2024.