2025 (11) TMI 603 - AT - Service Tax

Contractor's construction of TTMCs qualifies as transport terminal works, shifting burden to Revenue; Revenue's appeal dismissed

Commissioner of GST and Central Excise Versus M/s. Consolidated Construction Consortium Ltd.

CESTAT held that the contractor's construction of Traffic and Transit Management Centers (TTMCs) qualified as works for a transport terminal and fell ... Levy of service tax - applicability of exclusion to ‘transport terminal’ provided in Section 65(105)(zzza) - construction of Traffic and Transit Management Centers (TTMC) - construction of bus terminals appeared to have not been recognised as a separate activity - invocation of extended period of limitation - HELD THAT:- Admittedly, the show cause itself states that BMTC is a State Government Public Transport Service Undertaking and engaged in providing public transportation to the city and sub-urban population in and around Bangalore. It is also conceded in the SCN that as part of the development of urban infrastructure stated in the Comprehensive Traffic & Transportation Plan for Bangalore and vision plan under Jawaharlal Nehru National Urban Renewal Mission, M/s. BMTC Bangalore has started construction of the ‘ Traffic and Transit Management Centers’ in different localities of Bangalore. The funding of the project too is entirely by the Government of India, Government of Karnataka and the aforementioned State Government Public Transport Service Undertaking BMTC in the proportion of 35%, 15% and 50% respectively. In this background, BMTC has contracted the Respondent by way of agreement No.2/08-09 dated 23.07.2008 to construct the TTMCs as per the plan provided by BMTC. The fact that the construction of TTMCs attract the levy of VAT and accordingly the Respondent is discharging its sales tax liability is also not in dispute. It is also seen from the statements given by the Senior Manager (Accounts), General Manager (Finance) of the Respondent that they have not only expressed their bonafide belief that the said TTMCs are meant as bus terminals, bus depots and office space for providing passenger amenities, but also stated that they are constructing as per the plan and design provided by BMTC and that it is only subsequent to their construction activity nearing completion that BMTC had issued advertisement calling for expression of interest for renting the structures. Evidently, when the agreement was entered, it was only for construction of TTMC, which for all purposes of the Respondent were bus Terminals/bus depots according to which the appellant has provided the works contract service. When BMTC itself has issued a notification only subsequently on 07.09.2010, inviting expression of interest while exploring options of operating and maintain the commercial space, that cannot be held to the detriment of the Respondent, as it cannot be attributed with the prescience to know what the service recipient, namely, BMTC, is intending to do with the structure it was contracted to construct. Incidentally, the said notification also reflects that BMTC itself has held out that the essential character of the TTMC is that of a Bus Terminal and Bus Depot to provide all facilities/services to the travelling public under a single roof and such portrayal by BMTC also independently corroborates the Respondent’s contention that it was under the belief that it is being contracted to construct a bus terminal. In the instant case when the appellant is under a belief that it is not within the ambit of the taxable service due to the exclusion in the definition, unlike an exemption notification which has mandated conditions which the appellant would have the burden to prove that it has fulfilled, the burden of proof on the appellant is only to show wherefrom such belief has stemmed. Once the appellant discharges its burden of proof in this regard, then the onus would shift on the Revenue to prove that the belief of the appellant is incorrect - when Revenue is alleging that TTMC is not a transport terminal, it is for the Revenue to prove the same. It is a settled principle of law that the onus to prove rests heavily on the person who is alleging it - there is no evidence let in by the Revenue that the law itself empowers revenue to embark on such a methodology of determination of what constitutes a Transport Terminal, much less an evidence let in also to show that the approved plan for construction of TTMC would reflect that the building is primarily to be used for commerce or industry. Once the Tribunal has indicated its view and expressed that the submissions are not in line with the grounds raised, learned authorised representative should then desist from advancing further submissions by returning to repetition of the same, albeit couched differently. The Tribunal is conscious that its decisions are to be rendered only after due and proper consideration and is at all times cognizant of the arguments addressed before it. Persistence in pressing submissions after the Tribunal has expressed its inclination, serves no constructive purpose and is incompatible with the decorous conduct of proceedings - The smooth administration of justice is best secured when the Bench and the representatives of the rival parties before the Tribunal act in concert, guided by mutual respect and adherence to the best traditions befitting the Tribunal. The appeal preferred by the Revenue is rejected as devoid of merits. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether construction of Traffic and Transit Management Centres (TTMCs) executed under a Government/urban infrastructure project is excluded from 'works contract service' by virtue of the statutory exclusion for 'transport terminals' in the definition of works contract. 2. When a construction project combines transport-related facilities and commercial/retail/leasable spaces, how is the 'essential character' test under Section 65A(2) to be applied for classification between excluded transport-terminal construction and taxable commercial/industrial construction? 3. Whether the Revenue discharged the burden of proof required to deny the statutory exclusion and invoke service tax on the works contract. 4. Whether invocation of the extended period of limitation was justified on the facts, including allegations of suppression or wilful evasion. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Applicability of statutory exclusion for 'transport terminals' to TTMC construction Legal framework: The definition of 'taxable service' for works contract expressly excludes works contracts in respect of 'roads, airports, railways, transport terminals, bridges, tunnels and dams.' Classification rules (statutory rule analogous to Section 65A(2)) require preference to the most specific sub-clause and, for composite services, classification according to the service giving them their essential character. Precedent treatment: Tribunal authority considering similar TTMC projects has held that constructed facilities serving means of public transport remain within the exclusion despite incorporation of commercial outlets; higher-court principles on strict interpretation of taxation statutes were applied to favour the assessee where statutory language was plain. Interpretation and reasoning: The Court assessed the project context (JNNURM urban-infrastructure scheme, government funding, contract terms and project plans) and factual matrix showing that TTMCs were conceived and contracted as transport infrastructure (bus terminals, depots, passenger amenities, inter-modal connectivity). The Court rejected a narrow or purposive re-definition by the Revenue that would treat commercial outlets as converting the essential character to commercial complex. Absent statutory qualification of 'transport terminal,' the term must be read in its ordinary/commercial sense and not artificially dissected; the presence of ancillary commercial facilities is customary and incidental to modern transport terminals and does not, without legislative indication, oust the exclusion. Ratio vs. Obiter: Ratio - Where a works contract is awarded to construct a legally and factually envisaged transport terminal under public infrastructure project, inclusion of ancillary commercial amenities does not by itself change the essential character so as to remove the statutory exclusion from works contract service. Obiter - Observations on comparative attributes between airports and bus terminals and on commerciality as a policy matter. Conclusion: The construction of TTMCs as undertaken qualified as works in respect of transport terminals and fell within the exclusion; the adjudicating authority correctly dropped the demand on this ground. Issue 2 - Application of the 'essential character' test for composite constructions Legal framework: Statutory classification rules require preference for the most specific description and, for composite services, classification according to the service that gives them their essential character. Precedent treatment: The Court relied on established principles that taxing statutes are to be strictly construed and ambiguities resolved in favour of the taxpayer; administrative attempts to import quantitative thresholds or artificial demarcations without legislative basis are impermissible. Interpretation and reasoning: The Tribunal accepted that modern transport terminals routinely include retail, food courts, parking and other revenue-generating facilities, and held these to be incidental to the primary transport function. The essential character test was applied by examining the contractual purpose, funding, project conception and the plan provided by the service recipient. The Court emphasized that classification must reflect the objective character of the contracted construction and that the statutory exclusion for transport terminals carries no built-in proviso allowing Revenue to vivisect a single contract into taxable commercial portions solely because some built-up area is later leased. Ratio vs. Obiter: Ratio - Essential character is determined from the contract, statutory language and project context; incidental commercial components do not displace an otherwise transport-terminal character. Obiter - Remarks on commercial leasing post-construction and on inadmissibility of administrative apportionment absent legislative mandate. Conclusion: The essential-character analysis supported the view that TTMC construction remained a transport-terminal activity and not a taxable commercial/industrial construction. Issue 3 - Burden and onus of proof when Revenue alleges exclusion is not attracted Legal framework: On questions of taxability, the burden of proof lies on the Revenue to bring the assessee within the ambit of the levy; where an assessee relies on a statutory exclusion, it must show the basis of its belief, after which evidentiary onus may shift to Revenue to displace that belief. Precedent treatment: Court reiterated established distinctions between burden of proof and onus of adducing evidence in tax matters and the principle that Revenue must prove facts enabling taxation; administrative circulars or letters cannot supplant the statutory wording. Interpretation and reasoning: The Tribunal found that the assessee demonstrated its belief in non-taxability by reference to the plain statutory exclusion and to contractual/plan documents; Revenue failed to produce evidence (e.g., approved plan reflecting primary commercial use or other material) sufficient to prove that the construction was primarily for commerce or industry. Reliance by Revenue on post-construction advertising by the project owner to lease space was held insufficient to attribute prescience to the contractor or to rebut the contractor's bona fide position established at contracting. Ratio vs. Obiter: Ratio - Revenue bears the primary burden to prove that a contracted construction does not fall within the statutory exclusion; absence of persuasive evidence warrants acceptance of the assessee's position. Obiter - Observations on the limits of administrative letters and the evidentiary value of post-contract commercialization. Conclusion: Revenue did not discharge its burden; the adjudicating authority correctly declined to tax the contractor. Issue 4 - Invoking extended limitation period and allegations of suppression/wilful evasion Legal framework: Extended limitation (for invoking longer period) requires positive material showing suppression or wilful misstatement; mere post-facto indications of commercial utilization are insufficient without proof of concealment when the assessee acted on a bona fide belief of non-taxability. Precedent treatment: The Court applied binding principles that allegations of suppression must be proved with cogent evidence and that onus lies on Revenue to demonstrate malafide or concealment to justify extended limitation. Interpretation and reasoning: The Tribunal recorded contemporaneous statements and contract documents indicating the contractor's bona fide belief that the project was exempt as a transport terminal. The Court discounted threats or suggestions of prosecution recorded during inquiries as affecting voluntariness and found no positive act of suppression; internal and statutory audits and returns were also said to have reflected exempted-service reporting. Therefore, invoking the extended limitation lacked basis. Ratio vs. Obiter: Ratio - Extended limitation cannot be invoked in the absence of demonstrable suppression or wilful misstatement by the assessee; constructive or speculative inferences do not suffice. Obiter - Comments on probative weight of audit/statement evidence and prosecutorial cautions. Conclusion: Extended period of limitation was not invokable on the facts; allegations of wilful evasion were unsubstantiated. Overall conclusion The adjudicating authority's detailed findings that the TTMC construction formed part of excluded 'transport terminal' works and that Revenue failed to discharge the burden to demonstrate otherwise are legally sustainable. The appeal by Revenue was dismissed as lacking merit. The Tribunal also cautioned that representatives must confine arguments to cases made out in show-cause proceedings and conduct advocacy consistent with duties to the Tribunal.