2010 (5) TMI 337 - AT - Service Tax

Construction project classified as 'Works Contract Service' despite exemption arguments. Tribunal cites cost breakdown, Circulars, waivers.

The Tribunal classified the construction project as a 'Works Contract Service' for turnkey projects, rejecting the appellants' arguments for exemption ... Works Contract - construction of canal for conveying water for irrigation and though canal was a civil structure it was not meant for commerce or industry - works contract in respect of above works even if done through EPC(Engineering, Procurement & Construction) mode are exempt from payment of service tax – Held that: - waiver of the pre-deposit stay recovery thereof pending disposal of the appeal. Issues:Classification of the activity for service tax - Works Contract or Commercial/Industrial Construction ServiceAnalysis:The case involved the appellants, M/s. Ramky Infrastructure Ltd. and WPIL JV, executing a project for the Government of Andhra Pradesh involving the construction of a Low Level Canal Pumping Station. The Departmental Authorities concluded that the activity fell under 'Works Contract' and imposed service tax, along with penalties under sections 77 and 78 of the Finance Act, 1994. The appellants argued that the activity should be classified under 'Site Formation and Clearance, Excavation and Earth Moving and Demolition' or 'Commercial or Industrial Construction Service' to be exempt from tax. They also cited a CBEC Circular stating that canal systems under Government projects were not commercial activities. The Tribunal found the activity to be a turnkey/EPC project, falling under 'Works Contract Service' as per the Act's explanation. The Tribunal noted the percentage breakdown of the work and previous judgments waiving pre-deposit for similar cases involving the appellants.The appellants contended that the construction was not for commerce or industry, relying on Circulars and a previous Tribunal judgment. They argued against the classification under 'Works Contract' service and claimed exemption based on the nature of the project. The Tribunal, after reviewing the contract documents and arguments, determined the activity as falling under 'Works Contract Service' for turnkey projects, as specified in the Act's explanation. The Tribunal highlighted the percentage allocation of work costs and the absence of the cited CBEC Circular. Additionally, the Tribunal referenced a previous case where pre-deposit was waived for a similar project by the appellants, emphasizing the classification under 'Works Contract Service' and upholding the waiver of pre-deposit for the current case pending appeal disposal.