AI Drafter 
TaxTMI 
TaxTMI 
2018 (7) TMI 620
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....mplexes built by assessee for Government organizations / agencies like Slum Clearance Board, Housing Board etc., Department takes the view that assessee is required to discharge service tax liabilities under CICS, Construction of Complex defined in Section 65 (30a) of the Act; (ii) With respect to works related to widening and deepening of canals, construction of flood protection wall, construction of storm water drain, construction of diversion channel etc. for Government agencies like water resources department, Government of Tamil Nadu Water Resources Department, Palar Basin Authority etc., Department took the view that these activities fall under the category of 'dredging service' as defined in Section 65 (36a) of the Finance Act, 1994 and hence service tax should have been discharged on the value of taxable service involved. (iii) Assessee had constructed civil structures / compound wall, retaining wall, pipe line works for TNSCB, on which activity, department took a view that that assessee should have discharged service tax liability under Commercial or Industrial Construction Services (CICS) as defined in Section 65 (25b) of the Act. For certain periods, such construct....
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....p;Rs 200 per day for non registration on M/s Ramalingam for non registration Penalty of Rs. 10,000 for non registration Penalty of Rs. 6,52,95,618 under Section 78 Construction for Royal Orchid Bangalore 4,27,079 4,27,079 Chennai Metro Development Authority I 1,71,125 1,71,125 (Confirmed totalling to Rs. 2,90,058) Chennai Metro Development Authority III 75,662 75,662 Public Works Department Trichy 43,271 43,271 Public Works Department Cuddalore 88,774 Not Confirmed Sriram Aveneue, Coimbatore 8,925 8,925 Pudhukottai Municipality - Shopping Complex 2,12,455 2,34,127 TOTAL 6,61,18,056 6,52,95,618 ST/40066/2014 SCN NO 108/2011 dated 18.10.2011 OIO No 08/2013 dated 7.10.2013 POD April 2010 to March 2011 Royal Orchid Bangalore 1,68,251 1,68,251 Interest Under Section 75 Penalty of Rs. 200 per or Rs. 10,000 under Section 77 for non registration Penalty of Rs. 10,000 for non- filing of ret....
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....,000 for non- TOTAL 2,03,65,809 2,03,65,809 filing of returns under Section 77 Equal Penalty under Section 78 ST/42180/2017 SCN 18/2016 dated 22.08.2016 OIO No 06/2017 dated 31.05.2017 POD 01.04.2013 to 31.03.2015 Karnataka Housing Board 2,47,91,740 2,47,91,740 Interest Under Section 75 Penalty of Rs. 10,000 for non- filing of returns under Section 77 Equal Penalty under Section 78 5. On 18.4.2018 when the matter came up for hearing, on behalf of the assessee, Ld. Advocate, Shri S. Muthuvenkatraman submitted oral and written submissions in respect of each disputed service and the projects that have come under the department's scanner. These arguments and submissions can be broadly summarized, project wise, as under : I) Activity alleged to be Dredging Service: In respect of this activity, various projects were undertaken by the assessee as under: 1. Southern Basin Package VII (Velacherry) 2. Package I (Kodungaiyur) 3. Package III (Buckingham canal) 4. Package II (Maduravoyyal) 5. South Buckingham Canal 1. Name of the Project : ....
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.... (ST/41748/2015).With regard to the above project, Ld. Advocate reiterated the submissions made in respect of Southern Basin Package Velacherry Project. It is also submitted that work undertaken by assessee is for improvement to Kodungaiyur drain from 3050m to 3450m (beneath) GNT Road), construction of diversion channel for surplus in Kollathur Tank to Madhavaram Tank, improvements to OtteriNullah like widening and construction of floor protection wall concrete bed lining; that construction of diversion channel from Kolathur Tank (Surplus water) to Madhavaram Tank beneath GNT Road so as to divert the same to OoteriNullah and widening the construction of flood protection wall to OoteriNullah. The presumption that OoteriNullah as a river is incorrect. The work undertaken by the assessee cannot be considered as dredging service in a river. The said project was merely a construction service and not dredging service as alleged. 3. Name of the Project :Package III (Buckingham Canal) Service Tax liability in respect of this project has been demanded in impugned orders No.8/2013-ST dt. 7.10.2013 (ST/40066/2014), 5/2014 dt. 28.3.2014 (ST/41599/2014) and 4/2015 dt.30.4.2015 (ST/41748/2....
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....oject service and held that Exemption Notification No.41/2009 is not applicable. The work undertaken by assessee is in no way connected with the dredging services and it is only draining of storm water to Cooum. Therefore it cannot be classified as dredging services. II (a) Arguments in respect of demand on construction of Residential complex to Karnataka Housing Board (KHB), Karnataka Airport Land Gulbarga, R1/V1 Quarters, Gadag, Thalikottai, Institute Hostel at Gulbarga, Suryanagar, Sheiqroza, Ragigudda. Demands in respect of these activities have been confirmed by adjudicating authority in impugned OIO dt. 28.09.2012 (ST/40066/2013), OIO dt. 7.10.2013 (ST/40066/2014), OIO dt. 28.3.2014 (ST/41559/2014), OIO dt.30.4.2015 (ST/41748/2015).Assessee had constructed residential units for the KHB Bangalore. In impugned order dt. 28.9.2012 (ST/40066/2013), adjudicating authority has rejected submission of assessee that such construction would be liable to tax only after 1.6.2007 and has demanded tax under Commercial Complex service. In the impugned order dt. 7.10.2013 (ST/40066/2014) adjudicating authority has denied benefits given in Master Circular 96/2005 dt. 23.08.2007 on the g....
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....ter 1.6.2007 Adjudicating authority has held that assessee is not entitled to benefits given in Master Circular No.96/2007 dt. 23.08.2007, on the ground that houses built for Slum Clearance Board are meant for sale to the allottees. Assessees reiterated the submissions made in respect of the demands made on Karnataka Housing Board (KHB) and Bangalore Development Authority (BDA) residential projects. * Assessee has constructed houses for TNSCB under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) towards slum clearance. * Post 01-07-2010 the service is exempt vide Notification No.28/2010- ST Dt.22-06-2010, wherein service tax on the construction of complex provided to JNNURM is exempt. Reliance is also placed on the decisions placed in SANTOSH KATIYAR Vs CCE, BHOPAL 2017 (3) GST 203 (Tri.-Del.) and CCE, Allahabad v. Ganesh Yadav 2017 (6) GSTL 428. III In respect of Management, Maintenance or Repair Services. (i) Repair and Renewal of Electrical Installation of Iron and Steel Market complex at Sathangadu - CMDA. Assessee had provided repairs and renewals of electrical installation of Iron and steel market complex at Sathangadu in relation to Ch....
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....and such other services similar to fire proofing. In the instant case, the assessee is only rendering service for firefighting. Therefore it cannot be said the definition includes the firefighting system. (iii) Residential Complex for Bangalore Development Authority (BDA) SCN dt. 22.08.2016 alleged that construction of residential complex to BDA will not fall under definition of rendering of service to government authority since it is not an activity in relation to entrusted to municipality / local authority, hence it is not exempted category provided in Notification 25/2012. Adjudicating authority in impugned order dt. 31.05.2017 (ST 42180/2017) has accepted the contention of assessee that BDA and KHB are government authorities. However, he has refused to grant exemption under Notification No.25/2012. It is the contention of assessee that the Adjudicating authority has failed to rely on serial No. 12(a) of the Notification No.25/2012 exempting a civil structure or any other original works meant predominantly for use other than for commerce industry or any other business or profession. In the instant case, the construction or original works under taken, rightly falling within....
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....ruction activity is related to road and hence they are exempted. The work had only done by their customer as the municipal authorities had procrastinated coverage of the drain. In impugned order dt. 7.10.2013 (Appeal ST/40066/2014), the demand has been made of Rs. 1,68,251/- in respect of the works of RCC cover of storm water drain inside compound of Royal Orchid Hotel Bangalore. Assessee submits that adjudicating authority proceeded on wrong presumption that storm water drain is inside the hotel whereas it was situated outside the hotel on the public road. (iv) Name of the Project : Rain water harvesting system at Arasur sub-station of Power Grid Corporation Ltd. The demand has been confirmed by the impugned orderdt.28.3.2014 (ST/41559/2014). The adjudicating authority has held that since the assessee has paid service tax it has to be held that they have accepted the classification as Works Contract Service. Assessee however submits that they had changed the classification and the taxability, however adjudicating authority had failed to consider the submission. (v) Name of the Project - Koyembedu Bus Terminal - Fire Fighting System . In the impugned order dt. 28.09.....
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....ter alia, a building or buildings having more than 12 residential units. Ld. AR referred to Master's circular No.96/2007 dt. 23.08.2007 to argue that the assessee having building the residential complex as contractor is liable to pay service tax on the gross amount charged for the construction service under the construction of complex category, the argument of assessee that there is no sale in the case of Slum Clearance Board and Housing Board building till the completion is over is also not relevant and their activities will definitely fall under the construction of complex service during the impugned period. ii) The housing buildings for Slum Clearance Board and Karnataka Housing Boards are for sale to the allottees. These Boards therefore are the promoter or developers and the assessees are the contractors, and in view Board's Circular No.108/02/2009-ST dt. 29.01.2009 they are very much liable for discharging the service tax liability under construction of complex services. iii) With regard to assessee's contention that construction of residential complex under JNNURM were exempt from tax from 2010 under Notification No.28/2010-ST dt. 22.06.2010, the adjudicating autho....
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....f extended period was very much present, penalty under Section 78 of the Finance Act, 1944 should have been compulsorily imposed. Hence action of the adjudicating authority to impose reduced penalty under section 76 of the Act instead of section 78 is not correct and legal and that part of the order requires to be modified to the extent of ordering imposition of penalty under Section 78 ibid. 7. Heard both sides and have gone through the records. 8. We intend to take up the issues one by one. 9.1 Dispute on activity alleged to be dredging Services Name of the Projects : 1. Southern Basin Package VII (Velacherry)- Rs. 2,52,64,423 2. Package I (Kodungaiyur) - Rs. 3,44,49,740 3. Package III (Buckingham canal)- Rs. 8,26,33,444/- 4. Package II (Maduravoyal) - Rs. 85,17,042/- 3. South Buckingham Canal- Rs. 21,53,012/- Period : 2010 - 2013 Total Demand : Rs. 15,30,17,661/- Impugned Order : 08/2013 dt. 07.10.2013, 05/2014 dt. 28.03.2014, 04/2015 dt. 30.04.2015, 5/2014 dt. 28.03.2014 Appeals : ST/40066/2014, ST/41559/2014, ST/41748/2015 'Dredging service', defined in Section 65 (36a) of the Finance ....
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....ine Dictionary "Dredge" (Verb) means : When people dredge a harbour, river, or other area of water, they remove mud and unwanted material from the bottom with a special machine in order to make it deeper or to look for something. The word 'dredging' (Noun) is explainedas: The process of clearing a channel or harbour by using a dredge A 'Dredger (Noun)' is described as: a machine, in the form a bucket ladder, grab or suction device, used to remove material from a riverbed, channel etc. The Origin of the word 'dredge' is explained as : prob.<MDu dregge, akin to drag A 'Dredger' is defined as: A dredger is a boat which is fitted with a special machine that is used to increase the size of harbours, rivers, and canals. 9.4.3 As per the Oxford Online Dictionary 'Dredge (Verb)' means, to : 1 Clear the bed of (a harbour, river, or other area of water) by scooping out mud, weeds, and rubbish with a dredge. 'the lower stretch of the river had been dredged' 'the dredging and deepening of the canal' 1.1 Bring up or clear (something) from a river, harbour, or other area of water with a dredge. 'mud was dredged out of ....
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....dictionary meanings of 'dredging' include removal of such unwanted material from bottom of a lake, canal also, however, the definition of 'dredging' in Section 65 (36a) of the Finance Act, 1994, restricts the scope of such activity only to a river, port, harbour, backwater or estuary. 9.6 It then appears to reason that not only are the two essentialities of the definition of 'dredging' under Section 65 (36a) of the Act namely, removal of material and such removal related to or while excavating, cleaning etc., required to be present in tandem, but also, such activity will require the use of a boat, ship etc. equipped with a dredger, or, at the very least, there has to be use of dredging apparatus for enabling the activity. 9.7 We now intend to test our increased understanding of the nature and scope of dredging to adjudge whether the activity performed by the assessee will fall within the scope of "dredging" for the purpose of the Finance Act, 1994. 9.8 The projects undertaken by the assessees which have been alleged to be conduct of dredging activities are (1) Southern Basin Package VII (Velacherry), (2) Package I (Kodungaiyur), (3) Package III (Buckingham canal), (4) Pack....
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....on 65 (36a) of the Act. While assessee has certainly performed the works of deepening, widening and construction of flood protection walls etc. using cement and steel, there are no attendant contracts to "dredge" From the facts and records there is also no narration that boats or ships equipped with dredgers or for that matter, any dredging apparatus or equipment was used by the assessees for clearing or deepening these water bodies. 9.11 Viewed in this light, the activities of the assessee in respect of the above mentioned projects cannot surely fall within the scope of "dredging services" for the purpose of the Finance Act, 1994. In the event, those part of the impugned orders relating to Appeals ST/40066/2014, ST/41559/2014, & ST/41748/2015 which concluded that the works performed by assessees related to the aforesaid projects fall within the scope of 'Dredging services" and have demanded service tax under that service category cannot be sustained and will have to be set aside, which we hereby do. Appeals made in this regard are allowed. So ordered. 10.1 Dispute on service tax liability in respect of construction of residential complex for Karnataka Housing Board (KHB) Ins....
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....idential complex, for TNPHCL for use of police personnel, and relying upon the CESTAT Bangalore decision in Nithesh Estates Ltd. Vs CCE & ST Bangalore - 2015 (40) STR 815 (Tri.-Bang.), has held that the houses so constructed rested with TNPHCL which is nothing but an extended arm of the Government and they are only meant for personal use. 10.5 Even after the negative list regime w.e.f. 1.7.2012, higher appellate forums have consistently held that services provided by contractors to Housing Boards, Local Development Authority under JNNRUM etc. there could be no service tax liability since such houses etc. were meant for residential purpose, was within exemption under Notification No.25/2012- ST. In Bharat Bhusan Gupta & Company Vs State of Haryana - 2016 (44) STR 195 (P&H), involving the construction of houses for Below Poverty Line (BPL) category persons, the Tribunal held that the Board was a governmental authority and that the BPL houses constructed by the appellants were meant for residential purposes and hence service provided by contractors was within exemption Clause 12 of Notification No. 25/2012- S.T., dated 20-6-2012, effective from 1-7-2012, and from that date Board co....
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....ps in such complex are leased out at some level of pricing. Hence the scope and purpose of the complex would only be commercial in nature. In the impugned order dt. 28.09.2012 it is brought out that appellant had not produced any documentary evidence to the contrary. Neither have they have done so before this forum. However, we note that from para 12.02 of the related SCN dt.21.10.2010 that appellants had undertaken the construction as a composite contract and received payment from June 2005 to October 2005. This being so, in view of the settled law as laid down by the Hon'ble Apex Court in the case of L&T Ltd. - 2015 (39) STR 913 (SC). These services will have to be treated as works construction service which cannot be exigible to service tax levy prior to 1.6.2007. For this reason, this demand cannot be sustained and is set aside. Appeal in this respect is allowed. So ordered. 11.4 Name of the Project : Sri Ram Avenue, Coimbatore Period : November 2005 to December 2005 Impugned Order : 05/2012 dt. 28.09.2012 Demand : Rs. 1,73,966/- Appeal :ST/40066/2013 From a perusal of the agreement found in page 693 of the compilation submitted by the appellant, it is seen th....
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.... relation to providing rain water harvesting system for the Power Grid Corporation sub-station is also an activity for a project which is being implemented in public interest through its designated special purpose vehicle specially created for creating and maintaining a power grid. Hence following the ratio of these decisions cited supra, we hold that the demand confirmed in the impugned order in respect of such projects requires to be set aside. Appeal in this regard succeeds. So ordered. 11.7 (a) Name of the Project : Repairs and Renewals of Electrical Installation in Iron and Steel Complex, Sathangadu for CMDA Period : October 2009 to March 2010 Impugned Order : 05/2012 dt. 28.09.2012 Demand : Rs. 75,662 Appeal :ST/40066/2013 11.7 (b) Name of the Project : Repairs and Renewals of Electrical Installation in Iron and Steel Complex, Sathangadu for CMDA Period : June 2010 to Sept 2010 Impugned order: 8/2013 dt. 7.10.2013 Demand: Rs. 1,92,114/- Appeal No. :ST/40066/2014 In respect of Appeal ST/40066/2013 (Impugned order dt. 28.09.2012), the SCN dt. 21.10.2010 at para 14 has proposed demand of service tax liability of Rs. 75,662/- in respect of this ac....
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....pellants have relied upon the case law of Marubeni India Pvt. Ltd. Vs CST, New Delhi - 2016 (45) STR 549 (Tri.- Del) wherein it has been held that adjudication beyond scope of SCN is not permissible, hence the related demand was set aside. In this case also, as the impugned order has gone beyond the scope of the SCN, having the effect of arbitrary classification of the service, the related demand of Rs. 1,71,125/- raised thereof cannot sustain and is set aside. Appeal in respect of this activity is allowed. So ordered. In respect of Appeal ST/40066/2014, the related SCN dt. 18.10.2011 proposed demand of service tax liability of Rs. 2,41,403/- under Erection, Commissioning or Installation Service (ECIS). The impugned order dt. 07.10.2013 has also confirmed on the same category. Evidently, the work of providing Fire Fighting System will come within the scope of Commissioning or Installation of equipment and falling within the fold of "ECIS" as defined in Section 65 (39a) of the Act. Though the fire fighting system has been installed for the CMDA, it appears to reason that the double level basement parking area would surely be used for commercial purposes by collection of parking f....
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....ess to serve as National Resource Centre for empowerment of such persons with multiple disabilities, surely then, these services cannot be made exigible to service tax under the Finance Act, 1994. In the event, that part of the impugned order confirming the above demand is set aside. Appeal in this regard succeeds. So ordered. 11.11 Name of works: (a) Provision of Fire Fighting system to RTC at CISF, Arakonam (b) Provision of Fire Fighting system to office of Commissioner of Police, Chennai Period : April 2011 to March 2012 Demand : Separately not quantified and is part of total demand of Rs. 10,42,668 Impugned Order No.05/2014 dt. 28.03.2014 Appeal : ST/41559/2014 The demands are not made separately but combined demand of Rs. 10,42,668/- made for the above services for provision of fire protection system. Discernably, the above services have been provided to Government or Government bodies and hence they cannot be subjected to service tax liability under Finance Act, 1994. The demand confirmed on this score will not sustain and is therefore is set aside. Appeal in this regard succeeds. So ordered. 11.12 Name of the Project :Services in relation to construct....