TaxTMI 
TaxTMI 
2019 (1) TMI 381
X X X X Extracts X X X X
X X X X Extracts X X X X
....oga for necessary processing and onward transmission and transportation to the customers. The agreement entered by appellant with RIL on 18.10.2006 narrates the reasons for entering into such agreement and the scope of work to be undertaken by the appellants was under: 1. Construction of onshore Terminal & Infrastructure work 2. Construction of Civil works for comprehensive Protected Water Supply Scheme (CPWS) Scheme at Gadimoga village. 3. Haul Road work. 4. Access Bridge to Workman Colony 5. Flyover Bridge 6. Road widening work 7. Other Common and infrastructure facilities The appellants were required to execute the above work and RIL was to provide with all the machinery and equipments. Appellant had registered themselves as service tax payer but did not pay the tax under an impression that OT which is developed for receiving and transportation of gas for further distribution and hence it would be exempted from payment of tax. After investigation, lower authorities issued a show cause dated 31.07.2008 directing the appellant show cause as to why the service tax be not demanded for consideration received under the category of commercial or industrial const....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce tax, hence there cannot be intention to evade. Department was aware of the transaction in 21.2.2007. A.5 Secondly, the department was already aware about the said activities at Onshore Terminal as the appellants vide their letter dated 5.3.2007, in reply to the department letter dated 21.2.2007, submitted list of various contractors undertaking the aforesaid activity and the amounts paid to them. A.6 Simultaneously, investigation was also started by Visakhapatnam Commissionerate in 2007 itself. A.7 Further, AG Audit was also undertaken during the month of October 2007, wherein contract and other related documents were sought by the department. The appellants duly submitted the contract along with other relevant documents. Even though all the relevant documents were available with department, DGCEI erroneously delayed the issuance of show cause notice and eventually issued the present show cause notice on 31.7.2008 by invoking extended period. Deficiency in the prescribed format of return form will not amount to non-disclosure on the part of the appellants A.8 In absence of any column in ST-3 Returns for declaring amount in relation to non-taxable services, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t could not have alleged suppression, when all the facts were disclosed in the returns and the assessee specifically claimed that it was not liable to pay any duty. There are figures on record from which appropriate inference could have been drawn by the Revenue. It is, therefore, the department's obligation to investigate and for that purpose, it possessed the requisite powers. If the department fails in that duty, it could not turn around and blame the assessee. 5. That is how the Commissioner (Appeals) approached the matter. The Tribunal endorsed this approach because it found that the same was not vitiated by any error of law apparent on the face of the record. The Tribunal referred to the judgment in the case of Northern Plastic Ltd. v. Collector of Customs and Central Excise -[1998 (101) E.L.T. 549 (S.C.)]. The Tribunal relied upon it because the principle enshrined therein had application to the case at hand. Meaning thereby, it did not blindly follow this principle. The principle is, when all the facts necessary to be disclosed by the assessee have been disclosed and there cannot be any allegation of suppression, then, the extended period of limitation cannot be in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the service tax leviable thereon under section 66 of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to a percentage specified in the corresponding entry in column (5) of the said Table, of the gross amount charged by such service provider for providing the said taxable service, subject to the relevant conditions specified in the corresponding entry in column (4) of the Table aforesaid: Table Sl. No. Sub-Clause of clause (105) of Section 65 Description of taxable service Conditions Percentage (1) (2) (3) (4) (5) 7. (zzq) Commercial or industrial construction service. This exemption shall not apply in such cases where the taxable services provided are only completion and finishing services in relation to building or civil structure, referred to in sub-clause (c) of clause (25b) of section 65 of the Finance Act. Explanation.- The gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service. 33 Provided that this notification shall not apply in cases where, - (i) the CEN....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intained. B.5 Reliance is placed upon Bharat Heavy Electricals Ltd., Vs. CCE, 2014 (34) STR 430 (T) (page 65-68 of the compilation) wherein it was held that even if there are more than one contract, abatement under the said Notification can be claimed for any one of the contract. "4.2 A plain reading of the Notifications clearly shows that the condition relating to non-availment of CENVAT credit on inputs/input services applies to "case" where CENVAT credit is taken either on the 'input' or 'input service', then the abatement under the aforesaid Notifications would not be available. In a "case" where the CENVAT credit on input/input service is not taken then the benefit of abatement would be available. The Notification uses the expression "in cases where". In other words, the Notification does not stipulate that in all cases, the condition of non-availment of CENVAT credit should be satisfied uniformly without exception. Therefore, in respect of a contract where the assessee has not taken input credit prior to 1-3-2006 and input/input service tax credit on or after 1-3-2006, the assessee would be rightly entitled for the benefit under the Notification No. 15/2004-S.T. as repl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch 1, 2005. It was argued that since building construction contract is a composite contract of providing services as well as supply of goods, the said notifications were issued for the convenience of the assessees. According to the Revenue, the purpose was to bifurcate the component of goods and services into 67% : 33% and to provide a ready formula for payment of service tax on 33% of the gross amount. It was submitted that this percentage of 33% attributing to service element was prescribed keeping in view that in the entire construction project, roughly 67% comprises the cost of material and 33% is the value of services. However, this figure of 67% was arrived at keeping in mind the totality of goods and materials that are used in a construction project. Therefore, it was incumbent upon the assessees to include the value of goods/material supplied free of cost by the service recipient as well otherwise it would create imbalance and disturb the analogy that is kept in mind while issuing the said notifications and in such a situation, the AO can deny the benefit of aforesaid notifications. This argument may look to be attractive in the first blush but on the reading of the notific....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh)] has held as under : "23. A close look at the Finance Act, 1994would show that the fixed taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines 'taxable service' as 'any service provided". Further, while referring to exemption notifications, it observed: "42. ...Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise." It is clear from the above that the service tax is to be levied in respect of 'taxable services' and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added. B.8 The abatement is not only given in the cases wherein the composite contract is involved but also to take care of situation wherein there could be a possibility of distortion of the CENVAT credit scheme. B.9 One example of the above situation is abatement in case of goods transport agency services. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the sub-clauses (105) of section 65; (2) When for any reason, a taxable service is prima facie, classifiable under two or more sub-clauses of clause (105) of section 65, classification shall be effected as follows :- (a) the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description; (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, in so far as this criterion is applicable; (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the sub-clauses which equally merits consideration;] (3) The provisions of this section shall not apply with effect from such date as the Central Government may, by notification, appoint. C.2 In para 10 of the show cause notice dated 31.7.2008, the department has analyzed whether the activity undertaken by the appellants can be covered under 'Works Contract Service', 'Erection, Comm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uctions/clarifications in Section 65A would be of no direct relevance. In any event, organising or arranging of tours is indisputably a service provided to tourists and not a service provided by the assessees to themselves." C.5 In the present case, the transaction many of the items involve non-taxable services such as 1. fabrication work, 2. construction of roads, 3. residential complex, 4. guest house for personal use, 5. water supply facility, 6. bridges, etc. C.6 Construction of guest house or residential complex for personal use is not taxable-reliance is placed upon- 1. P.B. Rathod Vs. CCE, [2015 (39) STR 650 (T) (Residential Quarters)] (page 104-106 of the Compilation) 2. Mittal Construction Vs CCE, [2018 (11) GSTL 334 (T) (Guest House)] (page 107 of the Compilation) C.7 Therefore, the present transaction shall not be governed by Section 65A (b) of the Finance Act, 1994. THE ACTIVITY UNDERTAKEN BY THE APPELLANTS IS NOT A CONSTRCUTION OF A 'NEW BUILDING' OR 'CIVIL STRUCTURE' OR 'PIPELINE' OR 'CONDUCIT', IN ANY CASE, THERE IS NO ALLEGATION IN THE SHOW CAUSE NOTICE TO THAT EFFECT D.1 Section 65(25b) of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of the terminal as the said terminal comprises of numerous other structures such as pipes, equipments, machineries, etc. In any case, majority of the work is fabrication of the pipes. Hence, the terminal as a whole cannot be considered as a 'building'. D.6 Further, the terminal constructed by the appellants is not a 'Civil Structure'. The term 'Civil Structure' in common parlance refers to a structure wherein cements and bricks are used. Whereas the 'terminal' in the present case, is an 'engineering structure' or a 'non-civil structure' comprising of pipes, equipment, machineries, roads, etc. Therefore, the said activity is not on civil structure. D.7 Also, the activity in the present case is not construction of a 'pipeline' or 'conduit'. As admittedly, the appellants has constructed the terminal as a whole and is not concerned with the laying of pipeline from the terminal to the end users and the said activity is not forming part of the present dispute. It is the terminal that has been constructed and therefore there is no construction of 'pipeline' or 'conduit' per se. D.8 There is no averment in the show cause notice that the activity undertaken in the present case is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h contract is for the purposes of carrying out, - (a) 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 (b) 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 (c) construction of a new residential complex or a part thereof; or (d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects". ...Emphasis supplied. E.3 Unlike works contract, the other taxable category will not include a composite activity of engineering, procurement ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....istributed. ETYMOLOGY: 19c in adj sense 1; 15c in obsolete heraldic sense: from Latin terminals, from terminus boundary." b) Illustrated Oxford Dictionary 6. an installation where oil is stored at the end of a pipeline or at a port. c) The American Heritage Dictionary of English Language a terminus either end of a railroad or other transportation line, a boundary or border d) Cambridge International Dictionary of English the area or building at a station, airport or port which is used by passengers leaving or arriving by train, aircraft or ship. e) Under the Integrated Planning Act, 1997 (a statute passed under the laws of Australia), transport terminal has been defined to mean as under: "Premises" used for the transport of goods and people, including the loading, unloading and temporary storage of goods. The term also includes the garaging and routine servicing of vehicles engaged in the transport of such goods and people. F.7 The term 'terminal' as defined in the Transport Geography Glossary compiled by Dr. Jean Paul Rodrigue, Dept. of Economics & Geography, Hofstra University is as under: Terminal. Any location where freight and passengers either....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eat the gas Gas dehydration package Removal of water MEG Regeneration Recirculation of MEG F.13 The above facilities enable the terminal to carry out processing of natural gas; such processing being activities undertaken to make the said gas transportable. Using the above facilities, the terminal receives gas from the offshore facilities, dehydrates (removal of moisture, free water and MEG) the gas to make it suitable for onward transportation (meeting sales specifications) and feeding the gas into the cross-country transportation pipeline. F.14 All gas transport terminals receiving gas from deepwater offshore wells and transported to customer through cross country pipelines would have same or similar facilities and it is the presence of these facilities that goes to establish that the main activity of the said terminal is transportation. F.15 Taking into consideration the industry practices, it is beyond any doubt that the said onshore terminal of RIL at Gadimoga is a 'transport terminal' which receives natural gas from offshore deepwater fields, removes the impurities and transports dry gas through cross country pipelines and the services of construction of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther originates, terminates, or is handled in the transportation process. Thus, it can be a place where either the transportation of goods/passengers 'originates', or where the transportation of goods/passengers 'terminates' or a place where goods/passengers are handled. Unidirectional movement of goods/passengers will not make any difference. 2. Further, nowhere in the said Article, it has been mentioned that there has to be arrival of passengers or freight from different destinations and dispersal to different destinations. Such inference has been wrongly derived from the said article as the terms used in 'originates', 'terminates', or 'handled' and not 'originates', 'terminates', and 'handled'. The term 'or' cannot be used as 'and' for the purposes of interpretation. 3. Concept of 'transport terminal' is exhaustive, it cannot be limited to Airports, railways, bus terminals, etc. There are number of articles including that of Dr. Jean Paul Rodrigue and Dr. Brian Slack that specifically state that 'transportation through pipelines' is a worldwide phenomenon. Some of such articles are as under: a. 'Transportation Modes: An Overview' by Brian Slack, Dr. Jean- Paul Rodrigue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otification nowhere implies that CICS in relation to construction of public port only eligible for exemption. Service (CICS) rendered in relation to construction of other port and eligible for benefit of full exemption under Notification No. 25/2007-S.T. G.5 The Appellant places reliance on the decision of the Hon'ble Tribunal in CST, Ahmedabad v. Shilpa Constructions Pvt. Ltd. reported at 2010 (19) STR 830 (Tri. Ahmd.) (page 308-310 of the Compilation) wherein the respondents constructed a driveway in a petrol pump and paid service tax on the same. Subsequently, they filed an application for refund on the grounds that they had paid it wrongly for the construction of road which is exclude from the category of "Commercial and Industrial Construction" as defined under clause (25b) of the Section 65 of the Finance Act, 1994. While allowing the said exclusion to them, the Hon'ble CESTAT observed as follows: "7. After carefully considering the submissions made by both the sides we find that it is an admitted fact by both the sides that the construction of road does not require payment of service tax. The Revenue's only appeal is that construction of driveway cannot be equated with....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch are susceptible to analogous meaning. Each of the words have a different meaning. H.2 The rule of 'ejusdem generis' is also not applicable to the words covered by the notification because 'ejusdem generis' is a specific application of the broader principle of 'Noscitur a sociis' ; none of the nine words contained in the notification are specific words which originate from a particular genus; each word is an independent term having a defined scope. H.3 In the instant case, the only underlying thread between the terms covered in the definition of 'Commercial or Industrial Construction Service' referred supra is that all these are 'infrastructure projects' and the intention of legislature to provide for the exclusion from levy was because these are infrastructure projects and not because these are 'public utility projects'. H.4 The exclusion from levy was provided by the legislature because these were infrastructure projects, the Appellants rely on Para 6.4.1 of TRU letter DOF No. 334/1/2007-TRU dt 28.02.2007, extracted below: "Works contract in respect of specified infrastructure projects namely roads, airports, railways, transport terminals, bridges, tunnels and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cture projects would independently be excluded from the levy of service tax under excluded categories of "road", "bridge", "dam" etc. I.6 Without prejudice, the said infrastructure facilities being construed by the Appellants are merely incidental and ancillary to the onshore terminal. It is well settled that incidentals will never determine or decide the classification. In fact, the said incidentals will not influence or alter the classification for the reason that they are not predominant or equally significant to the main activity undertaken by the Appellants i.e. the development of the onshore gas transport terminal. I.7 The onshore terminal and the related infrastructural facilities are so integrally connected and inter linked that the said infrastructure facilities are ancillary to the transportation of gas. Moreover, the entire plant has to be construed as one whole integrated unit for receiving, processing and transporting gas. I.8 Therefore, the aforesaid activities undertaken by the Appellants would not be liable to service tax under taxable head of 'commercial or industrial construction' service as defined under the Finance act, 1994. COMMISSIONER, HYDERABAD-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l the relevant documents were available with department, DGCEI erroneously delayed the issuance of show cause notice and eventually issued the present show cause notice on 31.7.2008 by invoking extended period. N. No penalty is imposable under Section 78 of the Act as there was no suppression of facts or intention on the part of the Appellants to evade payment of duty; In any case, penalty under both Section 76 & 78 not payable. Reliance is placed upon CST Vs. Motor World - 2012 (27) STR 225 (Kar.) (Page 408-422 of the Compilation). O. Without prejudice, Appellant is entitled to waiver of penalties under Section 80 of the Act. DEPARTMENT APPEAL NO. ST/314/2009. The Assessee is entitled to claim the benefit of cum tax. P. The Order-in-Original has rightly allowed the benefit of cum tax on the count that the Appellant was not collecting any service tax in all the cases of demand of service tax. The cum-tax benefit should be extended to the Appellant and the taxable value quantified by the department was correctly treated as being inclusive of service tax for the purpose of modifying the service tax demand. In support of this reliance is placed on the following: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thin normal period of one year were 23/10/2008 and 23/4/2009 respectively, for the periods 4/07 to 9/07 and 10/07 to 3/08. Thus, extended period has been invoked only in respect of the assessment period from 9/06 to 3/07. The objection raised is pertinent only for this period. (ii) Kind attention is invited to Paras 2.5.1 to 2.5.8 of the written submissions filed on 11/9/2018 on behalf of Revenue. The suppression aspect has been clearly brought out in these submissions. In the light of the internal correspondence it is clear that the concerned officials were of the view that L&T was liable to pay the ST for the construction of OT for RIL but were forced to claim waiver from tax as RIL held a contrary view. Hence, L&T cannot claim any bonafide belief that ST was not payable. (iii) Bid document of May 2006 did not contain any mention about tax 'exemption' for the subject services rendered by L&T. The subject clause was introduced only in the Contract dated 18/10/2006. Legal opinion from Shri K. Vaitheeswaran was obtained on 23/10/2006 i.e. after the signing of the contract. (iv) Legal opinion of Shri K. Vaitheeswaran dated 23/10/2006 also clearly indicates that he was of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f OT. Statement of Shri Udaybhaskar dated 1/4/2008 refers in this context. Detailed scope of work clearly points to substantial civil construction activity, such as pile foundation, base civil structure for erection of equipment, pipes connecting processing chambers and construction of buildings. It was for this reason, L&T themselves had classified the service of construction of OT under CICS and the same has been accepted by the Department. Hence, classification under CICS correct in terms of section 65A (2) (b). 5. Point No. 4: Section 65A (2)(b) is only applicable on two or more taxable service and not in case where non-taxable services are also involved. Submissions: (i) Construction of OT is the service rendered by L&T to RIL. The contract in question was a simpliciter service contract since all materials were provided by RIL. It was not a turn-key project for this reason. (ii) Nevertheless, the service rendered by L&T was in the nature of a composite service comprising more than one service. It was a combination of different services such as, civil construction, laying of pipes, erection, commissioning and installation of equipments. (iii) Since L&T is essentiall....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a running pipeline is incident in the present case. (iv) The decision of the Mumbai Bench of the Hon'ble Tribunal in the case of Afcons Infrastructure is squarely applicable as far as the issue whether the constructed by L&T for RIL is a transport terminal is concerned. The OT in question is the same as in the present case. 8. Point No. 7: Commissioner Hyderabad II has no jurisdiction to demand ST in the instant case. Submissions: This point is exhaustively dealt with in paras 2.3.1 to 2.3.10 of written submissions filed on 1/9/2018 on behalf of Revenue. These submissions may kindly be given due consideration. 9. Point No. 8: Penalty/ interest are not attracted. Submissions: (i) L&T deliberately suppressed the fact of rendering the services in respect of the OT project and did not declare to the officer with whom they were registered that they were not paying duty since the OT was a 'transport terminal'. (ii) L&T cannot claim bonafide belief as a defence since they were aware that the OT constructed for RIL was in fact a manufacturing facility. They were fully aware of the ST liability for the services rendered to RIL but deliberately did not discharge the liabil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....site one involving construction, erection, commissioning and installation of plant equipment, structure, instrumental, electrical, etc.,; it is nobody's case that services rendered under contract can be bifurcated activity wise for the tax implication; Revenue Authorities as well as the appellants were unanimous in their submissions that the entirety of the contract is to be taken as a single indivisible contract and taxability thereof or otherwise should be decided. In terms of contract, appellant was to construct a gas processing plant with certain alloyed facilities called as OT. 8. The appellant was also to undertake the construction of certain common and infrastructure facility such as helipad; hanger; ATF refuelling facility; Radio room, portable water treatment system, permanent facilities like canteen building, office building, first aid centre; security control room; swipe and control access system; permanent warehouses; administrative buildings; accommodation buildings; health centre; construction of road; widening of road; construction of flyover as also construction of civil works for comprehensive protected water supply. 9. At the threshold the appellant has subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... property in goods. The reason for excluding the service from the head "Erection Commissioning or Installation Services", was that the appellant was not a "Commissioning and Installation Agency". The allegation in the notice is that activity of appellant is CICS, Strenuously challenged by appellant contending that the essential character of the composite service was that of ECIS services, we need to look in to that before coming to a conclusion. 11. The appellant has contended that applying the essential character test in terms of Section 65A(2)(b), to the contract awarded to it, the service would be aptly classified under the head of ECIS and not under the head of CICS/WCS. It has been contended that in any ECIS contract, construction is imperative for the purchase of commissioning and installing the plant, machinery, equipment. Reliance in this regards has been placed on CBEC clarification issued pursuant to the Finance Bill 2004-05 being introduced explaining the scope and ambit of Erection services which was added to the head of Commissioning and Installation services. The relevant extract of the clarification is reproduced here for ease of reference. 14. Extension of ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estion. The submission of the appellant before us that most of the work carried out was in the nature of ECIS services is not supported by any verifiable data or facts and figures. In the course of hearing we were shown a video presentation of the entire facility in which the work was carried out, but we are unable to take cognizance of such a presentation in the absence of facts and figures. Learned Counsel for Revenue has rightly submitted that in a pure service contract which is based on cost plus model, as is in the instant case, the essential character of the service rendered can be derived from details of the man hours spent for each activity along with the cost of such manpower. In our view this aspect needs consideration except in appeal No. ST/30275/2016, to determine the essential character of the service rendered under the composite contract on the aforesaid basis. 14. Insofar as appeal No. ST/30275/2016 is concerned, the demand has been confirmed under the head WCS. This demand is unsustainable, as admittedly the contract awarded to appellant, is a pure service contract and does not involve any transfer of property in the goods involved in the execution of the contra....