By TIOL News Service

MUMBAI, DEC 04, 2017: THE appellant entered into various contracts with PCMC, MIDC, PCNTDA, Nanded Waghala City Municipal Corporation etc. (NWCMC) for providing services of erection, commissioning or installation of electrical equipments such as conversion of HT/LT Overhead line to underground cable, installation of transformers, erection and fixing of street lights, shifting and fixing of HT/LT conductors etc. for which the appellants were receiving amount as already fixed by the above clients.

Although the appellant was paying service tax on certain activities under works contract service but during the period 2007-08 to 2010-11, they have not discharged the service tax on erection, installation and commission of street lights under the works contract.

Therefore, SCN was issued on 09.10.2012 wherein the demand of Rs.50,63,718/- was proposed on various services under the works contract.

Being aggrieved by the order-in-original confirming the demand and imposing penalties, the appellant is before the CESTAT.

The appellant submits that the demand was mainly raised in respect of installation of street light; that such service is in relation to road and which is not taxable under the works contract service. Reliance is placed on the Board Circular No. 123/05/2010 dt. 24.05.2010 and it is also argued that the demand is time barred as for the earlier period 2005-06 to 2006-07 SCN was issued on 16.4.2010; that since the activity of the appellant was known to the department, suppression of fact cannot be alleged.

The AR while supporting the impugned order submitted that the services of installation of street lights has nothing to do with road construction, therefore, such services cannot be related to road and fall under the exclusion category under the works contract service. As for limitation, the AR informed that the department had no occasion to know whether the appellant have rendered any other taxable service other than the service declared in ST-3 Returns, therefore there is a clear suppression of fact.

The Bench considered the submissions and inter alia observed -

A. Installation of Street Lights

Merits:

++ We do not agree with this submission of the appellant (that the service of installation of street lights is related to the road, therefore, it is excluded from the taxable service under the head of works contract)for the reason that the installation of street lights is totally an independent service which is nothing to do with the road construction , the street lights may or may not be required besides the road, therefore it is not related to construction of road. Accordingly, the service of installation of street lights, being an independent service, clearly falls under Works Contract service and during the relevant period it was taxable.

Limitation:

++ We find that though earlier show cause notice dt. 16.4.2010 was issued for the period 2005-06 to 2006-07 but the services being a contract service based on the independent contract. For the subsequent period, whether any similar services were provided or otherwise was not known to the department for the reason that the appellant had not declared the transaction of the works contract service for the period May 2007 to March 2011 to the department in their ST-3 return.

++ Moreover, once the department has initiated the proceedings and show cause notice dt. 16.4.2010 was issued, the appellant should have declared their transaction of taxable service to the department as they were made to understand that the installation service of street light is taxable. Therefore firstly appellant had not declared the transaction in their ST-3 return subsequently despite knowing the taxability of the said service, they have not come forward and informed to the department regarding the provision of service. In these circumstances there is a clear suppression of fact on the part of the appellant.

++ We uphold the demand of service tax in respect of installation of street lights under the head of works contract on merit as well as on limitation.

B. Shifting/laying of Cables for road widening

++ Such service is not taxable as per the Board Circular No. 123/05/2010 dt.24.5.2010.

+ Demand of Rs.8,919/- and corresponding interest and penalty set aside.

The appeal was disposed of.

In passing:

++ Section 65(105) –

"taxable service" means any service provided or to be provided, -

(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads , airports, railways, transport terminals, bridges, tunnels and dams.

++ Special provision for exemption in certain cases relating to management, etc., of roads [inserted by Finance Act, 2012]

97.  (1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive).

++ 24/2009 -ST, Dated: July 27, 2009

(See 2017-TIOL-4248-CESTAT-MUM)