ST - Construction of Podium, Wall Panel for Power Generation Co is taxable as MAHAGENCO is engaged in power generation which is commercial activity: CESTAT
By TIOL News Service
MUMBAI, DEC 19, 2017: THE following are the demands of service tax and penalties made and confirmed against the assessee for which they have filed an appeal before the CESTAT -
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Services
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Service Tax Amount
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Penalty
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Management, Maintenance or Repair for goods, equipments or Properties
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Rs.21,95,371/-
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Rs. 200/- per day or @ 5% of such tax per month u/s 76 of the Finance Act.
Rs.5,000/- u/s 77 of the Finance Act.
Rs.50,67,445/- u/s 78 of the Finance Act.
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| Cleaning Service |
Rs.3,99,722/-
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| Commercial and Industrial Construction Service |
Rs.13,84,423/-
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| Work Contract Service |
Rs.9,68,838/-
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| Transport of Goods by Road Service |
Rs.1,19,091/-
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The appellant submits that they are not contesting the service tax demand of Rs.9,68,838/- in respect of Works Contract Service and Rs.1,19,091/- in respect of Transport of Goods by Road Service .
A) As regard Management, Maintenance or Repair for goods, Equipment or Property service (demand of Rs.21,95,371/-), it is submitted that this service was provided to Government Medical College, Nagpur which is maintained by Public Works Department of Government of Maharashtra and it is non- commercial in nature; therefore it is a non-commercial building. That they also provided the said service to Visvesvaraya National Institute of Technology, Nagpur, which is a Public Engineering Research Institution and is non-commercial and owned by Government. As regard the service provided to Central Railway, it is for residential quarters, which is non-commercial Government Building. Even work at Ajni viz. Replacement of corroded pipeline by new pipe lines and replacement of tank by new RCC underground was provided to Indian Railways which is a non-commercial Government property, therefore the management, maintenance or repair service provided in respect of non-commercial Government building is non-taxable as per retrospective exemption from 16.6.2005 to 1.7.2012 in terms of Section 98 of the FA, 1994.
B) As regard demand of Rs.3,99,722/- in respect of Cleaning Service, it is submitted that the said service was also provided to Ravi Bhavan (Chief Minister Secretariat), Hyderabad House (Dy. Chief Minister Office) and cleaning of MLA Hostel rooms, hall, and passage which are non-commercial Government buildings, therefore, this service is not liable for service tax.
C) The alleged Commercial and Industrial construction service, is in respect of making 18 rooms Guest House at Visvesvaraya National Institute of Technology, Nagpur which is a activity of non-commercial in nature, the same is not liable for service tax. Construction service provided in respect of construction of Podium, Wall panel etc. for Maharashtra State Power Generation Company Limited which is owned by State Government & Construction service provided in respect of residential complex of 14 flats for M/s. Karamchand Thapar & Brothers Ltd. i.e. for residence of Directors/Officers of the Company is also not taxable. Reliance placed in support on the decisions in Harsh Constructions Pvt. Ltd. - 2014-TIOL-2295-CESTAT-MUM and Mall Enterprises - 2015-TIOL-2210-CESTAT-MUM.
The AR reiterated the findings of the impugned order.
The Bench inter alia observed –
Merits:
A) Since the service provided in relation to Government building which is not for commercial purpose, the service of management, maintenance or repair of non-commercial Government buildings is exempted for the period from 16.6.2005 to 1.7.2012 in terms of Section 98 of the Finance Act, 1994. Therefore the demand of Rs.21,95,371/- is not sustainable, accordingly the said demand is set aside.
B) From the plain reading of the definition of “cleaning activity” it can be seen that only that cleaning activity is taxable which is provided in respect of the commercial or industrial buildings and premises thereof or factory, plant or machinery, tank or reservoir of such commercial or industrial buildings and such premises thereof. As the building and premises for which cleaning service was provided are Government building/premises which is non-commercial Government building, hence the same is not taxable. Accordingly, the demand of Rs.3,99,722/- in respect of cleaning service is set aside.
C) As regard demand of Rs.13,84,423/- in respect of commercial and industrial construction service, this service was provided in respect of guest house and canteen of Visvesvaraya National Institute of Technology, Nagpur which is an activity of non-commercial in nature. Therefore being a construction of non-commercial building, same will not fall under the category of commercial and industrial construction service, hence the same is not taxable. [Harsh Constructions Pvt. Ltd. - 2014-TIOL-2295-CESTAT-MUM relied upon.]
C.1) A part of the construction service was provided in respect of construction of Podium, Wall Panel etc. for Maharashtra State Power Generation Company Limited (MAHAGENCO).MAHAGENCO is a independent company which is engaged in generation of power which is a commercial activity, therefore, construction service provided to MAHAGENCO cannot be said to be a service of construction of non-commercial Government building, therefore, in our view the construction service provided for MAHAGENCO is taxable.
C.2) Similarly construction of residential complex of 14 flats was provided for company M/s. Karamchand Thapar & Brothers Ltd. for residence of Directors/Officers of the Company. Even though it is a residential building but it belongs to a company and the building is used in relation to overall business of the company. Therefore, it cannot be said that it is non-commercial building, therefore, the construction of residential complex for M/s. Karamchand Thapar & Brothers Ltd. is liable for service tax.
D) As regards the demand of Rs.9,68,838/- in works contract service and Rs.1,19,091/- Transport of Goods by Road Service, the appellant are not contesting the said demand, therefore, the same is upheld.
Penalty:
Major portion of the demand has been set aside and the issue involved is of interpretation of law. A part of the demand is paid by the appellant along with interest. Taking into consideration these facts, appellants are not liable to penalty under Section 78 by invoking Section 80 of the Finance Act, 1994.
The appeal was partly allowed.
(See 2017-TIOL-4450-CESTAT-MUM)
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