2020 (2) TMI 110 - AT - Service Tax

Erection installation and commissioning services - benefit of N/N. 25/2012-ST dated 20.6.2012 - exemption under Works Contract Service - the primary defense of the appellant is that the activity under taken by them does not fall under the category of ECIS - HELD THAT - The Hon ble High Court of Madras relied on the decision of Larger Bench of tribunal in M/S. LANCO INFRATECH LTD. AND OTHERS VERSUS VERSUS CC CE ST HYDERABAD 2015 (5) TMI 37 - CESTAT BANGALORE (LB) where it was held that the assessee was entrusted with the task of laying a long distance pipeline to enable the Tamil Nadu Water Supply and Drainage Board to supply water. It was an activity in public interest to take care of the civic amenities liable to be provided by the State. Therefore the Tribunal was right in holding in favour of the assessee - thus the activities under taken by the appellant cannot be classified under ECIS. The other arguments of revenue regarding classification of services under Works Contract Service or Commercial or Industrial Construction Service become irrelevant as no demand under the said head has been raised by revenue. No charge for classification of the serviced provided by the appellant under the head of Works Contract or Commercial or Industrial Construction Service has been made against the appellant. In these circumstances we are unable to uphold the demand raised against the appellant in respect of activities relating to laying of pipelines for Surat Municipal Corporation Gujarat Water Supply and Sewerage Board ( GWSSB) Canal Division NHAI And M/s. Surat Urban Development Authority. The revenue has also argued that in some cases the appellant have acted as sub-contractor and not as main contractor. We find that the said argument is of no use as the demand has been raised solely under the category of ECIS The specific clarity of charge has been made to levy Service Tax under the category of Business Auxiliary Service and no prejudice is caused to the appellant on account of this the demand under the head of Business Auxiliary Service is confirmed. The interest and penalty in respect of Business Auxiliary Service is also upheld. The demand of duty interest and penalties in respect of demand under ECIS category is set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Classification of services under Erection, Commissioning or Installation Service (ECIS).
2. Classification of services under Works Contract Service or Commercial and Industrial Construction Service.
3. Demand of service tax under Business Auxiliary Service.
4. Applicability of exemptions and negative list provisions.
5. Imposition of interest and penalties.

Detailed Analysis:

1. Classification of Services under ECIS:
The appellant argued that their activities of laying pipelines for water supply and drainage systems did not fall under the category of ECIS. They relied on multiple decisions, including INDIAN HUME PIPE CO. LTD. VS COMMISSIONER OF C. EX., which held that such activities do not constitute ECIS. The Tribunal agreed with this argument, citing the definition of ECIS and previous judicial interpretations, which clarified that laying long-distance pipelines does not involve erection, commissioning, or installation as defined under ECIS.

2. Classification under Works Contract Service or Commercial and Industrial Construction Service:
The appellant contended that their services should be classified under Works Contract Service or Commercial and Industrial Construction Service. The Tribunal noted that since the demand was raised solely under ECIS, it could not be sustained under any other classification. The Tribunal emphasized that no charges were made against the appellant under Works Contract or Commercial and Industrial Construction Service, making the revenue's argument on this point irrelevant.

3. Demand of Service Tax under Business Auxiliary Service:
The appellant challenged the demand under Business Auxiliary Service, arguing that the specific sub-clause under which the tax was demanded was not identified. The Tribunal found that the Show Cause Notice had clearly identified the nature of the services and the corresponding payments. Therefore, the demand under Business Auxiliary Service was confirmed, including the associated interest and penalties.

4. Applicability of Exemptions and Negative List Provisions:
The appellant argued that post-01.07.2012, their services were exempt under the negative list as per Notification No. 25/2012-ST. The Tribunal did not delve deeply into this argument since it had already concluded that the services did not fall under ECIS and no demand under other service categories was raised.

5. Imposition of Interest and Penalties:
The Tribunal upheld the interest and penalties related to the confirmed demand under Business Auxiliary Service. However, it set aside the demand, interest, and penalties related to the ECIS category, aligning with the judicial precedents that the activities did not fall under ECIS.

Conclusion:
The Tribunal partly allowed the appeal, setting aside the demand under ECIS while confirming the demand under Business Auxiliary Service along with the associated interest and penalties. This decision was pronounced in the open court on 29.01.2020.