2023 (9) TMI 653 - AT - Service Tax

Taxability - Classification of services - Works Contracts Services - electrical installation works undertaken by the appellant during the disputed period - time limitation - suppression of facts or not - HELD THAT - There must be installation of electrical devices or electronics devices. Whereas appellant are engaged in the business of electrical contractor for State Government and Semi-Governments Department. The nature of business of appellant is both electrification and electrical material supply through tender from Government Department. In the present matter revenue nowhere provided any invoices or any documents by which it can be conclude that the appellant are engaged in erection commissioning or installation of electrical and electronic devices. Further general wiring contracts and fitting thereof are not covered under the above entry. Therefore the Service tax demand in the present matter not sustainable under works contract services on appellant s activity. Time Limitation - Suppression of facts - HELD THAT - In the facts of the present case that firstly the issue involved is of pure interpretation of legal provisions and classification of services therefore it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax. It is also on record that the Appellant have represented the matter before department during the investigation of case. This clearly shows that there is no suppression or willful misstatement on the part of the Appellant. Further Revenue has picked up the figures from the balance sheet and profit and loss account maintained by the assessee. Reference can be made to Tribunal s decision in the case of C.S.T. NEW DELHI VERSUS M/S. KAMAL LALWANI 2016 (12) TMI 398 - CESTAT NEW DELHI laying down that extended period is not invokable if services rendered are reflected in balance sheet and income tax returns and no evidence was produced that non-payment of duty was due to any mala fide. There are no proof of intent to evade either from the show cause notice or from the impugned order. Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation - demand is time barred and therefore cannot sustain. For the same reason the penalties imposed upon the appellant also cannot be upheld. The impugned order is required to be set aside - Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the classification of services provided by the appellant under Works Contract Service, the taxability of services rendered to Government Agencies, and the invocation of extended period of limitation for service tax demand.

Classification of Services under Works Contract Service:
The Revenue contended that the electrical installation works undertaken by the appellant fall under Works Contract Service. The definition of Works Contract Services under Section 65(105)(zzzza) of the Finance Act, 1994 was analyzed, which includes installation of electrical and electronic devices. However, it was observed that the appellant's business involved general wiring contracts and fitting, not specifically the installation of electrical or electronic devices. As such, the Service tax demand under Works Contract Services on the appellant's activity was deemed unsustainable.

Taxability of Services Rendered to Government Agencies:
The appellant argued that the services provided to Government Agencies, such as the Gujarat State Police Housing Corporation, were not taxable as they were for non-commercial purposes. The appellant's services were mainly related to electrification of Government buildings and public utilities. Citing various decisions, the appellant contended that the services rendered to Government Agencies were not intended for commerce or industry, thus not subject to service tax. The Tribunal found merit in this argument and ruled in favor of the appellant.

Invocation of Extended Period of Limitation:
Regarding the limitation issue raised by the appellant, it was argued that since the issue involved interpretation of legal provisions and classification of services, there was no intention to evade payment of service tax. The appellant had cooperated during the investigation and no evidence of suppression or willful misstatement was found. The Tribunal referred to previous decisions highlighting that the extended period of limitation is not applicable when services are duly reflected in financial records and there is no intent to evade tax. As a result, the demand was deemed time-barred, and the penalties imposed on the appellant were not upheld.

Conclusion:
After considering the submissions and perusing the records, the Tribunal set aside the impugned order. The appeal was allowed with consequential reliefs, if any, in accordance with the law. The judgment was pronounced in the open court on 12.09.2023.