TMI Blog2011 (5) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered business auxiliary services to the sub-contractors cannot be sustained. - ST/15, 20 & 21 OF 2009 - A-138 TO 140/KOL./ 2011 - Dated:- 4-5-2011 - S.S. KANG, M. VEERAIYAN, JJ. J.P. Khaitan, Smt. Swapna Das, Rajesh Kr. T.R. and Akhil Kr. Gupta for the Appellant. D.K. Achariya for the Respondent. ORDER M. Veeraiyan, Technical Member. Appeal No. ST/20/2009 is by M/s. National Building Construction Corporation Ltd. ('NBCC', in short) challenging the demand of Service Tax of Rs. l7,00,97,423 (Rupees Seventeen Crores Ninety Seven Thousand Four Hundred and Twenty Three only) along with interest and imposition of penalties under various Sections. 1.2 Appeal No. ST/15/2009 is by M/s. APR Constructions Ltd. ('APR', in short) against the demand of Service Tax amounting to Rs. 6,28,87,427 (Rupees Six Crores Twenty Eight Lakhs Eighty Seven Thousand Four Hundred and Twenty Seven only) along with interest and imposition of penalties under various sections. 1.3 Appeal No. ST/21/2009 is by M/s. Sri Avantika Contractors ('SAC', in short) challenging demand of Service Tax of Rs. 3,24,18,125 (Rupees Three Crores Twenty Four Lakhs Eighteen Thousand One Hundred and T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also accepted the contention that for the period prior to 16-6-2005, no Service Tax was leviable as Service Tax on site formation services was introduced with effect from 16-6-2005 only. In pursuance of the contract entered in January 2004 they have received totally a sum of Rs. 104 crores approx. from M/s. NTPC. Out of this a sum of Rs. 78 crores (approx.) relates to work undertaken by them prior to 16-6-2005 and the Service Tax was around Rs. 3.03 crores stands paid. Though they have earlier taken a stand that an amount of Rs. 1.65 crores received relating to formation rip-rap on sloves should be treated services as "commercial or industrial construction services", on instruction from his client, he is not contesting the finding of the Department that the same relates to site formation services. He however, is contesting the quantum of demand on site formation services as confirmed by the Commissioner. Commissioner has demanded Service Tax on the site formation services on the value of Rs. 82,69,35,791 (Rupees Eighty Two Crores Sixty Nine Lakhs Thirty Five Thousand Seven Hundred and Ninety One only) relating to the period from 16-6-2005 to 31-3-2007. Even though they have m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. NTPC and their contract is only with NBCC and they have actually undertaken activities relating to site formation, levelling, etc. Their activities fall only under the category of specific service of site formation but the same have wrongly been treated by the Department as falling under business auxiliary service. They also submit that whether the activities undertaken by them fall under business auxiliary service or site formation service is relevant as the service tax on site formation services were introduced only with effect from 16-6-2005 whereas the tax on the business auxiliary services was introduced with effect from 10-9-2004. They also alternatively submit that prior to issue of Circular No. 96/7/2007-ST, dated 23-8-2007, the prevailing practice as per the Board's earlier circular dated 14-7-1997 was that when the main contractor pays service tax on any service, the sub-contractors were not required to pay service tax. Only by the circular dated 23-8-2007 by the Board clarified that the sub-contractors are also to be taxed separately and the services rendered by the sub-contractors should be treated as input services to the main contractor and the main contractor sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual recipient of services is M/s. NTPC. Therefore the sub-contractors have been rightly held to have rendered services to M/s. NTPC on behalf of NBCC. He also draws our attention to the clauses in the contract between the sub-contractors and NBCC and submits that the contract entered into between NBCC and M/s NTPC also forms part and parcel of the contracts between the sub-contractors and NBCC and therefore the services rendered by sub-contractors have been rightly held to be rendered to M/s. NTPC on behalf of NBCC. 5.2 He also submits that Board's earlier instruction in Circular dated 14-7-1997 has been overruled by the Circular dated 23-8-2007 and the legal position is that in a case like this, both the main contractor and the sub-contractors are independently liable to Service Tax. 5.3 He also submits that the services rendered by the sub-contractors, even if not treated as strictly falling under the category of business auxiliary services, could be treated as falling under commercial and industrial construction services and the Show Cause Notice having described the nature of activities undertaken by them, the quoting of a wrong service head cannot be held to be fatal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher side. As there is no dispute about the Service Tax liability on site formation services with effect from 16-6-2005, the dispute only relates to actual quantum of Service Tax demandable, the same requires to be reconsidered afresh by the Commissioner after taking into account the submissions and evidence to be produced by NBCC. 7. Coming to the finding of the Commissioner that NBCC have rendered business auxiliary services to the two sub-contractors, we are unable to agree to the same. NBCC have received an order for executing the site formation activity and the same have been distributed by entering into agreements with the sub-contractors. Having taken the contract from M/s NTPC they have entrusted the actual work to the sub-contractors. The Supervision of work undertaken by the sub-contractors by NBCC was to ensure whether the same was in conformity with the terms and conditions of the contract and the same cannot be treated as services rendered by NBCC to the sub-contractors. The margin retained by them as main contractor cannot be treated as consideration notionally received back from the sub-contractors. Therefore demand of Service Tax holding that NBCC has rendered bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) of section 2 of the Central Excise Act, 1944 (1 of 1944);" 8.2 Relying on the above definition issued on behalf of the Department that the sub-contractors have rendered services to M/s. NTPC on behalf of the client namely NBCC, On careful consideration, we are not able to accept this view. If this view is accepted it implies that the sub-contractors are rendering services indirectly to M/s. NTPC and that these sub-contractors are receiving payments indirectly from M/s. NTPC. The activities undertaken by the sub-contractors, in our considered opinion is only site formation services. These services have been rendered to the main contractors NBCC who are answerable to M/s. NTPC. If at all there is any doubt it could be whether the services rendered by NBCC could be treated as business auxiliary services and not the services rendered by the sub-contractors. This issue regarding the classification of service rendered by NBCC is only academic as the Commissioner has clearly held that NBCC is rendering services of site formation to M/s. NTPC and the Department is not in Appeal against the said findings. 9. From the above, the following emerges :- (a) NBCC has rendered services ..... X X X X Extracts X X X X X X X X Extracts X X X X
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