TMI Blog2024 (4) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... th effect from 16.06.2005 - The aforesaid notification exempts all the activities related to construction of public utilities as described above. In the instant case, we note that only the respondent s contracts are merely for excavation and not construction. The Notification is very clear that such services are exempt only if it is in the course of construction, which is not the case here. There are catena of judgements which hold that the wordings of a Notification have to be interpreted strictly and cannot be expanded to conclude any extraneous interpretation. The issue of the liability of service tax on subcontractors stands settled by the decision of the Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB] where it was held that it is not possible to accept the contention of the learned Counsel for the Respondent that a sub contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the subcontractor.All decisions, including those referred to in this order, taking a contrary view stand overruled. T he respondent was liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, and by not filing the statutory returns in respect of the taxable services provided by them. The respondent registered with the Service Tax Department in August, 2013 and began paying service tax and the statutory returns were also filed with the department. 2.1 Consequently, a show cause notice dated 22.04.2016 was issued to the appellant proposing:- (i) Recovery of Service Tax amounting to Rs. 2,61,97,972/- under proviso to Section 73(1) of Finance Act, 1994 alongwith interest and appropriation of Rs.1,42,94,158/- already deposited. (ii) Penalty under Section 77(1)(a),77(1)(c) 78 of Finance Act, 1994. (iii) Late fees for non filing /late filing of each of half yearly/quarterly returns during the period Oct, 2010 to Sept. 2015 in terms of Rule 7C of the Service tax Rules, 1994 read with section 70 of Finance Act, 1994. 2.2 The appellant filed a detailed reply to the said show cause notice, denying all the allegations. Out of total demand of Rs.2,61,97,972/- the Commissioner vide impugned Order-in-Original dropped the demand of Rs.1,23,45,815/- holding that the demand is not sustainable. Against confirming of demand and penalties, the respondent came in Appeal before this Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls, dams etc., it would not automatically lead to the classification of services being provided by the sub-contractor to the contractor as an exempt service. However, a sub-contractor providing services by way of works contract to the main contractor, providing exempt works contract services, has been exempted from service tax under the mega-exemption if the main contractor is engaged in providing exempt services of works contracts. It may be noted that the exemption is available to sub-contractors engaged in works contracts and not to other outsourced services such as architect or consultants. 3.1 The Learned Authorized Representative contended that the Board had issued similar clarification vide Circular No. 147/16/2011-S.T., dated 21-10-2011. The relevant para 2 is reproduced below for ease of reference:- 2. The matter has been examined. Vide the circular referred above, it was clarified that when the service provider is providing WCS service in respect of projects involving construction of roads, airports, railways, transport terminals, bridges, tunnels, dams etc. and he in turn is receiving various services like Architect service, Consulting Engineer service, Construction of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services were exempted. Hence, the total amount in dispute was not Rs.87,14,512/- but Rs.33,83,083/- which has been acknowledged in Para 30.1.6 of the impugned order. 4.1. The Learned Counsel submitted that the department was referring to the clarification in Para 7.11.11 of the Education Guide and Board Circular No.147/16/2011 ST dt.21.10.2011. She contended that the content of clarification is not applicable in the present case as the services provided by the appellant for Construction of Road, Bridge and Tunnel which is specifically exempted whereas the clarification/circular referring Architect Service, Consultant Engineering Services etc. which are specifically taxable. She submitted that the appellant is covered under Para 3 of the circular. She further submitted that since 01.07.2012 the services for construction of Road, Bridge and Tunnel have been specifically exempted under S.No.13(a) of Notification No. 25/2012 -ST dt.20.06.2012. Prior to 01.07.2012 these services were specifically excluded from levy of service tax in clause (zzzza) of Section 65(105) readwith Section 65(25b). She prayed that the appeal filed by the department may be dismissed and findings given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of road, bridge, tunnel, or terminal for road transportation for use by general public are exempt in terms of S. No. 13(a) of notification no. 25/2012. Therefore, during the relevant period, i.e., 2010-11 to 2015-16, the services of excavation and site preparation as provided by the assessee are exempt from levy of service tax. 7. We note that the observations and the findings of the adjudicating authority insofar as the period post 01.07.2012 is concerned, is correct. It has been correctly held that services provided by the respondent are exempt in terms of S. No. 13(a) of notification no. 25/2012. However, for the period prior to 01.07.2012, there was no express exemption provided for the activities carried out by the respondent. In this regard, we note that the notification 17/2005 -ST dated 07.06.2005 provided exemption to site formation and clearance, excavation and earthmoving and demolition and such other similar activities in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h by the learned counsel that these activities amounts to construction of roads and discovered by notification number 17/2005-ST is not on a firm footing. The detailed activity which is indicated in the said works order clearly states that the appellant is required to undertake only the activity of earth work for roads, letterpress of sub-grade by excavation/filling required level, consolidation with power roadroller of 8-12 ton capacity, compact to 95% procter s density at OMC by mechanical device, dressing to camber, making good the undulation, etc., including all leads and lifts. The clarity of the work in the contract executed by the appellant would indicate that they had not constructed any road for Nagarjuna thermal power plant but had done all the earth work on the site formation. In our view, this activity of the appellant will not get covered under the category of construction of road as has been considered in notification 17/2005 dt 07.06.2005 9. Similar stand was taken by the Tribunal in the case of Alok Guha vs Commissioner of C.Ex ST, Raipur reported in [2018(18) GSTL 434 (Tri. Del)] 10. We also observe that that the issue of the liability of service tax on subcontract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re contract amount and, therefore, the sub-contractor was not required to pay any Service Tax. 10. Section 66, as substituted by the Finance Act, 2007, provides that there shall be levied a tax (hereinafter referred to as the 'Service Tax') @ 12% of the value of taxable services of various sub-clauses of clause (105) of section 65 and collected in such a manner as may be prescribed. Section 68 of the Act provides that every person providing taxable service to any person shall pay Service Tax at the rate specified in section 66 in such a manner and within such a period as may be prescribed. Section 94 of the Act deals with power to make Rules. Subsection(1) provides that the Central Government may, by Notification in the official gazette, make Rules for carrying out the provisions of Chapter V of the Act. Sub-section (2)(a) provides that such Rules may provide for collection and recovery of Service Tax under sections 66and 68 of the Act. In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 and section 94 of the Act and in supersession of the CENVAT Credit Rules, 2002 and Service Tax Credit Rules, 2002, the Central Government framed the CENVAT Cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. 11. In view of the above, we are of the opinion that the respondent was liable to pay service tax on the taxable services provided by him for the period prior to 01.07.2012. However, we observe that adjudicating authority has ordered appropriation of an amount of ₹ 53,31,429/- which was collected as service tax from the service receiver on exempted services and deposited to the Government account in terms of provisions of section 73A (2) of the Finance Act. It would be appropriate to remand the matter to the adjudicating authority for recalculation of the demand, if any, taking into account the amount already so paid. 12. We now address the second issue as to whether the Commissioner had erred in imposing penalty @50% under section 78 of the Act. 13. We note that in terms of section 78(1) of the Finance act 1994, the penalty leviable is to the extent of 100% of total service tax evaded. The relevant section is reproduced herein below for ease of reference: 78. Penalty for suppressing, etc., of value o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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