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CENTRAL GOODS & SERVICES TAX

COMMISSIONERATE. CHANDIGARH.

C. R. BUILDING PLOT NO. 19 SECTOR 17-

CHANDIGARH. PH. 0172-2720240.

File No.APPL-COMMOST/26/2019-GST· APL·CHD

C N o.App-COMMOST 126/2019-GST -APPL-CHD Appeal No.19/A/ST/CHD/201S-19 ~

ORDER-IN-APPEAL

Dated:

Order-in-Appeal No. : CHD-EXCUS-001-APP- 133 -19-20 Dated: !ll ~ \ ! i Appellant Shri Milap Singh Thakur, Village Nirsu, P.O. Dutt Nagar,Tehsil Rampur Bushahar, Distt. Shimla (H.P.)

Order-in-Original No. 21/ST/JC/SML/2017-18 dated 28.03.2018 & date

Adjudicating Joint Commissioner, Central Goods and Services Authority Tax Commissionerate, Shimla

Amount of service tax Rs.l,20,9S,OSlI-

Amount of Penalty Rs.1,20,95,051/- under Section 78 of the Finance Act, 1994 and Rs.10,0001- under Section 77 of the Finance Act, 1994.

Period of dispute 01.04.2011 to 31.03.2013

Shri Milap Singh Thakur, Village Nirsu, P.O. Dutt Nagar, Tehsil Rampur Bushahar, Distt. Shimla (H.P.) (hereinafter referred to as the 'appellant') has filed this appeal against Order-in-Original No. 21/ST/JC/SML/2017-18 dated 28.03.2018 (here-in-after referred to as the 'impugned order') passed by the Joint Commissioner, Central Goods and Services Tax Commissionerate, Shimla (hereinafter referred to as the 'adjudicating authority'). I take up the appeal for decision.

1.1 During the course of investigation initiated by Hqrs (Preventive), Central Excise Commissionerate, Chandigarh-I against MIs Patel Engineering Ltd.,

. Rampur H.E. Project, Village Bayal, P.O. Koyal, Tehsil Ninnan, Distt. Kullu (for brevity the 'Principal Contractor') engaged by MIs Satluj Ja1 Vidyut Nigam Ltd., Rampur (Himachal Pradesh) for execution of Hydro Power Project, it was

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noticed that the appellant is one of the sub-contractors of the Principal Contractor and had provided various taxable services to the Principal Contractor without payment of Service Tax. On perusal of documents as submitted by the appellant, it was observed that various contracts were executed by the appellant with the Principal Contractor for undertaking various works which do not fall under the exclusion clause under the definition of "Works Contract Service" falling under Section 65(105)(zzzza) of the Finance Act, 1994(hereinafter referred to as the 'Act'). During the period 2007-08 to 2010-11, appellant had provided taxable services namely "Works Contract Service", and "Supply of Tangible Goods Services" falling under Section 65(lOS)(zzq) and 65 (l05) (zzzzj) respectively of the Act to their customers and had received remuneration amounting to Rs.9,18,91,10S/- involving Service Tax liability ofRsAl,58,358/-.

··1.2 Accordingly, show cause notice dated 22.10.2012 was issued to the appellant for recovery of service tax of RsA1,S8,358/- under Section 73(1) of the Act alongwith interest under Section 75 of the Act and penalties under Section 77 & 78 of the Act were also proposed against the appellant.

1.3 Further, for the subsequent period i.e. w.e.f. 01.04.2011 to 31.03.2013 (i.e. the period involved in the present appeal), the appellant provided the taxable services valued at Rs.10,72,10,700/- as a sub-contractor to the Principal Contractor i.e. M/s Patel Engineering Ltd., having Service Tax liability of Rs.1,24,89,043/- which appeared recoverable from the appellant.

1.4 Accordingly, statement/show cause notice dated 16.07.2013 under Section 73(3A) of the Act, was issued to the appellant for the demand of service tax ofRs.l,24,89,043/- alongwith interest. The said statement/show cause notice

'. dated 16.07.2013 was adjudicated by the adjudicating authority vide the impugned order wherein demand of service tax of Rs.1,20,9S,OSl/- was confirmed alongwith interest after allowing cum tax benefit to the appellant and balance demand was dropped accordingly. Penalties under Section 77 & 78 of the Act were also imposed on the appellant.

2 Being aggrieved by the findings of the adjudicating authority, the appellant has filed the instant appeal on the following grounds which interalia are summarized as under:-

2.1 That demand had been raised under the Works Contract on the following works carried out by the appellant-

(i) Labour rate for excavation of Drainage Gallery at Rampur for Patel Engineering; (ii) Mucking work of Pressure shaft tunnel at Rampur (iii) Mucking work of drainage gallery;

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(iv) Labour rate for excavation of pressure shaft

2.2 The work carried out by the appellant did not involve any transfer of property and therefore the service provided was not classifiable under works contract service as alleged in the show cause notice/statement. Therefore, the confirmation of the demand under Commercial or Industrial construction services is not legally correct. The adjudicating authority cannot go beyond the scope of the show cause notice.

2.3 The work entrusted to the appellant was with regard to the Power House construction, pressure shaft & valve house, Concrete supply. The details on account of which payments were made to the appellant against running bills were in respect of the following:

(i) Infrastructure development: (ii) Open excavation (iii) Pressure shaft and valve house; (iv) Protection work and approach road (v) Power House Construction (placing construction beams/placing concrete in others)

2.4 During the period prior to 0l.07.2012, infrastructure development in itself is not a specified service. During that period, the service tax was payable only on the specified services. In generality of things, the construction of roads, airports, railways, transport terminals, bridges, tunnels and dams amounts to infrastructure development which is not covered by service tax. With effect from 0l.07.2012, the Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road, bridge, tunnel, or terminal for road

'. transportation for use by general public are exempt from the payment of service tax under Notification No.25/2012-ST dated 20.06.2012. As infrastructure development was neither a specified service nor the same was mentioned in the show cause notice/ statement, therefore no service tax is chargeable. Further, major chunk of the amount received by them was in respect of manufacturing activity within the meaning of Section 2(t) of the Central Excise Act,1944 which was exempt from the payment of central excise duty under notification No. 5/2006-CE dated 01.03.2006.

2.5 That demand has also been confirmed (under "Supply of tangible goods") on the hire charges received for supply of machinery, lCB, Excavator, etc. It is submitted that after the handing over of machinery, lCB, Excavator, etc to the Principal Contractor, the appellant had no control over the said machinery. The machinery, etc were under the possession and effective control of the Principal

'. Contractor. Therefore, the supply of the machinery, excavators and lCB 111

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question was outside the scope of service tax as defined under Section 6S(10S) '. (zzzzj) of the Act.

2.6 Alternatively, it is submitted that the Principal contractor Mis Patel Engg. Limited holding Centralized Service Tax Registration had discharged the service tax on the taxable services including the services provided by the appellant as a sub-contractor. Once the service tax is paid by the principal, the sub-contractor was not required to pay the service tax again. Reliance is placed on the decisions of Hon'ble CESTAT (i) Mis Harsh Constructions Vs. Commissioner of Central Excise Surat reported as 20I2-TIOL-8S7-CESTAT- AHM, (ii) Urvi Construction Vs. Commissioner of Service Tax, Ahmedabad reported as 201 0(17)STR 302 (Tri), (iii) Oikos V s Commissioner of Central Excise Bangalore-III reported as 2007(S)STR 229(Tri), (iv) Sunil Hi Tech Engineers Ltd. Vs. Commissioner of Central Excise, Nagpur reported as 2010(I7)STR 121 (Tri) and Commissioner of Central Excise, Pune III Vs .

.. Akruti Projects reported as 2014-TIOL-192S-CESTAT-MUM.

2.7 That the adjudicating officer has mentioned that no evidence has been provided that service tax has been paid by the principal contractor which is factually incorrect. The Principal contractor has issued certificate dated 23.11.20 IS which was furnished before the adjudicating authority

2.8 That an amount ofRs.43,8S,700.00 mentioned at S.no.14 of the Annexure A for 2012-13 to the statement was not paid to the appellant. This amount pertained to Shri Rajinder Singh Thakur who was also working on the same project with the Principal Contractor. The appellant had placed on record a certificate dated 28.10.2017 issued by Mis Patel Engineering Ltd certifying that the amount of Rs,43,8S,700.00 was wrongly debited vide Voucher No. 706 dated 14.03.2013 to the appellant's account whereas the same related to the

'. account of Shri Rajinder Singh Thakur and that the amount was reversed vide. Entry dated 11.04.2013.

2.9 That as there is no charge of fraud, suppression, mis-statement, collusion, etc in the statement dated 16.07.2013 and that extended period has also not been invoked, therefore penalty under Section 78 of the Act is not imposable on the appellant.

3 The appellant has also filed an application for condonation of delay on the grounds detailed as under:-

3.1 That the impugned order was received by the appellant on 02.04.2018;

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3.2 That due to illness, the appeal could not be filed in time. A copy of the medical prescription by the primary health centre, Rampur Bushahar is

'. enclosed.

3.3 That the delay (of 18 days) was neither intentional nor willful.

4. Personal hearing in the case was held on 23.05.2019. Sh. Om Prakash Sharma, Advocate attended the hearing on behalf of the appellant and reiterated the submissions made in the appeal. He also filed additional submissions vide letter dated 23.05.2019.

5. I have carefully gone through the facts of the case, impugned order, appeal papers, the grounds of appeal and the submissions made at the time of personal hearing.

5.1 First, I take up the application of the appellant for condonation of delay in '. filing the appeal. The appellant has submitted that impugned order was received by them on 02.04.2018. As such, due date for filling the appeal was on or before 02.06.2018, but the same was filed by the appellant on 20.06.2018 i.e after a delay of 18 days beyond the statutory period of 2 months provided under the law i.e Section 85(3A) of the Act which reads as under:

"SECTION 85. Appeals to the Commissioner of Central Excise (Appeals):-

(3A) An appeal shall be presented within two months from the date of receipt of the decision or order of such adjudicating authority, made on and after the Finance Bill, 2012 receives the assent of the President, relating to service tax, interest or penalty under this Chapter:

Provided that the Commissioner of Central Excise (Appeals) may, if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the aforesaid period of two months, allow it to be presented within a further period of one month. "

5.1.1 The above mentioned provision clearly provides that Commissioner (Appeals) is competent to condone the delay of one month, ifhe/she is satisfied that the appellant was prevented by sufficient cause from presenting the appeal within the period of 2 months. In the instant appeal, there is delay of 18 days beyond the statutory period of 2 months as discussed in para 5.1 above i.e. within the competence of Commissioner (Appeals). The appellant submitted that due to illness, the appeal could not be filed in time. The appellant has also enclosed a copy of the medical prescription by the primary health centre, Rampur Bushahar in their support. I find the request of the appellant as

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genuine. Accordingly, I condone the delay of the appellant in filing the instant appeal.

.. 5.2 Now I proceed to decide the appeal on merit. I observe that appellant is one of the sub-contractors of Mis Patel Engineering Ltd.(Principal Contractor). The Principal Contractor was engaged by Mis Satluj Jal Vidyut Nigam Ltd., Rampur (Himachal Pradesh) for the execution of the Hydro Power Project. The adjudicating authority vide impugned order held that the appellant during the period from 01.04.2011 to 31.03.2013 had provided taxable services ( i.e. Commercial or Industrial construction services and Supply of Tangible Goods Services) to the Principal Contractor without payment of Service Tax. Accordingly, he confirmed the demand of service tax of Rs.1,20,95,051/- against the appellant.

5.2.1 The appellant on the other hand contended that since the work carried out by them did not involve any transfer of property, therefore the same cannot be classified under 'works contract service' as alleged in the show cause

.notice/statement; and that the confirmation of the demand under 'Commercial or Industrial construction services' is not legally correct as the adjudicating authority cannot go beyond the scope of the show cause notice. In this regard, I find that, in the earlier show cause notice dated 22.10.2012 on the basis of which the instant statement was issued for subsequent period, had raised demand in respect of taxable services defined under Section 65(105)(zzq) and 65(105)(zzzq) of the Act. The said sections as reproduced in para 4.9 of the impugned order makes it amply clear that demand of service tax was raised under 'Commercial or industrial construction services' and 'Supply of Tangible Goods Services'. As such, I find that adjudicating authority has correctly con finned the demand under 'Commercial or industrial construction services' and 'Supply of Tangible Goods Services' for the period prior to 01.07.2012.

5.2.2 The appellant further contended that the work executed by them i.e. the '. work of infrastructure development was exempted from Service Tax upto 30.06.2012; that with effect from 01.07.2012, the Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a road, bridge, tunnel, or terminal for road transportation for use by general public are exempt from the payment of service tax under Notification No.25/2012-ST dated 20.06.2012; and that the major activity of the appellant was manufacture within the meaning of Section 2(f) of the Central Excise Act,1944 which is exempt from the payment of service tax. The appellant has also submitted copies of some of the work orders and invoices in support of their contention. On perusal of the work orders, invoices, etc, I find that the items of work executed by the appellant for the Principal Contractor included "Placing of structural concrete

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of all grades in beams and columns in Power House including preparing surface placing vibrating curing and finishing complete in all respects, Erecting of form work for plain and curved surface for beams and columns including maintenance oiling all necessary ties and fixing access scaffolding deshuttering complete for all leads and lifts in Power House, Fixing rebar for RCC works in

'. beam and columns handling stacking cutting bending placing in position as complete in all respects; Open excavation Rock depositing the excavated materials with all leads and lifts upto the designated dumping yard with avrg. lead of 3 kms.; loose excavation in all type of soil and depositing the excavated material with all leads and lift upto designated dumping yard; providing and laying stone wire crates; etc". Further, as per the work orders, all material for the work was supplied by the Principal Contractor on site free of cost. Thus, I find that the appellant had rendered services to the Principal Contractor, which are taxable services falling under 'Commercial or industrial construction services' as defined under Section 65(105)(zzq) of the Act. With effect from 01.07.2012, notification No. 25/2012 dated 20.06.2012 exempted certain construction and erection services from service tax. Para 13 of said notification reads as under:-

.. " .. the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act, namely:-

13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration 0/,- (a) a road, bridge, tunnel, or terminal for road transportation for use by

general public,'

From the aforementioned provision, it is apparently clear that construction and erection services in respect of tunnelsl road are exempted from service tax only when the same are meant for use by the general public. In the

.. instant case, I find that there is nothing on record to suggest that services rendered by the appellant were not for commercial purpose but meant exclusively for use by the general public. Therefore, in the absence of any evidence, I find that benefit of notification No. 25/2012 dated 20.06.2012 cannot be extended to the appellant. Further, I also find no merit in the contention of the appellant that their major activity was manufacture within the meaning of Section 2(f) of the Central Excise Act, 1944. The activity of the appellant squarely falls under the definition of taxable services as discussed above. Moreover, the appellant never raised this contention during the adjudication proceedings. As such, the same appears to be an afterthought.

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5.2.3 The appellant has also contested the confirmation of demand on the 'Supply of Tangible Goods Services'. They contended that after the handing over of the machinery, lCB, Excavator, etc to the Principal Contractor, they had no control over the said machinery and therefore service tax is not applicable. However, as per the work orders, I find that operators for running the

'. machinery, lCB, Excavator, etc were provided by the appellant. The appellant also carried out day to day maintenance of the machinery, lCB, Excavator, etc. This clearly proves that the control of the machinery, JCB, Excavator, etc remained with the appellant even after the supply of the same to the Principal Contractor. As such, I find no merit in the above contention of the appellant. Therefore, I find that hire charges received by the appellant are taxable under the Supply of tangible goods services and demand on the same has correctly been confirmed by the adjudicating authority.

5.2.4 Appellant has also contended that even otherwise also the Principal contractor (M/s Patel Engg. Limited) holding Centralized Service Tax Registration had discharged the service tax on the taxable services including the services provided by them as a sub-contractor and that once the service tax is paid by the principal, the sub-contractor was not required to pay the service tax

'. again. The appellant has cited various case laws in support of their contention .. The appellant has also submitted a copy of certificate dated 23.11.2015 issued by Patel Engineering Ltd. Para 4 of the said Certificate is reproduced below:-

"Certified as under> 4. The taxable work, if any, executed by Shri Milap Singh Thakur at the site is included

in the total work executed by Mis Patel engineering Ltd. for construction of Rampur Hydro Electric Project on which they have since discharged the service tax liability; "

The certificate clearly certifies that service tax liability has been discharged only in respect of taxable work, if any, executed by the appellant, which implies that service tax on the non-taxable work of the appellant has not been discharged. In the instant case, appellant has vehemently pleaded that their work is non-taxable, which clearly proves that service tax liability in the instant case

'. (i.e. on the non-taxable work of the appellant) has not been discharged by the Principal contractor. Moreover, appellant has also not submitted any evidence to show that their work was treated as taxable work by the Principal contractor. Therefore, in the absence of any evidence, I find no purpose in going into the merit of their contention.

5.2.5 The appellant further contended that amount of Rs.43,85, 700/- mentioned at S.No.l4 of the Annexure to the Statement dated 16.07.2013 was not paid to them; that appellant had not performed any activity/provided any service with

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regard to this amount; and that this amount pertained to Shri Rajinder Singh Thakur who was also working on the same project with the Principal Contractor. The appellant had also placed on record a certificate dated 28.10.2017 issued by Mis Patel Engineering Ltd, which is reproduced as under:-

"We hereby certify that Cheque No. 003874 dated 14.03.2013 amounting Rs. 43,85,7001- was wrongly debited (voucher reference no. 706 dated 14.03.2013) to Mr. Milap Singh Thakur instead of Mr. Rajinder Singh Thakur. This is reversed and rectified by us through Journal Voucher No. 14 dated 11.04.2013. "

As Mis Patel Engineering Ltd has already certified that amount of Rs,43,85,700.00 was wrongly debited to the appellant's account instead of Shri Rajinder Singh Thakur and reversed vide Entry dated 1l.04.2013, therefore I find that the same merits to .be excluded from the taxable services. As such, I accept the contention of the appellant that amount of Rs.43,85,7001- be excluded from the taxable value for calculating the service tax amount. Accordingly, I find that confirmation of demand of Rs. 4,82,4401- (on Rs.43,85,7001-) is not sustainable and liable to be set aside.

Order

6 In view of the above, impugned order is upheld to the extent of confirming demand of service tax of Rs.1,16,12,611/- only, alongwith interest as well as imposition of penalties of Rs.10,0001- & Rs.l,16,12,6111- under Sections77 & 78 of the Act. However, I allow the appeal of the appellant against the confirmation of demand of service tax of Rs. 4,82,4401- (on Rs.43,85,7001-) as dicussed in para 5.2.5 above. The impugned order is modified to the above extent. The appeal filed by the appellant is disposed of, accordingly. Digitally signed by SUMAN BALA

Date,Mon Sep 02 1~t:i7~'ST 2019 Reason :Approved .

(Dr. S~rrl1t B:htY ~ COMMISSIONER(APP ALS)

REGD.A.D. Shri Milap Singh Thakur,

Village Nirsu, P.O. Dutt Nagar,

Tehsil Rampur Bushahar, Distt. Shimla (H.P.)

Copy to :-

1. The Principal Chief Commissioner (CZ), Central Goods & Service Tax, Chandigarh.

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2. The Commissioner, Central Goods & Service Tax Commissionerate, Shimla

3. The Deputy Commissioner, Central Goods & Service Tax Division- Shimla. Guard file. 4 .

. / 1M}' Superinte~ '(Appeals)

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