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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)
10