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PJ/Case Law/2013-14/2099

Construction of roads not leviable to service tax.

Case:- PALIMAR INFRACON PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MANGALORE

Citation:-2013 (32) S.T.R. 230 (Tri.- Bang.)

Brief fact:-There is a delay of 12 days in the filing of the appeal, which is sought to be condoned. After hearing both sides, we have found satisfactory explanation of the delay and hence allow the COD application. The stay application filed by the appellant seeks waiver and stay in respect of an amount of Rs. 4,38,237/- demanded as service tax and education cess for the period from May, 2006 to June, 2008 as also the penalties imposed on the appellant. The appellant paid an amount of Rs. 1,24,297/- and same stands appropriated. A major part of the demand is an amount of Rs. 2,99,976/- demanded towards service tax and education cess under the category of ‘commercial or industrial construction service’ for the period from April to June, 2007.
 
Appellant’s contention:-The appellant submits that a coordinate Bench of this Tribunal in a similar case held in favour of the assessee vide CST, Ahmedabad v. Shilpa Constructions Put. Ltd. [2010 (19) S.T.R. 830 (Fri.-Ahmd.). He has also relied on paragraphs 14.4 and 14.6 of C.B.E. & C.'s Circular F. No. B1/6/2005-TRU, dated 27-7-2005. The Board clarified to the effect that if the construction of road is integral part of a composite contract comprising several pieces of construction works, then only the value of road construction also be included in the gross taxable value.

Respondent’s contention:-The respondent pleaded that the appellant must be put to terms.

Reasoning of Judgment:-After hearing both sides, the tribunal find that the appellant claims to have undertaken a road construction for M/s. Nagarjuna Power Corporation Ltd and they are contending that this work is not exigible to service tax on account of exclusion of roads from the ambit of 'commercial or industrial construction service'.In the in­stant case, it has been claimed that the appellant undertook only construction of road along with allied works for the benefit of the service recipient. On a perusal of the work order available on record, they have found substance in this claim. If that be so, prima facie, a major part of the impugned demand is not sustainable. In this view, the tribunal grant waiver of pre-deposit and stay of recovery in respect of the adjudged dues.
 
Decision:-Stay granted.

Comment:- The gist of the case is that construction of road is not leviable to service tax. The board circular also clarifies that if the construction of the road is an internal part of a composite contract comprising several pieces of construction works, then only the value of road construction would be included in the gross taxable value of service. 

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