If an activity is included in definition by an amendment then ST payable from that date only .

PJ/Case Laws/2012-13/1247

Case: - HP STATE ELECTRONICS DEV. CORPN. LTD. VERSUS COMMR. OF C.EX, CHANDIGARH

Citation: - 2012 (27) S.T.R. 360 (Tri-Del.)

Brief fact: - The Appellants were registered for providing service under the head for "Business Auxiliary Service". During the audit of their books, it was seen that the appellants were providing services described by them to be 'industrial site preparation' and receiving payments for such services but were not paying service tax on such activities. From investigations it was seen that the appellants were providing service in relation to civil and electrical work and LAN cabling work as per the specific requirements for installing computers and other electronic gadgets at the site of different organizations. In this regard revenue was of the view that the Appellants should have registered for providing service under the category of "Erection Commissioning and Installation" defined under section 65(39a) of Finance Act, 1994 and paid service tax on the same. Accordingly a Show Cause Notice was issued for recovering service tax not paid. A Show Cause Notice issued on 22-10-2009 to recover such tax has been adjudicated vide the impugned order confirming tax amounts as above along with interest. In addition penalties are imposed under Sections 77 and 78 of the Finance Act.

Appellant Contention: - The Appellants submit that the adjudication order is issued considering that the same definition was prevailing through 2004-05 to 2008-09 and does not take note of the changes made on 16-6-2005 which was as under:
(39a) "erection, commissioning or installation" means any service provided by a commissioning and installation agency, in relation to, — (i) erection, commissioning or installation of plant, machinery or equipment; or (ii) installation of - (a) electrical and electronic devices, including wirings or fittings therefore; or (b) plumbing, drain laying or other installations for transport of fluids; or (c) heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work; or (d) thermal insulation, sound insulation, fire proofing or water proofing; or (e) lift and escalator, fire escape staircases or travelators; or (f) such other similar services'
Only on this date the activity of installation of electrical and electronic devices, including wirings or fittings therefore was brought under levy and therefore there is no question of any liability arising prior to that date on preparing any site for installation of computers. The Appellants further submits the impugned activities were in the nature installing false ceilings, air-conditioners, electrical wiring, wiring for LAN etc. required for installing computers and such activity is in the nature of civil works.
The Appellant further argued that they themselves was only an intermediary and were inviting tenders, short listing contractors and watching the interests of their clients ensuring proper and timely providing of services and the bills were routed through them. They submit that they work like a PWD. The appellants contests that the term erection commissioning or installation is commercially understood as assembling, integrating various parts and components and making a particular machine operational in industrial sense and they did not do any such activity.

Respondent Contention:- The ld. AR for Revenue submits that the appellants were doing activities in relation to installation of computers which are "equipment" and as per section 65(39a), any service in relation to erection or commissioning of any equipment was liable to tax from 10-9-2004. The appellants did not take out registration or pay service tax but adopted their own interpretation of the entry and therefore the demand for the entire period is appropriately made and the penalties also are properly imposed.

Revenue further submit that a part of any service like construction activity may be outsourced and for that reason the liability to pay tax does not go away. It cannot be that in a construction service provided by an agency like National Building Construction Corporation can be considered as Service provided by only the persons who soils their hand like a mason. If the appellants have received the service of any sub-contract as input service they can take Cenvat Credit for service tax if any paid by them. But the service tax liability for a work planned, monitored, supervised and billed by the appellant cannot be put on the sub-contractors.

Reasoning of Judgment: The Tribunal held that the interpretation canvassed by appellants that site preparation is different from installation and commissioning has some merit. When this position is seen together with the position that Revenue found it necessary to include the type of activity done by the appellant in the scope of installation and commissioning by amendment to Section 65(39a) with effect from 16-6-2005 Tribunal are inclined to accept the contention of the appellant that their activities were not covered by the entry as was in existence prior to that date. Therefore there cannot be any liability for service rendered prior to that date 16-6-2005.

Tribunal does not find any merit in the argument of the appellants that they were only an intermediary and not doing the work themselves and hence their activities did not amount to any service. Any service provided in relation to installation of electrical and electronic devices, including wirings or fittings, became taxable from 16-6-2005. The activities of short listing the sub-contractors, supervising their work to ensure that it is executed as per specification, are in fact work done in relation to such activity and taxable. It is also to be noted that the customer is making payment to the appellants and not to the persons who carried out the physical labour for such work. Accepting the arguments of the appellants will result in a situation where service tax on construction activity will have to be collected from the masons and carpenters and not from the building contractors. The laws do not warrant such an interpretation. The correct position is that the workmen or sub-contractors were providing service to the appellants and appellants in turn were providing service to the persons who gave them the contract. If the individuals doing the work were paying service tax the appellants would have been eligible for credit of tax paid on such input service. Therefore prima facie merit is found in the argument of the Revenue for the period from 16-6-2005. So the appellants are directed to make a pre-deposit of Rs. 8 Lakhs within 8 weeks of receipt of the order for admission of appeal. Subject to such pre-deposit, pre-deposit of balance dues arising from impugned order is waived and its collection stayed during the pendency of the appeal. If the order is not complied with, the appeal will be dismissed without further notice to the appellant.

Decision:- Application disposed off

Comments :- this is very important decision wherein it is clearly brought about that the amendment clearly saying that installation of electrical fittings will be taxable under head “installation and commissioning”. This means that they came into this definition from date of this amendment and service tax is not payable prior to this date.

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PJ/Case Laws/2012-13/1247

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