New ground cannot be taken at the appellate stage.

PJ/Case Law/2014-15/2388

Case:-SANJAY ELECTRICAL Vs COMMISSIONER OF SERVICE TAX, NOIDA

Citation:-2014-TIOL-340-CESTAT-DEL

Brief facts:-Adjudication order dated 29.08.2012 confirms a composite service tax demand of Rs.50,27,977/- besides interest and penalty as specified therein on the ground that petitioner provided four categories of taxable services including (i) commercial or industrial construction service, the tax liability for which is assessed as Rs.68,500/- ; (ii) construction of residential complex service, which is assessed to Rs.3,63,742/-. At the present stage of the proceedings, ld. Counsel for the petitioner/appellant, Shri A.K. Batra does not contest the classification of these services nor the quantum of tax liability assessed as relatable to these services. It is however submitted by the ld. Counsel that the petitioner has remitted Rs.3,97,273/- plus the applicable interest thereon in respect of these services. The total assessed tax liability on these two services is Rs.4,34,272/-. The balance tax liability on these two services viz. commercial or industrial construction service and construction of residential complex service is thus Rs.35,000/- (approx.). In respect of erection, commissioning and installation services, the petitioner urged several contentions including that all the petitioner's activities alleged and classified by Revenue to constitute erection, commissioning and installation service were provided under composite contracts involving rendition of service and deemed sale of goods as well and therefore ought to be classified as works contract service and are classifiable under Section 65(105)(zzzzh) of the Finance Act, 1994. The tax liability assessed on erection, commissioning and installation, is Rs.26,01,012/-. Prima facie, since the period in dispute is 1.4.2010 to 31.03.2011, subsequent to introduction of works contract service, which is an independent taxable service and undisputedly the services provided by the petitioner are under composite contracts involving rendition of service and deemed transfer of the goods during the course of executing the works, these should prima facie be classified as work contract. The petitioner's claim for execution of the value of the goods incorporated, claimed to be to the extent of 90% of the gross consideration received was not accepted on the ground that no proof was furnished regarding the value of goods or deemed to have been sold during the course of rendering the service. The Commissioner granted the benefit of abatement of 67% only under Notification No.1/2006-ST.

Appellant contention:-It is submitted that the petitioner has made out a strong prima facie case in respect of the levy of Rs.7,87,000/- out of 19,94,813/- assessed as liable for management, maintenance or repair service. The balance of Rs.12,07,178/- is assessed for having provided Management, Maintenance and Repair service covered by works contracts involving operation and repair of pump houses and diesel generating sets at different locations for the Ganga Jal Distribution Scheme of Noida. The agreement between the petitioner and the Noida Authority requires the petitioner to depute qualified Pump Operators to run the Diesel Sets; Electricians to provide round the clock operations and generally to keep the DG sets and pump houses in a state of constant operation. Ld. Counsel for the petitioner contends that these activities do not fall within Management, Maintenance or Repair service, since the essential nature of the activity is operation of the DG sets and pump houses and that Management, Maintenance and Repair is merely incidental to that primary purpose. Further the petitioner has also contended that the adjudication order is unsustainable for want of jurisdiction by the Commissioner, Noida, since the petitioner is resident at Delhi.

Reasoning of judgment:-The tribunal is not inclined to consider this contention at this stage of the proceedings since the material on record does not reflect this objection having been raised before the adjudicating authority. Whether exercise of the jurisdiction by Commissioner, Noida is valid requires a deeper analysis. Since the service falls within the ambit of works contract service, an independent taxable service, introduced w.e.f. 1.6.2007 and is required to be classified only as works contract service, in view of the classification discipline mandated by Section 65 (A) of the Act, the amount of Rs.26,01,012/- being the tax liability assessed on Erection, Commissioning and Installation service is unsustainable. Insofar as Management, maintenance or repair service is concerned, according to the ld. Counsel, the tax liability on this is assessed as Rs.19,94,813/-. Of this amount Rs.7,87,000/- is on account of a contract involving shifting and strengthening of electric lines and street lights in different specified locations. On prima facie analysis of the provisions of this contract, this service falls more appropriately under erection, commissioning and installation but not within the ambit of management, maintenance or repair. The definition of Management, Maintenance and Repair service under Section 65(64) of the Act is any service provided under a contract or agreement by the manufacturer or any person authorized by him, in relation to, management of properties, whether immovable or not; maintenance or repair of properties, whether immovable or not; or maintenance or repair including reconditioning or restoration, or servicing of any goods, excluding a motor vehicle. The agreement between the petitioner and the Noida Authority requires the petitioner to take over the operation of DG sets and the pump houses and cater to the management, maintenance and repair of these equipment and infrastructure as well. The management of these movable or immovable properties is the essence of the agreement and the maintenance or repair is integral to the, overall assumption of the management function. Though ld. Counsel for the petitioner has relied on judgements of this Tribunal including CMS (I) Operations and Maintenance Co. Pvt. Ltd. reported in 2007 (7) STR 369 (Tribunal-Chennai) = (2007-TIOL-892- CESTAT-MAD) and Wartsila India Ltd. reported in 2011 (22) STR 338 (Tribunal-Mumbai), we find that on a perusal of these decisions, that there is no analysis on or reference to provisions of Section 65(64) of the Finance Act, which defines the taxable service of Management, Maintenance and Repair.

We therefore grant waiver of pre-deposit and stay all further proceedings pursuant to the adjudication order dated 29.08.2012 passed by the commissioner, Customs & Service Tax, Noida on condition that the petitioner remits Rs.12,42,000/- (comprising Rs.1,27,000/- on management, maintenance or repair service and Rs.35,000/- towards the balance liability on commercial or industrial and residential complex services) plus the proportionate interest thereon, within six weeks and report compliance by 11.3.2014. In default, the stay shall stand dissolved and appeal shall stand dismissed for failure of pre-deposit. The ld. counsel for the petitioner is present in the court and undertakes to intimate to the petitioner its obligations under this order.

The stay application is disposed of as above.

Decision:-Part pre-deposit ordered.

Comment:-The substance of this case is that at the appellate stage, it is not possible to take entirely new ground that has not been taken at the adjudication stage. As the ground of jurisdiction was taken for the first time before the Tribunal, the same was not accepted and pre-deposit was ordered.

Prepared by: Shubham Sancheti

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PJ/Case Law/2014-15/2388

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