Whether painting, tiling of existing building treated as repair and eligible for abatement?

PJ/Case Law /2016-17/3421

Case- CARPENTERS VERSUS COMMISSIONER OF C. EX. & SERVICE TAX, PUNE-III
Citation:- 2014 (33) S.T.R. 573 (Tri. - Mumbai)
Brief Facts-The appellant, M/s. The Carpenters are providing services under the category of ‘Commercial or Industrial Construction Services’. The appellant undertakes interior contract work such as panelling, tiling, painting, etc. The appellant discharges Service Tax on the above activity after availing an abatement of 67% on the gross value of the taxable value of the service rendered, under Notification No. 1/2006-S.T., dated 1-3-2006. The department was of the view that the appellant is not eligible for the said abatement for the reason that the activity undertaken by the appellant relates to completion and finishing services in respect of buildings or civil structure and the same has been excluded from the scope of the said Notification. Accordingly, a Service Tax demand was issued to the appellant vide notice dated 27-1-2010 demanding Service Tax of Rs. 4,74,75,144/- for the period 2005-06 to 2007-08 along with interest thereon and also proposing to impose penalties. The said order was adjudicated vide the impugned order and Service Tax demand of Rs. 4,74,75,144/- was confirmed by classifying the service under the category of completion and finishing services in respect of building and civil structures along with interest thereon and also by imposing an equivalent amount of penalty under Section 78 of the Finance Act, 1994 and penalty of Rs. 20,000/- under Rule 7(C) of the Service Tax Rules, 1994. Hence the appellant is before Tribunal.
Appellant’s Contention- The learned counsel for the appellant submits that the activity undertaken by them are in respect of existing buildings and he submitted copies of the work orders received by them from various hotels who are their clients, which are all in existence and operating and the contracts awarded for interior work, wood work, loose and fixed furniture for the rooms in the hotel and also in the clubhouse, health club, etc. Accordingly, the learned counsel submits that the activity undertaken by them will not come under completion and finishing services under clause (c) of the ‘Commercial or Industrial Construction Service’ but under clause (d) which deals with repair, alteration, renovation or restoration or similar services in relation to building or civil structure. He also relies on the decision of this Tribunal in the case of Agrim Associates Pvt. Ltd. v. Commissioner of Service Tax, New Delhi - 2012 (25) S.T.R. 30 (Tri.-Del.) wherein a similar issue was considered and it was held that activity such as dismantling work, flooring work, wood work, painting and finishing work, etc. undertaken on existing building would be classifiable under ‘repair, alteration or renovation or restoration’ under clause (d) of Section 65(25b) and accordingly would be eligible for the benefit of Notification No. 1/2006-S.T.
Respondent’s Contention- The learned Commissioner (AR) appearing for the Revenue, on the other hand, strongly contends that completion and finishing services does not refer to whether they are in respect of a new building or old building and, therefore, such services undertaken would come under clause (c) of Section 65(25b) and accordingly they will not be eligible for the abatement granted under Notification No. 1/2006. Accordingly, he prays for putting the appellant to terms.

Reasoning Of Judgement-   The Tribunal carefully considered the submissions made by both the sides. The Tribunal also perused the work orders given to the appellant by various clients. It will be useful to refer to the definitions of both the services at this juncture under Section 65(25b) which reads as follows :
“Commercial or Industrial Construction” means -
(a)        construction of a new building or a civil structure or a part thereof; or
(b)        construction of pipeline or conduit; or
(c)        completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or
(d)        repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is -
(i)         used, or to be used, primarily for; or
(ii)        occupied, or to be occupied, primarily with; or
(iii)       engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;”
From the perusal of the above definition it can be seen that completion and finishing services necessarily relate to an incomplete or unfinished building or civil structure and necessarily it has to be in relation to new building or a civil structure. A building which has already been completed and put to use does not need any completion or finishing services. Therefore, the activities of repair, alteration, renovation or restoration undertaken by the appellant prima facie comes under clause (d) and not under clause (c) and, therefore, the appellant is prima facie eligible for the benefit of Notification No. 1/2006-S.T.
This Tribunal, in the case of Agrim Associates Pvt. Ltd. (cited supra) also held a similar view. Thus, the appellant has made out a prima facie case for waiver of pre-deposit of the dues against them.
Accordingly, the tribunal granted unconditional waiver of pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal.

Decision- Stay application allowed.
Comment- The crux of the case is that activity of panelling, tiling, painting, etc. will be prima facie covered under repair, alteration, renovation or restoration clause of commercial or industrial construction service and not under completion or finishing clause. Therefore, the assess was prima facie entitled for the benefit of abatement in view of decision given in the case of Agrim Associates Pvt. Ltd. [2012 (25) S.T.R. 30 (Tribunal)]. Hence, appellant was granted unconditional stay.
Prepared By – Prateeksha Jain

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PJ/Case Law /2016-17/3421

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