Whether repair of runways can be treated at par with roads so as to be exempt from service tax?

Case:- D P JAIN CO INFRASTRUCTURE PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, NAGPUR

Citation:- 2013-TIOL-1029-CESTAT-MUM

Brief facts:- The appellant, M/s D.P.Jain & Co. Infrastructure Pvt. Ltd., Nagpur is having service tax registration under the categories of GTA Services, Site Formation and Clearance, Excavation, Earth Moving and Demolition Services. The department argued that the appellant was engaged in providing ‘Management, Maintenance or Repair Service', ‘Commercial and Industrial Construction Service' and ‘Site Formation and Clearance, Excavation, Earth Moving and Demolition Service' to various agencies like Airport Authority of India, Municipal Corporation of Nagpur, CPWD etc. Such services included repairs and strengthening of roads, improvement and resurfacing of runways, construction of toll plazas and the appellant was not discharging service tax. On scrutiny of the documents it was observed that the appellant had also undertaken repair activities of roads, improvement and resurfacing of runways for the Airport Authority of India and certain military airbases, construction of toll plazas etc., in addition to above services. Accordingly, a show cause notice was issued to the appellant demanding service tax of Rs.10,25,72,125/- for the period 2005-06 to 2009-10 by proposing to classify the activities undertaken under the aforesaid services. The said notice was contested. However, vide the impugned order service tax demands were confirmed along with interest thereon and penalties were imposed on the appellant under section 76, 77, 78 of the Finance Act, 1994.

Appellants contention:- The appellant submits that services in relation to management, maintenance or repair of roads was exempted from the whole of the service tax leviable thereon vide notification no. 24/2009-ST dated 27/07/2009 and vide section 97 of the Finance Act, 2012 this exemption has been given retrospective effect for the period from 16/06/2005 to 26/07/2009. In view of the above, the appellant is not liable to pay any service tax on the activities undertaken by them in respect of management, maintenance or repair of roads. However, he submits that when the impugned order was passed, the retrospective amendment had not come into force and, therefore, the matter needs to be remanded back to the adjudicating authority for extending this exemption and re-computation of demand.

As regards the maintenance, repair of runways undertaken by the appellant, it is his submission that the expression ‘road' includes runways as per the K.J.Aiyer's Judicial Dictionary published by Butterworths India, 13th Edition, which reads as follows:

“ Road. A way of passage. The expression is wide enough to include railway, railroad or railway track because road is genus and railway is a species of road [Union of India vs. Authority under Minimum Wages Act SIR 1969 Bom 310, 70 Bom LR 548, 1968 Mah LJ 771, 17 Fac LR 226, (1968) 2 Lab LJ 750]
The expression cannot be limited to public roads, and to exclude private roads. Road is road, whether public or private. [RTO, Ionkk v Philip 1979 Ker LT 522 (DB)]”

From the above, it can be seen that the expression ‘road' is wide enough to cover railroads, railway tracks, etc. and it also covers both public roads and private roads. The Hon'ble High Court of Bombay in the case of Union of India vs. Authority under the Minimum Wages Act reported in AIR 1969 Bom 310 held that the expression ‘road' would cover railways also and ‘road' is the genus and railway is a species of road. Runway is nothing but a road used by aircrafts for landing or taking off and, therefore, should be considered as a species of road. It is also his submission that as per the Standards and Specifications laid down for the road and bridge works by the Ministry of Road Transport and Highways, Government of India, the said standards cover specification for runways also and, therefore, runway is nothing but a road or a species of road. He also relies on the decision of this Tribunal in the case of Shilpa Constructions Pvt. Ltd. 2010(19)STR 830 2010-TIOL-1132-CESTAT-AHM wherein it was held that a driveway to a petrol pump also amounts to construction of road as a driveway facilitates those people to come to a petrol pump for filling fuel. Alternatively, he submits that as per section 65(25b) of the Finance Act, 1994, ‘Commercial or Industrial Construction Service' means:

(d) repair, alteration, renovation or restoration of, or similar services in relation to building or civil structure, pipeline or conduit” …but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.”

Since the repair services of roads are specifically excluded under ‘Commercial or Industrial Construction Service', the said activity cannot be brought under ‘Management, Maintenance or Repair Service' under section 65(24). He relies on the clarification issued by the Ministry in this regard vide a Circular no. 80/10/2004-ST dated 17/09/2004 and B/1/6/2005-TRU dated 27/07/2005. From this circulars, it is very well clear that ‘commercial construction' excludes construction of roads, airports etc., and, therefore, construction of runways are not eligible to service tax under ‘Management, Maintenance or Repair Service'. It is also his contention that in respect of runways, part of the construction was relating to defence airports and ‘airport' by definition has the meaning assigned to it in clause (b) of Section 2 of the Airport Authority of India Act, 1994, and as per these provisions “ ‘airport' means landing and taking off area for aircrafts, usually with runways and aircraft maintenance and passenger facilities and includes aerodrome as the defined in clause (2) of Section 2 of the Aircraft Act, 1934.” Vide Section 98 of the Finance Act, 2012 retrospective exemption has been granted relating to management, maintenance or repair of non-commercial government building, for the period from 16/06/2005 to 30/06/2012. Since defence airports are non-commercial government buildings, there will not be any service tax liability on the activities undertaken by the appellant in respect of repair of runways of defence airports.

It is his further contention that no abatement has been granted in respect of the materials used for the repair or re-surfacing of runways under Notification no. 12/2003 and its successor notifications. If all these are considered, the duty liability would come substantially.

It is also his contention that the entire demand is time-barred as the show cause notice for demand of service tax has been issued only on 13/10/2010 in respect of services rendered by the appellant during the period 2005-06 to 2009-10. The appellant was under the bona fide belief that since they were undertaking work towards public utilities, they were not liable to service tax and, therefore, invocation of extended period of time for confirmation of demand is unsustainable in law.

In view of the above he pleads for remanding the matter back to the adjudicating authority.

Respondents Contention:- The learned Commissioner (AR) appearing for the Revenue submits that when the case was adjudicated, the retrospective exemption on maintenance of roads was not in force and same came into force only with the enactment of the Finance Act, 2012. Therefore, the adjudicating authority could not have considered the exemption available to such activities and hence the matter needs to be remanded to the adjudicating authority to re-compute the service tax demand taking into account the exemption available. However, he strongly refuses the argument of the appellant that runway is a species of road. According to International Civil Aviation Organization (ICAO) ‘runway' is defined as “a rectangular area on a land aerodrome prepared for the taking off of aircraft”. Since India is a member of ICAO and all the airports have to be constructed and regulated in terms of the ICAO guidelines, the definition of ‘runway' by ICAO would be relevant and as per this definition ‘runway' is only a rectangular strip of land for landing or taking off of aircrafts . By no stretch of imagination, the runway can be constructed as a road or as a species of a road. The learned AR also contends that road is a means of travel by passengers or for carriage of goods from one place to another and it has to have access by the public. However, in the case of runways public access is prohibited and it is only meant for landing or taking off of the aircrafts. Therefore, runway cannot be considered as a road by any stretch of imagination. He relies on the decisions of the Hon'ble Kolkata High Court in the case of Nirode Chandra Mukherjee vs. Chairman of Commissioners AIR 1936 Cal 506 and Sarat Chandra Ghatak & Ors vs. Corporation of Calcutta and Anr Air 1959 Cal 36. As per these decisions, roads are something which may be accessible to the public for transportation. In the absence of any such access to any public in the case of runways, they cannot be considered as roads. He also relies on the decision of the hon'ble High Court of Madras in the case of Chairman, Neyveli Lignite vs. Nayathan and Ors. 2(1988) ACC 141 wherein it was held that road is a highway to which the public has access and includes bridges over which a road passes. It is his contention that public access is a must for something to be considered as a road. Since in the case of runways, public access is prohibited, runways cannot be considered as roads. Therefore, the benefit of exemption available to maintenance/repair of roads will not be available in respect of such activities carried out in respect of runways.

Reasoning of Judgement:- After carefully considering the submissions made by both the sides, it was found that the appellant has undertaken maintenance/repair of roads in addition to repair/maintenance of runways. Vide Notification no. 24/2009, maintenance/repair of roads was exempted from the levy of service and such exemption was given retrospective effect vide section 75 of the Finance Act, 2012 for the period starting from 16/06/2005 onwards. Therefore, the appellant is rightly eligible for exemption from service tax on the maintenance of repair of roads undertaken by him during the period 16/06/2005 to March, 2010. Since at the time of adjudication, this provision of the law had not came into existence, the matter has to go back to the adjudicating authority to consider grant of exemption in respect of maintenance or repair of roads undertaken by the appellant during the impugned period.

As regards the question whether runway is a species of a road and, therefore, exemption available to maintenance or repair of roads should be extended to maintenance or repair of runways, the matter needs careful examination. ‘Runway' is not defined in the Act neither the term ‘road'. Therefore, the matter has to be examined in terms of the dictionary meaning of the road and the common understanding of the subject. According to shorter Oxford English Dictionary, 5th edition, ‘road' means:

“a path or way between different places, usually, one wide enough for vehicles as well as pedestrians and with a specially prepared surface. Also the part of such a way intended for vehicles, the roadway, an underground passage or gallery in a mine, a railway.”

The said dictionary gives the meaning of ‘runway' as follows:

“ A specially prepared surface on an airfield along which aircrafts take off and land.”

From the above definitions while a road is a path or way between two different places, a runway is a specially prepared surface on an airfield. The purpose for which a road is put to use and a runway is put to use are substantially different. While a road is a means of travel from one place to another for the purpose of transportation of passengers or goods or animals, the runway is not a means of travel at all. Public access is prohibited and it is only a piece of land where the aircrafts can land or take off. It is also not necessary that runways has to be built on land. In the case of aircraft carriers, runways are built on the ship and the aircrafts land or take off from the ship. Thus, there is substantial difference between a road and a runway. The definition given by ICAO of a ‘runway' also says that a runway is a strip of land over which aircrafts to land or take off. The definition of ‘road' and ‘runway' in the Chamber's Dictionary also makes this position clear. While road is defined as a tract suitable for road traffic, a highway, a roadway etc. runway is defined as a firm strip of ground for aircraft to take off from land and land on. Therefore, in common understanding, road and runways are not one and the same. They are distinct and different. In view of the above, the Hon’ble CESTAT negative the contentions raised by the counsel for the appellant stating that maintenance or repair of road would include maintenance or repair of runways. In the absence of a specific exemption in respect maintenance or repair of runways, the benefit of service tax exemption available in respect of roads cannot be extended to runways and we hold accordingly.

The learned counsel has also argued that since ‘Commercial or Industrial Construction Service' includes repair, alteration, renovation or restoration or similar services in relation to a building or civil structure but excludes such services provided in respect of roads, airports, railways etc. the said activity cannot be brought under tax net under management, maintenance or repair services and he relies on the decision of the Tribunal in the case of Dr. Lal Path Lab Pvt. Ltd. vs. Commissioner of Central Excise, Ludhiana 2006(4)STR 527 [2006-TIOL-1175-CESTAT-DEL ]; Federal Bank Ltd. vs. Commissioner of Central Excise, Customs & Service Tax 2009(15)STR 279 [2008-TIOL-2552-CESTAT-BANG] etc., We have examined this submission. While section 65(25b) excludes from its scope, service provided in respect of roads, airports, railways etc. Section 65(64) covers within its scope, management, maintenance or repair of properties whether immovable or not. Therefore, though maintenance/repair of roads stands excluded under construction and management service, it is included in the management, maintenance or repair service as defined under section 65(64). In view of this position, the argument of the appellant that the said services stand excluded from the levy of service is not convincing. There is one more reason to come to this conclusion. If maintenance/repair of roads were not liable to service tax because of its specific inclusion under section 65(25b) under ‘Commercial or Industrial Construction Service', there was no need for the legislature to exempt the said activity vide notification no. 24/2009-ST dated 27/07/2009 and give retrospective effect to the said exemption vide section 97 of the Finance Act, 2012. The specific exemption for maintenance or repair of roads by the legislature retrospectively clearly shows that the said activity is a taxable activity and, therefore, in public interest the same has been given exemption. If the activity was not taxable ab initio, there was no need for the legislature to pass a specific legislation for this purpose. This also shows that the reliance placed by the appellant on the various case laws in this regard does not support the contentions raised by the appellant.

As regards the claim of the appellant that in respect of runways constructed in defence airports, the benefit of retrospective exemption under section 98 of the Finance Act, 2012 would be available, this aspect needs consideration by the adjudicating authority as this issue had not been raised or considered by the said authority.

In the light of the foregoing, the case was remanded back to the adjudicating authority for consideration of the appellant's claim for benefit of exemption under Notification no. 24/2009-dated 27/07/2009 read with section 97 of the Finance Act, 2012. The adjudicating authority is also directed to consider the claim of the appellant in respect of maintenance or repair activities undertaken on runways of defence airports under section 98 of the Finance Act, 2012. The adjudicating authority is also required to consider the claim of the appellant for grant of abatement towards the value of materials supplied while undertaking the maintenance or repair activities. The issue of time-bar is left open and the matter has to re-examined by the adjudicating authority. We also hold that ‘roads' and ‘runways' are not one and the same and, therefore, the benefit of exemption available to maintenance or repairs of roads will not be ipso facto apply to runways. With these directions, the matter is remanded back to the adjudicating authority for consideration afresh and pass a speaking order after giving the appellant a reasonable opportunity of being heard.

The matter was remanded back to Adjudicating authority and held that Runways would not covered by the meaning of Roads and hence, benefit of Notification no. 24/2009 cannot be extended to Runways also. If there is specific provision on a matter then general provision cannot be argued.

Decision:- Appeal allowed by remand.

Comment:- The gist of the above case is that road does not include runways. If there is specific provision relating to a matter then general provision should not be applied i.e. specific provision always prevails over the general provision and accordingly, repair of runways is not covered by the service tax exemption that is given with respect to roads.

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PJ/ Case Law/2013-14/1624

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