Whether supplying and fixing Metal Crash Barriers service covered under erection and commissioning or works contract?

PJ/Case Law /2016-17/3253

Case:-PIONEER FABRICATION PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT

Citation:-2016 (42) S.T.R. 563 (Tri-All.)

Brief Facts:-The brief facts of the case are that the appellants are engaged in the manufacture of Metal Crash Barriers liable to Central Excise duty. They are also executing work of installing these Metal Crash Barriers along the highways for their customers. Proceedings were initiated against the appellant for demanding service tax under the category of erection, commissioning and installation services. After a due process, the original authority vide order dated 31-10-2011 confirmed a service tax demand of Rs. 16,87,775/- against the appellant and imposed equal penalty under Section 78 and also penalties under Section 77 of Finance Act, 1994. On appeal, the Commissioner (Appeals) vide the impugned order upheld the original order and rejected the appeal.

Appellant Contention:-The appellant Shri Abhishek Jaju submitted that the impugned order is not legally sustainable, They have executed composite work contract involving supply of materials and rendering of service while fixing the Metal Crash Barriers along the highways. These are specifically covered under works contract not liable to service tax prior to 1-6-2007 as held by the Hon’ble Supreme Court in the case of CCE, Kerala v. Larsen & Toubro Ltd. reported in 2015 (39)S.T.R.913 (S.C.).The classification followed by the lower authorities is legally not sustainable. The work undertaken by them cannot be categorized as erection, commissioning or installation of any plant and machinery or structure. It is essentially a civil work having concrete foundation and Metal Barriers are fixed thereupon along the roadside. So the confirmation of demand under that category is not sustainable. All the work executed by them alongside the highways and on the bridges are part and parcel of highway roads and, as such, are exempted from tax as held by the Tribunal in the case of Phoenix Engineeringv. CCE, Nagpur reported in 2015 (39)S.T.R.337 (Tri. - Mumbai)and GMR Projects Pvt. Ltd. v. CST, Bangalore reported in 2014 (35)S.T.R.785 (Tri. - Bang.).

Respondent Contention:-The learned AR Shri A.K. Goswami, reiterated the findings of the lower authorities and stated that the appellants did not discharge excise duty on full value of the Metal Crash Barriers which resulted in the inquiry and thereupon the confirmation of demand for service tax liability on the work executed by the appellant. He submitted that the work executed by the appellant can rightly be classified under erection, commissioning and installation services as Metal Crash Barriers can be considered as equipment and structure.

Reasoning of Judgment:-Heard both the sides and perused appeal records. The point for decision is the liability for service tax in respect of supply and installation of Metal Crash Barriers along the side of highways by the appellant. On perusal of the submissions made by the appellant, we find that on all three points raised by the counsel, they have a strong case, Regarding the nature of service rendered by the appellant it is clear from the work order as well as the observations of the lower authorities that these are composite work involving supply of materials and provision of service. These are rightly to be categorized under works contract and the Hon’ble Supreme Court in the case of CCE, Keralav. Larsen & Toubro Ltd. (supra) held that prior to 1-6-2007 there is no charging section for levying service tax on works contract. We find on this ground alone, the appellant will succeed.
We also find that the classification followed by the lower authorities is not sustainable. From the nature of work and the material involved it is clear that supplying and fixing Metal Crash Barriers along the highways cannot be considered as erection and commissioning of any plant and machinery or similar equipments.
The Metal Crash Barriers are essentially part and parcel of highways and appellant’s plea that the exemption available to the construction of road will cover these structures also has much force. The Manual of Specifications and Standards for National Highways, issued by Government of India, Ministry of Shipping, Road Transport & Highways mentions Metal Beam Crash Barriers as one of the manufactured materials for use in the highways.
Considering the above discussions and findings, we hold the impugned order is not sustainable and accordingly allow the appeal with consequential relief, if any.

Decision:- Appeal allowed.

Comment:-The gist of the case is that metal crash barriers are essentially part and parcel of highways and are composite contracts involving supply of materials along with labour, they are more appropriately classifiable as ‘works contract services’ and are not covered under the category of erection and commissioning services. Moreover, since the works contract services are not leviable to service tax prior to 01.06.2007 in view of Apex Court decision in case of Larson & Turbo, the appeal was allowed.

Prepared by:- Bharat Chouhan

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PJ/Case Law /2016-17/3253

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