By TIOL News Service

MUMBAI, APRIL 25, 2013: THE Carpenters are providing services under the category of ‘Commercial or Industrial Construction Services'. They undertake interior contract work such as paneling, tiling, painting, etc. and claim that these are repair, alteration, renovation or restoration services in relation to a building or civil structure as mentioned in clause (d) of the category. They discharge 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-ST dated 01/03/2006.

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 falls in clause (c) of the definition of ‘Commercial or Industrial Construction Services' and which is excluded from the scope of the said Notification.

The core of the dispute lies in the following contending entries -

"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;"

The relevant entry in Notification 1/2006-ST reads -

Accordingly, the Carpenters were issued a ST demand of Rs. 4,74,75,144/-for the period 2005-06 to 2007-08.

The CCE & ST, Pune-III was not happy with the carpentry and, therefore, upheld the allegations leveled and imposed penalty and interest.

So, the Carpenters are before the CESTAT and make the following submissions -

+ that the activity undertaken by them are in respect of existing buildings and in support they submitted copies of the work orders received by them from various hotels who are their clients, which were 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.

+ Inasmuch as 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.

+ Reliance is also placed on the decision in Agrim Associates Pvt. Ltd. vs. Commissioner of Service Tax, New Delhi - 2011-TIOL-1232-CESTAT-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-ST.

The Revenue representative submitted that since in clause (d) completion and finishing services does not refer to whether they are in respect of a new building or old building, therefore, services undertaken by the Carpenters would come under clause (c) of Section 65(25b) and accordingly they will not be eligible for the abatement under Notification No.1/2006. He prayed that the appellant be put to terms.

The Bench after perusing the work orders given to the Carpenters by various clients and referring to the definition and the notification in question observed -

"5.1 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, thea appellant is prima facie eligible for the benefit of Notification No.1/2006-ST.

5.2 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."

In fine, the CESTAT granted unconditional waiver of pre-deposit of the adjudged dues and stayed the recovery.

Carpentry:The Carpenters were an American vocal and instrumental duo, consisting of siblings Karen & Richard Carpenter. During a period in the 1970s when louder and wilder rock was in great demand, Richard and Karen produced a distinctively soft musical style that made them among the best-selling music artists of all time. Incidentally, the name of the appellant involved in the current proceedings is ‘The Carpenters'.

(See 2013-TIOL-646-CESTAT-MUM)