By TIOL News Service

MUMBAI, JAN 09, 2015: THE appellant is engaged in the activity of constructing and maintaining sewage treatment plants, effluent treatment plants and water treatment plants. It was detected by the department that the appellant had not paid service tax on the above activities undertaken by them as well as on Goods Transport Agency Service.

Against a total demand of Rs.31.82 crores the appellant has deposited Rs.92 lakhs and is before the CESTAT seeking a stay in the matter.

The appellant submitted that a major amount of service tax demanded of Rs.29.44 crores is on the activity of contracts for constructing the effluent treatment plant, sewage treatment plant and water treatment plant for Municipal bodies and Government; that specific service under which contracts are covered for demanding service tax has not been set out either in the show cause notice or in the adjudication order; service tax has been demanded on the contract value whereas it was payable on receipt basis during the period in dispute i.e. 2006-07 to 2010-2011; that they admit their ST liability of Rs.16 lakhs on GTA out of which they had paid Rs.3 lakhs.

The AR submitted that investigation arose from information received from Income Tax/CBEC regarding the bogus purchase bills used in preparing the balance sheet; that the nature of service is mentioned such as EPC contracts, therefore, service has been specified and service tax has been correctly demanded.

The Bench observed -

++ On examination of Annexure ‘2' to the show cause notice, we find that against most contracts, the specific service under the Finance Act, 1994 under which the activity falls is not stated; rather the description of service is mentioned generally such as:

(i) Construction of commercial and industrial service/works contract service/repair and maintenance.

(ii) Erection, Commissioning and Installation of ETP operating and maintenance.

(iii) Design, approval of design, construction, erection, commissioning, operation and maintenance of CET.

++ We agree that the department has to first fix the classification of a particular activity and only then proceed to work out the demand of service tax which is due. This is necessary because different services may operate under different schemes, different notifications, different abatements etc. The classification under which charge of non-payment is made in the show cause has not been specified. Secondly, there is reference during the period in dispute. We also note that the adjudicating authority has not applied the relevant law for determining at what stage service tax payment is due. In the present case, it was due on receipt of payment for the services whereas the adjudicating authority has ignored this issue altogether.

The Bench directed the appellant to deposit an amount of Rs.10 lakhs towards GTA service and remanded the case to the adjudicating authority for consideration of all the factual and legal issues raised by the respondent which were not considered earlier.

(See 2015-TIOL-74-CESTAT-MUM)