By TIOL News Service

MUMBAI, JAN 16, 2016: IT is the case of Revenue that appellant had provided 'Commercial and Industrial Construction' services to telecom service providers for constructing foundation for towers. The assessee's claim is that the services of construction of RCC foundation is not covered under Commercial and Industrial Construction as the said foundation includes bolts on which the tower is erected hence is rightly classifiable under 'Erection, Commissioning and Installation Services' and liable to be taxed from 01.03.2006.

The Adjudicating authority confirmed the service tax demand but did not impose any penalty. Both, the assessee and the department went in appeal to the Commissioner (A) who rejected the appeal filed by appellant and allowed the appeal filed by Revenue.

Before the CESTAT, the appellant while reiterating the submissions made before the adjudicating authority laid emphasis on the fact that the foundations which are constructed by them would not get covered under the definition of “Commercial and Industrial Construction Services” and would be correctly covered under “Erection, Commissioning and Installation” services with effect from 01.05.2006 wherein structures whether pre-fabricated or otherwise are included for liability to service tax. Nonetheless, they had already discharged the service tax liability along with interest and, therefore, a lenient view should be taken as regards penalty imposed.

The AR supported the order of the first appellate authority.

The Bench observed –

+ We find that on merits the submissions made by the Consultant are required to be rejected as the scope of the services falling under the head "Commercial and Industrial Construction Services" would include construction of a new building or civil structure or part thereof. It is undisputed that appellant is engaged in providing of services of construction of foundation for the telecom towers which is nothing but a civil structure or part thereof. In our considered view the definition of the construction services as per Section 65(30a) of the Finance Act, 1994 and as amended from time to time would cover the services rendered by the appellant.

+ As regards the submission made by the learned Consultant that the services would fall under the category of “Erection, Commissioning and Installation Services” from 01.05.2006 we find that the said services include the structures whether pre-fabricated or otherwise. In the case in hand appellant has not erected any structures but were engaged in laying foundation for towers of the telecom services providers. Accordingly, the services as rendered by the appellant herein would merit classification under "Commercial or Industrial Construction Services". In view of this we hold that both the lower authorities are correct in upholding the service tax liability along with interest.

+ We find that the penalty imposed under Section 77 of the Finance Act, 1994 is correct as the appellant had not filed any returns with the authorities.

+ As regards the penalty imposed under Section 78 of the Finance Act, 1994, we find that the appellant had not taken any registration nor has informed the department about the activities undertaken by them. In our view, the provisions of Section 78 of the Finance Act, 1994 are attracted in this case as can be seen from the findings recorded by the first appellate authority.

+ However, we find that the first appellate authority has not extended the benefit of paying 25% of the penalty imposed under Section 78 as per the provisions, as it is undisputed that the appellant had already discharged the service tax and interest thereof.

The appeal was disposed of.