By TIOL News Service

MUMBAI, JUNE 22, 2016: THE CCE, Nagpur dropped the demand of Service Tax of Rs.1,07,38,207/- on the construction services provided by the appellant to Nagpur Municipal Power Corporation Ltd.& Nagpur Improvement Trust , on the ground that these services were rendered to local statutory bodies in discharge of their duty to provide civic amenities. However, the demand of Service Tax of Rs.1,15,505/- was confirmed on the construction services provided to NTPC & penalties u/ss76, 77 & 78 were imposed commensurate to the confirmed demand.

It seems Revenue has no grievance with the portion of the demand that was dropped by the adjudicating authority.

Nonetheless, the appellant is before the CESTAT and submits that laying of pipelines is not related to any commercial or industrial activity as the service is undertaken for providing drinking water to employees of NTPC . Furthermore, the service of laying of pipeline is not for commercial purpose but for the welfare of employees of the NTPC . In support, the appellant placed reliance on the following judgements viz. Nagarjuna Construction Co. Ltd. - 2010-TIOL-789-CESTAT-BANG, Dinesh Chandra Agarwal Infracon P. Ltd. - 2010-TIOL-1413-CESTAT-AHM, P.B. Rathod - 2015-TIOL-2874-CESTAT-MUM, B.G. Shirke Construction Technology P. Ltd. - 2013-TIOL-1424-CESTAT-MUM.

The appellant also submitted that the larger period of limitation could not be invoked as non-payment of ST occurred only due to bonafide belief that the service is not taxable.

The AR while reiterating the findings of the adjudicating authority submitted that NTPC is a Public Ltd. Company purely engaged in the commercial activity; that the welfare of their staff such as housing, providing water etc. is under statutory obligation for running the industry and, therefore, the service of pipeline provided by the appellant to M/s NTPC falls under the category of "Commercial or Industrial Construction Service".

The Bench observed -

Merits:

+ Service recipient M/s NTPC Ltd. is a Public Ltd. Company and indeed engaged in the industrial and commercial activities i.e. generation of power and selling thereof. Therefore, the laying of pipeline even for providing to water supply to staff quarter is not for social or philanthropic purposes. The staff quarter and welfare of the employee is part of the statutory obligation of M/s NTPC Ltd. for ultimate object of running the commercial and industrial organisation. Therefore the service provided by the appellant is for use in the activity of commercial or industrial activity &clearly falls under the category of "Commercial or Industrial Construction Service", hence, liable for Service Tax.

+ In the present case, the service of laying of pipe is provided to M/s NTPC Ltd. which is a commercial or industrial organisation. Therefore, ratio of none of the judgments is applicable in the facts and circumstances of the present case.

Limitation:

+ On the issue of limitation, we find that the appellant never informed the department about their activity, even did not bother to take any opinion either from department or from any legal professional. Since, the department was not aware about activity of the appellant, therefore, the extended period was rightly invoked.

Penalty:

+ We find that the appellant recorded the transaction in the books of account, therefore, there is no malafide intention on their part which shows reasonable cause for non-payment of Service Tax. We, therefore, invoking the Section 80, waive the penalty imposed under Section 76, 77 & 78 of the Finance Act, 1994.

The appeal was partly allowed.

(See 2016-TIOL-1493-CESTAT-MUM)