By TIOL News Service

MUMBAI, SEPT 25, 2017: APPEALS have been filed against confirmation of demand of Service Tax and imposition of penalties on the activity of Construction of Green House under the category of 'Erection, Commission and Installation Services'.

The appellant argued that the service category of "Erection, commissioning or installation service" was amended w.e.f 01.05.2006 to cover erection, commissioning or installation of pre-fabricated structures and from that date they were paying service tax; that for the prior period, the said service did not cover erection and commission of structure like greenhouse as it covered only erection, commission and installation of plant, machinery or equipment. It is also submitted that in view of the decision of Apex Court in case of Larsen and Toubro Ltd - 2015-TIOL-187-SC-ST no service tax can be levied on such lumpsum contracts for the period prior to the introduction of Works Contract service. Furthermore, there was separate demand of Central Excise duty on the pre-fabricated structure cleared by them under Chapter 94, in the case of one of the appellants M/s Siroz Consultants Pvt. Ltd. Reliance is also placed on the Board Circular No. 62/11/2003-ST dated 21-8-2003 to submit that in view of the said clarification, their activity would not be covered under the said service as greenhouse are use only for agriculture purpose and not for industrial purpose. The decision in Indian Hume Pipes Co. Ltd - 2015-TIOL-2049-HC-MAD-ST & Neo Structo Construction Ltd. Order A/338-339/2010-WZB/AHD dated 18 March 2010 is also adverted to.

The appellants also argue that the demand is hit by limitation since they had provided all the details vide their letter 7th June, 2008 to Superintendent, Anti-evasion; that their claim regarding composite contracts, abatement of material portion in erection and commission service; demand having been raised on the basis of balance sheet figures which are on accrual basis whereas service tax is levied on receipt basis had not been considered by the adjudicating authority.

The AR, while reiterating the impugned order, submitted that demand notice for manufacture of structure was for their activity at the factory and demand notice for the erection and commission service was related to their activity on site and thus there is no duplicate levy.

The Bench extracted passages from the Tribunal decision in Neo Structo Construction Ltd. (supra) and where it is concluded that the process of pre-fabrication of structures was not covered under the "Erection, Commissioning & Installation Service" prior to 01.05.2006.

Adverting to the Circular No. 62/11/2003-ST dated 21-8-2003 which explained and indicated the activities that were covered under 'Commissioning or Installation', the Bench observed that the activity of installation of greenhouse would be covered under the said service if the greenhouse could be considered a plant.

To the appellants rebuttal that greenhouse cannot be considered a plant, the Bench referred inter alia to the definitions given below –

The American Heritage Dictionary

Plant: a building or a group of buildings for the manufacture of a product; the equipment including machinery, tools instrument and fixtures and the buildings containing them necessary of industrial or manufacturing operation.

Webster's Comprehensive Dictionary of English Language

Plant: a set of machines, tools, apparatus etc. necessary to conduct a manufacturing enterprise or other business.

And observed –

"It is seen that the definition of plant includes a building. The term "Building" has been defined in the Merriam Webster's dictionary as:

"a usually roofed and walled structure built for permanent use (as for a dwelling)"

The term Building has been defined in on the website of dictionary.com as under:

"a relatively permanent enclosed construction over a plot of land, having a roof and usually windows and often more than one level, used for any of a wide variety of activities, as living, entertaining, or manufacturing".

In the website of business Dictionary.Com term as under:

"1. Permanent or temporary structure enclosed within exterior walls and a roof, and including all attached apparatus, equipment, and fixtures that cannot be removed without cutting into ceiling, floors, or walls.""

The CESTAT further observed –

"5.1 The greenhouse is a building on ground and is enclosed a structure. The said structure contains ventilation and window/doors. In view of the above, it is apparent that a greenhouse would fall under the category of 'building'. Greenhouse is used for commercial production of crops, vegetables, fruits and other agriculture produce. As a result, use of greenhouse is industrial in nature. In these circumstances, it cannot be denied that the said greenhouse would fall under the definition of plant. In view of the above, it is apparent that appellants are engaged in the activity of installation of plant (greenhouse), and therefore the appellants are liable to pay services on the said activity."

As regards the submission by the appellant that CE duty had been demanded on the pre-fabricated structure (Greenhouse) cleared by them and, therefore, no service tax can be demanded, the Bench viewed that the argument was a flawed one and that both the activities are independently leviable to corresponding levies.

In the matter of invocation of the extended period of limitation, the Tribunal observed that the appellant could not have harbored a bonafide belief that they were not liable to pay service tax since specific services of "Commission and Installation" were incorporated in the Finance Act, 1994 and there was no reason for the appellant to doubt the same; that documents recovered from the appellant's premises evidenced that while quoting price to the clients they had included service tax specifically and, therefore, it could not be said that the appellant were not aware of their tax liability; the claim that since the same is an unsigned document hence cannot be relied upon is misplaced as the said document was recovered from the appellant's own premises. Inasmuch as extended period of limitation is rightly invoked, the CESTAT held.

Nonetheless, as regards the other claims made by the appellant viz. Works Contract, abatement of material portion of supply and that balance sheet figures cannot be based for computing demand since on accrual basis, the CESTAT observed that since the said issues were not examined in the impugned order, the matter needs to be remanded to the adjudicating authority.

In fine, the Appeal was allowed by way of remand.

(See 2017-TIOL-3479-CESTAT-MUM)