ST - Beautification and landscaping of Panaji Municipal garden - instead of 'Maintenance & Repair Service', service is appropriately classifiable under CICS - since service is provided to local government body, it cannot be said to be of commercial nature: CESTAT
By TIOL News Service
MUMBAI, JAN 04, 2018: A demand of service tax was confirmed against the appellant in respect of a contract entered with the Corporation of the City of Panaji for Beautification and Landscaping of Panaji Municipal Garden.
In their appeal before the CESTAT, the appellant submits that the activity undertaken by them is the activity of renovation which essentially involved razing the existing dilapidated structures and building new ones, re-laying pipelines, foundation plinth sides etc. and related cleaning and movement of debris work. Inasmuch as the demand of service tax cannot be made under the head of Management, Maintenance and Repair Service as maintenance and repair can be done only on the existing structure; that they were razing the existing dilapidated structures and building a new one. The appellant also relied on the Gujarat High Court decision in Maganlal Shivlal Vs. Memon Daudbhai Mithabhai 1969 (10) GLR 336 wherein it is held that the term "renovation" is not restricted to repairs only but includes demolition of a building and construction of another building on the same site. In the alternative, the appellant suggested that the activity could be covered under CICS but since the municipal gardens cannot be considered as commercial structure, therefore, it cannot held liable to tax under commercial and industrial construction.
Furthermore, in their own case, the Commissioner (Appeals) in identical circumstances vide Order-in-Appeal No. GOA-EXCUS-000APP-234-2015-16 set aside the demand under the head of management, maintenance and repair service and which order has been accepted by the Revenue. Moreover, vide Section 98 of the FA, 1994 inserted by Finance Act, 2012, a retrospective exemption was granted to management, maintenance and repairs of non-commercial Government buildings but no findings were given by the adjudicating authority.
The AR supported the impugned order.
The Bench noted that the issue has been dealt with by the Commissioner (Appeals) in his order in appellant's own case in respect of a different garden located elsewhere.
Observing that the order of Commissioner(A) dealt with all the aspects of the issue comprehensively, the CESTAT extracted in entirety the paragraph 7 of the order wherein it is concluded that –
"…From the contract, it is found that the appellant undertook construction and extension of Garden of Panaji City of Caranzalem, which involved land Development and construction of drainage, construction of compound wall, developing symmetrical garden, pathways, promenade, function lawn, etc. These activities predominate civil construction work and also comprise of activity akin to clearing and excavation and site formation. However, the majority of work relate to civil work in the nature of either fresh construction of a civil structure within the park like drainage system, pipes/conduits or renovation of civil structure (where old structure are reinforced and retained).The essential character of this composite work is reflected as that of construction service. Thus, instead of "Management, Maintenance or Repair Service, this service is appropriately classifiable under 'Commercial or Industrial Construction Services'. Since the information before me are no sufficient for holding it was 'works contract service', and not holding the classification urider this head. Further, since this service is being provided to Corporation of the City of Panaji, which is a local government body, it cannot be said that the construction work is of commercial nature. It is a settled law that construction service provided to government and government bodies are outside the purview of the 'Commercial or Industrial Construction Services'. In view of this peculiar facts before me, I hold that the demand is not sustainable. Be that so as it may, once I hold that the appellant is not liable to pay service tax, the question of consequent actions like interest and penalty do not arise. This is based on the oft cited maxim of law sublato fundamento, cadit opus (means the foundation being removed, the structure falls)…"
Agreeing with the findings (supra) of the order and which has been accepted by the Revenue, the Bench allowed the appeal.
(See 2018-TIOL-69-CESTAT-MUM)
