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ST - If an activity has been clarified to be not taxable, based on which demand was dropped, then revenue cannot take a stand that Commissioner(A) had traveled beyond SCN which disputed classification: CESTAT

By TIOL News Service

MUMBAI, AUG 31, 2018: THE respondents are engaged in the activity of laying "underground optical fiber cables" for telecom companies like Reliance Communication, Vodafone Essar, BSNL and IDEA Cellular.

They were registered and were discharging the service tax liability under the category of "Erection, Commissioning and Installation Services".

During the course of audit, it was observed that the services provided by the respondents were more appropriately classifiable under the category of "Commercial or Industrial Construction Service" and are also not entitled for benefit of abatement under notification 1/2006-ST as they were availing CENVAT Credit on inputs and input services.

The Commissioner(A) set aside the order confirming the demand of service tax of Rs.42,73,752/- by holding that the activity is not taxable and hence does not attract service tax.

Revenue is aggrieved. In appeal before CESTAT, it is argued that the Commissioner (Appeal) had travelled beyond the scope of show cause notice inasmuch as the issue involved in the notice was in respect of classification of services, whether as "Commercial or Industrial Construction Service" or as "Erection, Commissioning and Installation Services" and whether the benefit of abatement as provided under notification No 01/2006-ST dated 01.03.2006 was admissible to them. Furthermore, as the notice was issue within normal period of limitation, the finding that the extended period of limitation invoked? in the present case is not sustainable is irrelevant.

The Bench observed that the Commissioner (Appeal) had relied heavily on the CBEC Circular No 123/5/2010-TRU dated 24th May 2010 which had, on the subject, "Applicability of service tax on laying of cables under or alongside roads and similar activities" clarified inter alia -

2.

Laying of cables under or alongside roads

Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994

3.

Laying of electric cables between grids/sub-stations/transformer stations en route

Not a taxable service under any clause of sub-section (105) of section 65 of the Finance Act, 1994

Adverting to the grounds taken in appeal by the Revenue, the CESTAT further observed -

++ If some activity has been clarified to be not taxable, then revenue cannot take a stand that activity would fall under any taxable category, because of the reason that show cause notice raised dispute of classification.

++ Revenue has in their appeal not even challenged the applicability of the said circular in the present case.

++ We are not in position to agree with the findings of the adjudicating authority that the "activity of laying optical fiber cable" is different from the "activity of laying electric cable".

Concluding that there is no merit in the appeal filed by the revenue, the same was dismissed.

(See 2018-TIOL-2676-CESTAT-MUM)


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