Ishikawajima Harima Heavy Industries ... vs Commissioner Of Central Excise

IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI

COURT No. I

Appeal No. ST/62/12

(Arising out of Order-in-Appeal No. 356/27/V/2011/COMMR/ KS/ST dated 04.11.2011 passed by Commissioner of Central Excise, Mumbai V)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Ishikawajima  Harima Heavy Industries Co. Ltd. Appellant Vs.

Commissioner of Central Excise Mumbai V Respondent

Appearance:

Shri Prasad Paranjape, Advocate for appellant Shri D. Nagvenkar, Addl. Commr (AR) for respondent

CORAM:

Honble Mr. M.V. Ravindran, Member (Judicial) Honble Mr. C.J. Mathew, Member (Technical)

Date of Hearing: 14.09.2015 Date of Decision: 14.09.2015

ORDER NO

Per: M.V. Ravindran

This appeal is filed by the appellant against Order-in-Appeal No. 356/27/V/2011/COMMR/KS/ST dated 04.11.2011.

2. Heard both sides and perused the records.

3. On perusal of the records we find that the appellant herein was executing a turnkey project as per an agreement entered with Petronet LNG Ltd. for providing the design, engineering, procurement, construction and commissioning of two storage tanks and re-classification of LNG at Dahej, Gujarat. The lower authority was of the view that these services would fall under the category of Consulting Engineers Services but the appellant has discharged the service tax liability and interest thereof. The Commissioner of the Service Tax, Mumbai issued a show-cause notice to the appellant for confirmation of demands and also for imposition of penalties. On adjudication he confirmed the demands with interest and also imposed penalties. The appellant preferred this appeal stating that the entire execution of the work undertaken by the appellant for turnkey project was done prior to 01.06.2007 and was not taxable under any other services except works contract which came into effect from 01.06.2007, for which the appellant pressing home with the ratio of the judgement of the Honble Apex Court in the case of Larsen and Toubro  2015-TIOL-187-SC-ST. We find it so. We reproduce the relevant paragraphs i.e 24 and 29.

24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.

29. It is interesting to note that while introducing the concept of service tax on indivisible works contracts various exclusions are also made such as works contracts in respect of roads, airports, airways transport, bridges, tunnels, and dams. These infrastructure projects have been excluded and continue to be excluded presumably because they are conceived in the national interest. If learned counsel for the revenue were right, each of these excluded works contracts could be taxed under the five sub-heads of Section 65(105) contained in the Finance Act, 1994. For example, a works contract involving the construction of a bridge or dam or tunnel would presumably fall within Section 65(105)(zzd) as a contract which relates to erection, commissioning or installation. It is clear that such contracts were never intended to be the subject matter of service tax. Yet, if learned counsel for the revenue is right, such contracts, not being exempt under the Finance Act, 1994, would fall within its tentacles, which was never the intention of Parliament.

4. In view of the foregoing, we hold that the impugned order is incorrect and is liable to be set aside and we do so.

5. Impugned order is set aside and the appeal is allowed with consequential relief, if any.

(Dictated in Court)

(C.J. Mathew) Member (Technical) (M.V. Ravindran) Member (Judicial)

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1 4 Appeal No. ST/62/12