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BRIEF FACTS OF THE CASE :-

It appeared that M/s. N.P. Patel & Co., 9, 2nd Floor, Sukhsagar Complex, Opp. Dinesh Chambers, Bapunagar, Ahmedabad (herein after referred to as ‘N. P. Patel & Co.’ for the sake of brevity), were interalia, engaged mainly in the business of providing and laying of different types of Sewerage pipelines, Railway projects and other construction projects allotted by the State & Central Government departments and agencies, Gujarat State Police Housing Corpn. Ltd., Sabarmati River Front Development Corpn. Ltd., Nagar Palicas and bodies, etc. They had also carried out contracts of construction with M/s Gujarat Energy Transmission Corporation Ltd. (GETCO), which were all covered under the various taxable services, as defined under section 65 (105) of the Finance Act, 1994. Presently, they are registered with the Service Tax Department having Registration No. AASPP5751DSD003 from 19-04-2010, for “Works Contracts Services”, as required under the provisions of section 69 of The Finance Act 1994, as amended from time to time.

2. An intelligence was received with the Directorate General of Central Excise Intelligence (DGCEI), Ahmedabad Zonal Unit (AZU), Ahmedabad that M/s. N. P. Patel & Co. were indulging in evasion of Service Tax by not obtaining Service Tax registration and non payment of Service Tax on the taxable services provided by them to their clients. Therefore, a search was carried out at the premises of M/s N. P. Patel & Co., 9, 2nd Floor, Sukhsagar Complex, Opp. Dinesh Chambers, Bapunagar, Ahmedabad as per the provisions of Section 82 of the Finance Act 1994 under Panchnama dtd. 23-03-2010, wherein Shri Narendrabhai Popatbhai Patel, the Proprietor of the said firm was present. Further the documents as mentioned in Annexure-A of the above Panchnama, were withdrawn. 3. Scrutiny of documents withdrawn during search conducted on 23.03.2010 at the premises of M/s N. P. Patel & Co., Ahmedabad

3.1 During the course of search, Shri Narendrabhai Popatbhai Patel, the Proprietor of the said firm, informed that his firm was established in the year 1997 and they were functioning as a Government approved AA-Class Contractor. He also informed that his firm was carrying out various items of laying of sewerage and drainage pipelines & other types of construction works for different clients, such as Ahmedabad Municipal Corporation, Western Railway, Ahmedabad Urban Development Authority, Gujarat Police Housing Board, Sabarmati River Front Development Corpn. Ltd., Gujarat Energy Transmission Co. Ltd. and most of such work, they got it done through Sub-contractors. Further, on being asked, Shri Narendrabhai Popatbhai Patel, informed that they were not registered with Service Tax department and not paying Service Tax.

3.2 The scrutiny of the documents withdrawn under Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of M/s N.P. Patel revealed that the firm, has been an approved AA Class Contractor and engaged in providing and laying of various types of Sewerage Pipelines, allotted to them by Ahmedabad Municipal Corporation, Ahmedabad Urban Development Authority, and other Government departments & agencies. Further, the said firm was also engaged in carrying out different types of construction work for irrigation projects allotted to them by the State Government departments of Govt. of Gujarat.; different types of construction work pertaining to Western Railway; Construction of Quarters, police stations and other construction works for Gujarat state Police Housing Corporation Ltd., Gandhinagar; construction work related to Electric sub-stations for the Gujarat Energy Transmission Corporation Ltd.; some road Construction and other work of the Road & Building department of Govt. of Gujarat and other construction projects of Govt. departments and agencies.

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3.3 Therefore, a detailed scrutiny of the works orders was carried out, seeking explanation from Shri Narendrabhai Patel, the Proprietor of M/s N.P. Patel & Co., Ahmedabad and the details of all the projects carried out by them from 2005-06 to 2009-10 was prepared, which was given under Annexure-A to the Show cause notice. However, detailed scrutiny revealed that some of the construction projects carried out by M/s N. P. Patel & Co., Ahmedabad for Western Railways, projects were related to construction of sub-minor canals and new road construction work did not attract Service Tax. While the projects like construction works carried out for Gujarat Energy Transmission Corporation Ltd., (GETCO); Construction of Commercial Complex at Jasdan on the land provided by Gujarat State Road Transport Corporation Ltd.; Construction of Residential Police quarters and other construction work for Gujarat State Police Housing Corporation Ltd., Gandhinagar; Earth filling work for land reclamation on the embankment of the wall of Sabamati River Front Project of M/s Sabarmati River Front Development Corporation Ltd., Ahmedabad; Drainage Pipe laying and related construction work contracts carried out for Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority, Ahmedabad; construction works carried out for Navsari Agricultural University; Construction works for Commissionerate of Health, Govt. of Gujarat; Construction of Panchayat Bhavan at Amreli; etc. appeared to be the projects, wherein taxable services have been provided, which have been discussed below. The details of all the projects wherein taxable services have been provided were listed in Annexure-A-1 to the show cause notice.

4. Construction Works carried out for M/s Gujarat Energy Transmission Corporation Ltd. (GETCO, Vadodara.)

4.1 Scrutiny of the Work-orders and other documents withdrawn, revealed that M/s Gujarat Energy Transmission Corporation Ltd. (hereinafter referred as GETCO), Vadodara has issued the following two Letter of Intent to M/s N.P Patel & Co., Ahmedabad for “acceptance of Tender” for the construction work as specified hereinbelow :

Sr. No

Letter No. & date GETCO & Date

Work carried out as per Acceptance letter

Value (Rs.)(excluding Service Tax)

1 2 3 41 CE(Proj)/SE©/

LOI/AMR/220KV Botad/8540 dtd. 06-11-2008

Construction of Control room building (on 1st floor), Structure & equipment foundation, C. Wall, road & ancillary civil works at 220 KV/Botad (Samadhiyala) S/S, Tal. Botad & Dist. Bhavnagar under Amreli Tr. Circle.

41288014.58

2 CE(Proj)SE/WO/AMR/66KV Shramjivi Soc.(Sardarnagar/ 8550 dtd. 07-11-2008

Construction of C.R. Building Foundation, Cable Trench, Compound Wall, Raod, etc. at 66 KV Shramjivi Society (Sardarnagar) S/S – Bhavnagar City under Amreli Tr. Circle.

11392280.68

4.2 Scrutiny of documents placed in File listed at Sr. No. 03 :

4.2.1 Whereas, scrutiny of the two above-mentioned Letters of Intent dtd. 06-11-2008 and 07-11-2008, issued by M/s Gujarat Energy Transmission Corporation Limited, Vadodara, placed in file, pertaining to documents of GETCO, listed at Sr. No. 03 of Annexure-A to the Panchnama dtd. 23-03-2010, revealed the details of work, time limit for completion of the work allotted in the Tender and procedure of billing has been specified in the said letters

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4.2.2 In the above-mentioned letters of intent, the total value of the work order has been specified, as “excluding Service Tax”, but including all other taxes, duties, as given in the Column No. 4 of the above table. In the Letters of intent, it has been further specified that “Service Tax is payable at the rate of 12.36 % on the 33.33 % of the Contract Value i.e. 4.12 % of contract value which shall be reimbursed on production of proof of such payments made by you to the appropriate department”. Thus, in the Letters of Intent issued by M/s Gujarat Energy Transmission Corporation Limited, Vadodara, the aspect of Service Tax has been explicitly covered. It has been given that on the services as mentioned in the above two projects, Service Tax was payable by the contractor and the same will be reimbursed on production of proof of such payment made by the contractor to the appropriate department of M/s Gujarat Energy Transmission Corporation Limited. However, during the course of search, on being asked about the details of Service Tax, Shri Narendrabhai Patel, the Proprietor of the said firm, deposed that his firm was not registered with Service Tax department. Therefore, M/s N.P. Patel & Co., Ahmedabad had not obtained Service Tax registration and they had not paid the amount of Service Tax payable on the above two works allotted to them by GETCO.

4.2.3 In the said file, the Running account bills submitted by M/s N. P. Patel & Co., Ahmedabad to Gujarat Energy Transmission Corporation Ltd., Vadodara had been placed and scrutiny of the same, revealed that M/s N.P. Patel & Co., Ahmedabad has already carried out the above-mentioned two projects of construction for Gujarat Energy Transmission Corporation Ltd. and submitted the Running account bills periodically. These Running Account bills give the details of the work carried out, alongwith the measurements, which were duly certified by the Engineers of GETCO and recommended for making payment, by the competent authorities of GETCO.

4.3 Whereas, the scrutiny of the Bank Ledger Accounts for the period from 2005-06 to 2009-10 (upto February’2010) withdrawn at Sr. No. 10, 11 and 12 of Annexure-A to the Panchnama dtd. 23-03-2010, it was found that during the period from 2008-09 TO 2009-10, they had received the following amount of payments from M/s Gujarat Energy Transmission Corporation Ltd. :

PAYMENT RECEIPT DETAILS OF M/S N. P. PATEL & Co., AHMEDABAD AS PER BANK STATEMENT

Sr. No.

Date of receipt

Amount received

Year Name of the Bank

1 19-06-2009 4175734 2009-10 Axis Bank Ltd.2 27-07-2009 4800390 2009-10 Axis Bank Ltd.3 12/10/2009 11701673 2009-10 Axis Bank Ltd.4 2/11/2009 200000 2009-10 Axis Bank Ltd.5 2/11/2009 200000 2009-10 Axis Bank Ltd.6 2/11/2009 62610.34 2009-10 Axis Bank Ltd.7 11/12/2009 2855893 2009-10 Punjab National Bank8 31-03-2009 3396000 2009-10 Punjab National Bank9 3/2/2009 2972832 2008-09 Punjab National Bank

10 25-03-2009 322067.9 2008-09 Punjab National Bank11 25-03-2009 5000000 2008-09 Punjab National Bank

35687200.00 4.4 From the above details, it was evident that M/s N. P. Patel & Co., Ahmedabad, had provided taxable services, which were covered under the definition of “Works Contract Service”. The definition of Works Contract Service given under Section 65 (105 (zzzza) of the Finance Act, 1994, as amended, is reproduced below :

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“the taxable service, as any service provided or to be provided ‘to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams’.

The Explanation under this sub-clause defines the term ‘Works Contract’ for this purpose as follows :

“For the purposes of this sub-clause, ‘Works Contract’ means a contract wherein –

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out, -

(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape, staircases or elevators; or

(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purpose of commerce or industry; or

(c) Construction of a new residential complex or a part thereof; or(d) Completion and finishing services, repair, alteration, renovation or restoration

of or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or

commissioner (EPC) projects;

4.5 M/s N. P. Patel & Co., Ahmedabad vide their letter dtd. 22-04-2010, submitted the details of payments received by them from M/s Gujarat Energy Transmission Corporation Ltd. for the above two Civil construction projects carried out by them. Vide the same letter, they also submitted the working of Service Tax payable @ 10.30 % on the above 33.33 % of the total amount received from M/s Gujarat Energy Transmission Corporation Ltd. The details of the payments received from GETCO and the amount of the Service Tax payable on it, submitted by M/s N.P. Patel & Co., Ahmedabad have been reproduced as under :

Sr. No.

Date of receipt

Amount of bill received (Rs)

Assessable value @ 33.33% (Rs)

Service Tax payable @ 10.30 % (Rs)

1 15-01-2009 3188574 1062752 1094632 3/2/2009 6100490 2033293 2094293 21-03-2009 3766120 1255248 1292914 19-06-2009 4801980 1600500 1648515 27-07-2009 4913399 1637636 1686766 8/10/2009 12085024 4027938 4148787 11/11/2009 473501 157818 162558 11/12/2009 2941190 980299 1009719 21-04-2010 8621869 2873669 295988 TOTAL 46892147 15629153 1609803

4.6. Further, M/s N.P. Patel & Co., Ahmedabad on 19-04-2010, obtained Service Tax registration with the Service Tax Commissionerate, Ahmedabad, under “Works Contract Service” and from 19-04-2010, they were holding Service Tax registration No. AASPP5751DSD003. Thereafter, vide their letter dtd. 30-04-2010, M/s N.P. Patel & Co., Ahmedabad submitted the copies of two Cyber Receipts dtd. 29-04-2010, evidencing the payment of Service Tax of Rs. 13,04,600/- (i.e. Rs. 928000.00 and

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Rs. 376600.00) for the services provided under Works Contract Service. On 18-05-2010, M/s N.P. Patel & Co., Ahmedabad once again submitted a copy of Cyber receipt dtd. 17-05-2010, evidencing the payment of Service Tax of Rs. 3,41,000/-. They had specified that all the above-mentioned three payments of Service Tax, had been made by them, in respect of the Service Tax payable by the firm, for the “Works Contract Services, provided by them to M/s GETCO, at its Amreli division, for the projects of Botad and Bhavnagar.

4.7 Therefore, M/s N.P. Patel & Co., Ahmedabad, after initiation of the inquiry and investigation against them, had accepted that the Services provided by them to GETCO were liable for payment of Service Tax under the “Works Contract Service” and accordingly, they had worked out their Service Tax liability and paid the amount of Service Tax payable by them, the details of which were given in the foregoing para no. 4.5 and 4.6.

5. Construction of Commercial Complex, at Jasdan, Amreli :

5.1 During the course of investigations, from the documents withdrawn under Panchnama dtd. 23-03-2010, it was noticed that M/s Gujarat State Road Transport Corporation proposed to build bus terminus at Jasdan. Jasdan is the Taluka headquarter consisting of 67 villages, located in the Southern Part of Saurashtra region of Gujarat, approximately 260 kms from Ahmedabad and around 60 kms from Rajkot. GSRTC is a passenger transport organisation under the Ministry of Transport, Govt. of Gujarat, providing bus services both within Gujarat and to neighbouring states. M/s GSRTC issued a tender for the same and in response to the tender, M/s N. P. Patel & Co., Ahmedabad submitted their proposal and detailed project report. In this regard, to ascertain the details of the said project, vide letter dtd. 25-08-2010, M/s GSRTC, Ahmedabad was asked to furnish the details of the project. In response to the said letter, M/s GSRTC, vide their letter dtd. 23-09-2010, submitted the details of the above-project, carried out by M/s N. P. Patel & Co., Ahmedabad. On scrutiny of the documents submitted by M/s GSRTC, Ahmedabad, it was found that M/s GSRTC, vide their letter dtd. 15-02-2005, issued the Letter of Acceptance in favour of M/s N. P. Patel & Co., Ahmedabad. Thereafter on 20-04-2005, M/s GSRTC and M/s N.P. Patel & Co., Ahmedabad entered into a “BTL i.e. BUILD, TRANSFER AND LEASE” agreement, which specified the terms, conditions and specifications of the project. Further, M/s GSRTC issued letter for commencement of work, in favour of M/s N. P. Patel & Co., Ahmedabad vide their letter dtd. 10-06-2005.

5.2 In this regard, as per the “Detailed Project Report of Bus station and Public Amenities Centre at Jasdan”, submitted by M/s N. P. Patel & Co., Ahmedabad, they had offered to pay fixed premium of Rs. 93,02,001/- to M/s GSRTC, subject to limitation in use of FSI approved of planning by Jasdan local authorities & irrespective of any construction cost & revenue.

5.3. In the “BTL agreement” between M/s GSRTC and M/s N. P. Patel & Co., Ahmedabad, wherein M/s GSRTC is termed as “GSRTC” and M/s N.P. Patel & Co., Ahmedabad has been termed as “Developer”, the following important conditions had been specified :

The Developer agrees to carry out the work of commercial complex and non commercial complex at location as decided by GSRTC as per specification, terms and conditions mentioned in the tender documents contained in five volumes duly filled in and signed by the Developer while making the original offer (technical & price-bid) : and as per land use plan. The location of site shall not be changed. The site shall be free of any structure.

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The ownership of the land situated at Jasdan shall remain with the Corporation and the Developer has only right to make construction on the land in question and after construction, the commercial and non commercial complex shall be transferred to GSRTC by Developer. Then after GSRTC shall transfer the commercial complex on lease for 90 years for allotting the same to different uses/companies as per the terms mentioned in the agreement. However, the Developer is entitled to receive the amounts for the area, which is to be allotted by him to the users in consideration of the cost of the commercial / residential premises.

The Developer agrees that he will carry out construction only as per the plans prepared by their Architect and approved by Local Competent Authority.

5.4 Further, after obtaining the approval for start of construction from the concerned local authority, the construction work of the Commercial construction was initiated by M/s N. P. Patel & Co., Ahmedabad for which letter of construction was issued by GSRTC on 10-06-2005. From the details submitted by M/s GSRTC, it was found that the work of construction had been completed in November’2009. The completion of the project was received and put up for public use on 09-11-2009. As per the agreement and specifications, the commercial complex constructed has a total of 149 shops, out of which 52 are located in the ground floor, 66 shops are located at the first floor and 31 shops are located at the second floor. The entire design and specifications like the number and size of the shops have been decided by M/s N. P. Patel & Co., Ahmedabad. After allotment of the work, the drawing comprising of the design and size of the shops, was submitted by them to GSRTC.

5.5. As per the conditions of the agreement specified that M/s N. P. Patel & Co., Ahmedabad was required to identify the members/prospective parties, to whom the shops of the commercial complex were to be leased out. Further, it was found that the work of construction of the Bus terminus and the Commercial complex was started in 2005 and during the course of construction, M/s N. P. Patel & Co. had identified the prospective parties, to whom, the shops were to be leased out. They booked the said shops of the Commercial complex for them, after receiving amounts in advance. After negotiations about the rate and amount, with the prospective parties, they submitted the details to GSRTC, who entered into the lease agreement with the said parties, as per the BTL agreement. The lease agreements, consists the details of the number and size of the shop/s being leased, the terms and conditions of the lease and the amount of stamp duty.

5.6 Scrutiny of the Ledger Accounts for the period from 2005-06 to 2009-10 (upto February’2010) withdrawn at Sr. No. 10, 11 and 12 of Annexure-A to the Panchnama dtd. 23-03-2010 and the ledgers for the period 2009-10 and from 01-04-2010 to 30-09-2010, submitted by M/s N.P. Patel & Co., Ahmedabad, it was found that, they had received total amount of Rs. 91,87,488/- from the parties to whom the shops had been leased out, during the period from 2006-07 to till 30-09-2010. Further, most of the above-mentioned amount has been received by M/s N. P. Patel & Co., Ahmedabad during 2006-07, 2007-08, 2008-09 and early part of 2009-10, which revealed that M/s N. P. Patel & Co., Ahmedabad had booked the shops of the said complex before and during the course of construction and received amounts in advance, the details of which were given in the Annexure-B to the Show Cause notice.

5.7 Therefore, in the project of construction of Commercial complex at Jasdan for M/s GSRTC, by M/s N. P. Patel & Co., Ahmedabad, they identified the buyers of the shops in the proposed Commercial complex, before and during the course of construction and received advances from the said buyers. So, the services provided by M/s N.P. Patel & Co., Ahmedabad for construction of the commercial complex at Jasdan, Dist. Rajkot, were covered under the definition of Commercial or Industrial Construction Services, as defined under Section 65 (30a) of Finance Act, 1994, as

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amended by Section 65(25b) inserted by the Finance Act, 2005. As per the definition of Commercial or Industrial Construction Service :

“Commercial or Industrial construction service” means

(a) construction of a new building or a civil structure or part thereof; of (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and

wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or

(d) repair, alteration, renovation or restoration of, or similar services in relation to building or civil structure, pipeline conduit,

which is

(1) used, or to be used primarily for; or (2) occupied, or to be occupied, primarily with; or(3) engaged, or to be engaged, primarily in,

commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams”.

Further, from 16-06-2005, the amounts received for the services proposed to be provided by a Service provider to the Service Receiver, are also liable for Service Tax leviability and payment of appropriate amount of Service Tax on it.

5.8 Therefore, the commercial complex, proposed by GSRTC and constructed by M/s N. P. Patel & Co., Ahmedabad, was for commercial use. So, M/s N. P. Patel & Co., had provided taxable Commercial construction services by carrying out the construction of the said project and alongwith that also marketed the units in the said complex, for which they had received Deposits and advances from the members, during the course of construction of the project. Therefore, as per the provisions of the definition of the “Commercial or Industrial Construction Service”, the services of construction provided by M/s N.P. Patel & Co., in construction of Commercial complex, has been taxable Services and the payments received from the lessee was liable for payment of Service Tax at applicable rates.

6. Residential Construction Service provided by M/s N. P. Patel & Co., Ahmedabad to M/s Gujarat State Police Housing Nigam Ltd., Gandhinagar :

6.1 Scrutiny of the various works orders, placed in the File listed at Sr. No. 06 of Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the premises of M/s N. P. Patel & Co., Ahmedabad, it was found that M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar is a Government of Gujarat’s undertaking, established on 01.11.1988 for the purpose of construction & maintenance of residential & non-residential buildings of police department of Gujarat. From the Work orders placed in the above-mentioned file, it was found that M/s N. P. Patel & Co., Ahmedabad has been engaged in the execution of various residential and other construction work allotted to them by M/s Gujarat State Police Housing Nigam Ltd., at different places in Gujarat. The details of the various construction projects carried out by M/s N. P. Patel & Co., Ahmedabad for M/s Gujarat State Police Housing Corporation Ltd. during the period from 2005-06 to 2009-10 are as under :

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DETAILS OF THE PROJECTS UNDERTAKEN BY M/s N. P. PATEL & Co., AHMEDABAD FOR M/S GUJARAT STATE POLICE HOUSING CORPORATION LTD., GANDHINAGARSr. No.

Year Name of the Agency with whom project carried out

Work order No. and Date

Title of Work

1 2008-09 Gujarat State Police Housing Nigam Ltd., Gandhinagar

Sanction order GPH/Tech/Tender/MD/3816/1287/2008 dtd. 12-02-2009

Construction of Standard B-12, C-01 and D-01 units of Police Housing at Bhiloda Taluka of Sabarkantha.



Construction of B-12 level units at Ambaliyara, Dist. Sabarkantha.


Sanction order No. GPH/Tech/Tender, MD/3815/1722/2008 dtd. 25-02-2009

Construction of B-12 level units at Ambaliyara, Dist. Sabarkantha. (With Electrification)


Sanction order No. GPH/Tech/TenderMD/2774/4232/2005 dtd. 01-10-2005

Construction of Police Quarters of B-32 level at Police lines of Amreli City (with electrification)

6.2. Scrutiny of the above-mentioned work orders revealed that M/s N. P. Patel & Co., Ahmedabad bids the tenders issued by M/s Gujarat State Police Housing Nigam Ltd., Gandhinagar, for construction of different types of construction works specified above. After the bid submission, on acceptance of the bid, Acceptance letters were issued by M/s Gujarat State Police Housing Corporation Ltd., Ahmedabad in favour of the contractor, wherein, the contractors were directed to submit the Security Deposit. After submission of the Security Deposit, the order for beginning of work was issued to the contracts, which specifies the time limit for execution of the work and other aspects.

6.3 Further, from the Income ledgers placed in the File listed at Sr. No. 08 of the Annexure-A to the Panchnama dtd. 23-03-2010, drawn at the office premises of M/s N. P. Patel and Co., Ahmedabad, it was found that for the period from 2006-07 to 2010-11 (till September’2010), the said Service provider had received the following payments from M/s Gujarat State Police Housing Nigam Ltd., Gandhinagar for the construction works carried out by them :

Sr. No. Financial Year Amount received in Rs.

01 2006-07 8290937.0002 2007-08 8044612.0003 2008-09 3395049.0004 2009-10 14616986.0005 2010-11 (September’2010) 1778603.00

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6.4 Therefore, in the works of residential construction projects carried by out M/s N. P. Patel & Co., Ahmedabad for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar like residential quarters at Bhiloda Taluka and Amabliyara of Dist. Sabarkantha and in Amreli City, they had provided Construction of Complex service i.e. the Residential construction Service, which has been brought into the ambit of Service Tax from 16-06-2005 and defined under Section 65 (30a) of Finance Act, 1994, readwith the definition of Residential Complex given under Section 65(91a) of the Finance Act, 2005. As per the definition of Construction of complex Service :

“Construction of complex”, means

(a) Construction of a new residential complex or a part thereof: or(b) Completion or finishing services in relation to residential complex such as

glazing, plastering, painting floor and wall tiling, wall covering and wall papering, wood and metal joinery, and carpentry, fencing and railing, construction of swimming pools, acoustic application or fittings or other similar services, or

(c) Repairs, alteration, renovation or restoration or similar services in relation to residential complex.

The term residential complex has been defined in Section 65(91a), as per which

“Residential complex” means any complex comprising of

(i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more facilities or services such as park, lift, parking space,

community hall, common water supply or effluent treatment system,

located with a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of layout, and the construction of such complex is intended for personal use as residence by such person.

6.5 The services provided for residential quarters constructed by M/s N. P. Patel & Co., Ahmedabad for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar at different locations like Bhiloda, Ambaliyara and Amreli has been covered under “Construction of Complex service”. So, the payments received by M/s N. P. Patel & Co., Ahmedabad from M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar during the period from 2006-07 to 2010-11 i.e. September’2010 for the residential construction work carried out by them were liable for payment of Service Tax at applicable rates.

7. Site Preparation Formation and Clearance Service provided under the Sabarmati River Front project to the Sabarmati River Front Development Corporation Limited (SRFDCL), Ahmedabad :

7.1 Scrutiny of the Letters dtd. 06-12-2008 and 27-03-2009, placed in the File listed at Sr. No. 06 of Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the premises of M/s N. P. Patel & Co., Ahmedabad, it was found that M/s Sabarmati River Front Development Corporation Limited, Ahmedabad, engaged in a project on the banks of river Sabarmati located in the Ahmedabad city area, has allotted the work of “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash bridge to 575 mts down stream on river Sabarmati, located in Ahmedabad”. The project aims to reclaim the private river edge as a public asset. The key feature of this project is a two-level, continuous promenade on both sides of the river.

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The lower promenade has an average width of 10.30 meters. It is built just above the water level to serve only pedestrians and cyclists and to provide access to the water. The upper promenade is being built to host a variety of public features: cultural and educational institutions, leisure activities, large public parks and plazas and areas for commercial and retail development. From the letters placed in the above-mentioned file, it was found that M/s N. P. Patel & Co., Ahmedabad has been engaged in the execution of work of filling of General earth for reclamation of land on the bank of River Sabarmati located in Ahmedabad. The land so reclaimed will be utilized for commercial developments, as per the details mentioned above.

7.2. Scrutiny of the above-mentioned work orders revealed that M/s N. P. Patel & Co., Ahmedabad had submitted bid for the tender of the above-mentioned work to M/s Sabarmati River Front Development Corporation Limited (SRFDCL) on 18-11-2008, against which SRFDCL issued the letter of Intent No. SRFDCL O. No. 1187 dtd. 08-12-2008 for the above-mentioned work. The letter dtd. 27-03-2009 was issued by SRFDCL, for beginning and time limit for the work was issued in favour M/s N. P. Patel & Co., Ahmedabad.

7.3 Further, from the Income ledgers placed in the File listed at Sr. No. 08 of the Annexure-A to the Panchnama dtd. 23-03-2010, drawn at the office premises of M/s N. P. Patel and Co., Ahmedabad, it was found that for the period from 2008-09 to 2009-10, the said Service provider had received the following payments from M/s Sabarmati River Front Development Corporation Limited (SRFDCL) for the works carried out by them :

Sr. No. Financial Year Amount received in Rs.

03 2008-09 19926584.0004 2009-10 31319592.00

TOTAL 51246176.00

7.4 Therefore, in the work of filling of Earth for the embankment construction behind the retaining wall for the Sabarmati Rvier Front Development Corporation Ltd., carried by out M/s N. P. Patel & Co., Ahmedabad, they had provided the services of “Land Reclamation work”, which was covered in the clause (d) of the definition of Site Formation and clearance service, which has been brought into the ambit of Service Tax from 16-06-2005 and defined under Section 65 (97a) of Finance Act, 1994, as amended. As per the definition of Site Formation and Clearance, Excavation and Earth moving and Demolition Service :

“Site formation and clearance, excavation and earthmoving and demolition” includes

(a) Drilling, boring and core extraction services for construction geophysical, geological or similar purposes; or

(b) Soil Stabilization, or(c) Horizontal drilling for the passage of cables or drain pipes; or (d) Land reclamation work; or (e) Contaminated top soil stripping work, or (f) Demolition and wrecking of road, building or structure but does not include

such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring or water sources or water bodies”.

Further the Taxable service has been defined under Section 65 (105 (zzza) of the Finance Act, 1994, as amended, as per which taxable event is “

11

“Service to any person, by any other person, in relation to site formation and clearance, excavation and earthmoving and demolition and such other similar activities”.

7.5 The services provided for “General Earth Filling for the embankment construction behind the retain wall on the river Sabarmati” by M/s N. P. Patel & Co., Ahmedabad for M/s Sabarmati River Front Development Corporation Ltd. (SRFDCL) at Subhash-bridge are of Ahmedabad has been covered under “Site Formation and clearance, excavation and Earth moving and Demolition service”. So, the payments received by M/s N. P. Patel & Co., Ahmedabad from M/s Sabarmati River Front Development Corporation Ltd. (SRFDCL), Ahmedabad during the period from 2008-09 to 2009-10 for the Land Reclamation work carried out by them were liable for payment of Service Tax at applicable rates.

8. Drainage laying and related construction work carried out for Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority, Ahmedabad during 2005-06 and 2009-10 :

8.1 Scrutiny of the Work-orders and other documents withdrawn, revealed that M/s Ahmedabad Municipal Corporation (hereinafter referred as AMC), Ahmedabad have been regularly allotted different work orders to M/s N.P Patel & Co., Ahmedabad during the period from 01-06-2007 to 30-09-2010 for Drainage and Sewerage network pipeline laying and related construction work in the various areas of Ahmedabad Municipal limits. Similarly, it was found that during the same period, M/s Ahmedabad Urban Development Authority, Ahmedabad (hereinafter referred as AUDA) had also allotted different work orders to M/s N. P. Patel & Co., Ahmedabad for laying of Drainage and Sewerage pipeline network in the areas of Ahmedabad, which have been outside the Ahmedabad Municipal Limits.

8.2 In this regard, scrutiny of the work orders issued by M/s Ahmedabad Municipal Corporation and M/s Ahmedabad Urban Development Corporation revealed that M/s N. P. Patel & Co., Ahmedabad had submitted bids for the tenders of the drainage and sewerage pipeline laying and related construction work issued by AMC and AUDA during the above-mentioned period and as a result of the tender and bidding process, the tenders have been allotted to M/s N. P. Patel by these bodies. The Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority had issued work orders or letters in the favour of M/s N. P. Patel & Co., Ahmedabad from time to time for the drainage and sewerage pipeline laying and related construction projects carried out them. The details of the work orders issued by AMC and AUDA to M/s N. P. Patel & Co., Ahmedabad during the above period were as under :

Name of the Agency with whom project carried out


Title of Work

Ahmedabad Municipal Corporation

Resolution No. 239 dtd. 12-06-2009

Providing & Laying RCC Sewerage network at East Zone New limit of A.M.C. under JnNURM project (Package SN/EZ-6)







Ahmedabad Resolution No. Providing & Laying RCC Sewerage network

12

Municipal Corporation

236 dtd. 12-06-2009

at East Zone New limit of A.M.C. under JnNURM project (Package SN/EZ-2)


670 dtd. 25-09-2009. Work order dtd 24-12-2009

Providing & Laying Sewerage Network for West Zone AMC area under JnNURM Programme Package SN/NWZ-2


Work order dtd. 31-01-2009

Deepening of Maleksaban Talav in Bapunagar ward and Pitching work in Embarkment slope.


Work order dtd. 23-05-2008

Development of Ghodasar Lake, Ahmedabad


Work Order dtd. 21-05-2007. LOI Dr. Proj. I. No. 81 dtd. 07-04-2007

Providing and Laying RCC Storm Water Drainage System for North Zone of AMC area under Jn-NURM Programme (Package –SWD/N.Z. -2)


LOI dtd. 10-12-2009

Providing & Laying R.C.C. Sewerage Network for New West Zone of A.M.C. area under JnNURM programme (Package SN/NWZ-4)


LOI dtd 16-06-2009

Providing & Laying R.C. Sewerage network at East Zone New limit of A.M.C. under JnNurm project (Package SN/EZ-2)


Work Order dtd. 09-06-2008

Constructing New U.G.T. & Pump House (Civil Work) at Jashodanagar, South Zone.


Work order dtd. 27-02-2009 – Drainage project No. 4702/date dtd. 27-02-2009

Providing & Laying of R.C.C. NP-4 pipe for repairing pipeline of 13urroundi of ourfall at Pirana Lagoon


N. A Providing & Laying of R.C. Pipes of Dia 450 CC, 600 CC and 900 CC of NP-3 class, from Potliya ward, Anil Starch Mill Choktha to Chamunda Shamshan


Work Order No. 22-07-2008

Repair & replacement of Sewerage Pipe line 1800/1600/1200- mm dia RCC NP4) including MH/Chamber from Ishwar park to Bhiravnath cross road to Drainage Pumping station, Maninagar


Resolution No. 287 dt. 22-05-2008

Constructing New UGT & Pump House (civil work) at Jashodanagar, South Zone



Providing and Laying 1600 mm dia RCC NP-4 Drainage Line from Nehrunagar Circle to Shreyas bridge approach



Construction of Slab Culvert in Muthiya village across drain in Narod-Muthiya Ward, Ahmedabad

Ahmedabad Urban Development Authority

E.Cell/Job NO. 33/2009-10 dtd. 16-03-2010

Laying of 900 mm Pipeline from Dehgam Aathamna Pond to south side of G.E.B. office.

13


Ecell/SWD-02/2008-09 dtd. 24-11-2008

Providing & Laying of Storm Water line in the TR No. 18, 28, 29, 30,45 in the Chandlodiya lake to Gota under JnNURM project


Work order dtd. 13-08-2008. Work order No. 13105

Providng and laying of 1600 mm drainage line, next to pushing of Railway line at S.G. Road.


N-pani/U-12/V-7597/2005 dtd. 22-08-2005

Drainage connection and Drainage maintenance Wrok of Ahmedabad

8.3 Further, from the Income ledgers placed in the File listed at Sr. No. 08 of the Annexure-A to the Panchnama dtd. 23-03-2010, drawn at the office premises of M/s N. P. Patel and Co., Ahmedabad, it was found that for the period from October’2005 to September’2010, M/s N. P. Patel & Co., Ahmedabad had received the following payments from AMC and AUDA for the works carried out by them :

Sr. No.

Period Amount received from M/s AMC (Ahmedabad Municipal Corporation) (Rs.)

Amount received from AUDA (Ahmedabad Urban Development Authority) (Rs.)

02 01-06-2007 to 31-03-2008

39414183.00 10189377.00

04 2008-09 78703328.00 15405828.0005 2009-10 164985432.00 53106218.0006 2010-11(Upto

Sept’2010)130719818.00 14754705.00

8.4. The work of laying of drainage and sewerage pipelines and related construction work carried out by M/s N. P. Patel & Co., Ahmedabad appeared to be covered under the definition of Works Contract Services as defined under Section 65 (105) (zzzza) of Finance Act, 1994, as amended, which are discussed in detail in Para 4 above.

9. Construction of Boys Hostel Building for Navsari Agricultural University :

9.1 Scrutiny of the Work-orders and other documents withdrawn, revealed that the Office of the Executive Engineer, Navsari Agricultural University, Navsari (hereinafter referred as GETCO) have issued a Work order No. NAU/EE/B-3/9617-22/2009 DTD 09-09-2009 to M/s N.P Patel & Co., Ahmedabad for construction of Boys Hostel Building at Dediyapada, District Narmada for the Navsari Agricultural University, Navsari. After issuance of the work order, the said work has been carried out b M/s N. P. Patel & Co., Ahmedabad during the period 2009-10 and 2010-11.

9.2 Further, from the Income ledgers placed in the File listed at Sr. No. 08 of the Annexure-A to the Panchnama dtd. 23-03-2010, drawn at the office premises of M/s N. P. Patel and Co., Ahmedabad and obtained from M/s N. P. Patel & Co., it was found that for the financial year 2009-10 and 2010-11 (upto Sept’10), M/s N. P. Patel & Co., Ahmedabad had received the following payments from the Office of the Executive Engineer, Navsari Agricultural University, Navsari for the works carried out by them :

Sr. No.

Financial Year Amount received in Rs.

01 2009-10 3099109.00

14

02 2010-11 (Upto September’2010) 2799095.00TOTAL 5898204.00

9.3. The work of construction of Boys Hostel building appeared to be commercial in nature because, generally, the university charges fees for providing hostel facilities to the students. Therefore, the work of construction of Boys Hostel building for the Navsari Agricultural University carried out by M/s N. P. Patel & Co., Ahmedabad appeared to be covered under the definition of Construction of Complex service, as defined under Section 65 (30a) of Finance Act, 1994, readwith the definition of Residential Complex given under Section 65(91a) of the Finance Act, 2005, which were discussed in details in Para 6 above. 10. Statement of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad.

10.1 A statement of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N.P. Patel & Co., Ahmedabad was recorded on 18-08-2010, under section 14 of Central Excise Act, 1944 readwith Section 83 of the Finance Act 1994, wherein he stated as follows :-

After perusal of the panchnama dated 23-03-2010 drawn at the office premises of M/s. N. P. Patel & Co he put his dated signature on it. He further stated that, he was present throughout the course of the above-mentioned Panchnama and the facts mentioned in the panchnama were true and he agreed with the same.

He stated that M/s N.P. Patel & Co. was a Proprietorship firm and he is the Proprietor of the firm. He further stated that he was looking after the overall work including the work of the said firm.

His firm M/s N. P. Patel & Co. has been functioning as “Government Contractor” and functioning since 1997. His firm was engaged mainly in the business of securing and executing contracts of Sewerage Pipe Lines and other construction activities like Government housing projects, Railway projects and other different types of construction projects. He further stated his firm was functioning as Government Approved AA-Class Contractor and had carried out many projects of above-mentioned types. As part of the work, his firm submits the bids for the tenders issued by various Govt. Departments, agencies, boards, etc., subject to the terms and conditions of the tenders and on approval of the same, they execute the work, as specified in the tender. Further, he specified that in his case, most of the works allotted to his firm were given on Sub-contract basis to various Sub-contractors and labour Contractors, however, the entire billing procedure was followed by his firm.

His firm’s main clients have been Ahmedabad Municipal Corporation, Ahmedabad Urban Development Authority, Western Railway, Gujarat Police Housing Corporation Ltd., Central Public Works Department, Gujarat Energy Transmission Company Limited, Sardar Sarovar Narmada Nigam Ltd., Gujarat Industrial Development Corporation, Commissioner of Health, Gujarat Govt., Roads & Building department, Govt. of Gujarat, Navsari Agricultural university, etc. He further stated that over the years, his firm had carried out different projects for the above-mentioned organizations and department of State and Central Government.

On being asked to give the details of Service Tax registration of his firm he stated that at the time of search carried out at the office premises of his firm, carried out under Panchnama dtd. 23-03-2010, his firm was not registered with Service Tax Authorities. However, during the course of search, as per the details explained to him by the DGCEI officers, the services provided by his firm to M/s Gujarat Energy Transmission Company

15

Ltd. were liable to Service Tax, so his firm had obtained Service Tax registration on 19-04-2010 and presently, his firm hold Service Tax registration No. AASPP5751DSD003 for the “Works Contract Services”.

After careful scrutiny of the three files listed at Sr. No. 1, 2 & 4 of Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm, he stated that the said two files consisted the copies of the bills and other related documents raised by his firm, to their clients, during the financial years 2008-09 and 2009-10. He further stated as part of their bill submission system, as a “AA” Class Contractor, his firm submits part bills on completion of specified part of work done in the total project. Usually, on completion of specified part of work done, the Inspection, quality checks and measurement was carried out by his firm as well as the nominated person/agencies of the organization and accordingly, his firm submits the part bills, which were known as “Running Account Bill” or “R. A. Bill”. The R.A. Bills or regular bills were approved by the Engineers and other nominated persons/agencies and thereafter, it was sent for final approval, after which, he received payments from the accounts department of the concerned organization/agency.

He perused the document placed in the file listed at Sr. No. 3 of Annexure-A to the Panchnama dtd. 23-03-2010, drawn in his office, and stated that the said file comprised of the copies of the Running Account bills of the work carried out by his firm as per the Tenders of construction work allotted to his firm by M/s Gujarat Energy Transmission Corporation Ltd.(GETCO), Vadodara. The said file also consisted the documents related to the tender, tender allotment and Acceptance letters, etc.

He was shown the copies of the two letters of Intent i.e. Acceptance of Tender dtd. 06-11-2008 and 07-11-2008, for the work of construction, issued by the Chief Engineer, (Project), GETCO. After perusal of the two above-mentioned letters dtd. 06-11-2008 and 07-11-2008, issued by the Chief Engineer (Project), GETCO, Vadodara he stated that vide the above two letters the construction work as mentioned in the above letters had been allotted to his firm. In this regard, value of the project was given in the above-mentioned letters only and it has been specified in the above-mentioned letters that “Service Tax is payable at the rate of 12.36 % or 33.33 % of the Contract Value i.e. 4.12 % of Contract value as a Service Tax which shall be reimbursed on production of proof of such payments made by you to the appropriate department”. The details of the work to be carried out and the value/price of the projects were as under :

Sr. No




1 CE(Proj)/SE©/LOI/AMR/220KV Botad/8540 dtd. 06-11-2008

Construction of Control room building (on 1st floor), Structure & equipment foundation, C. Wall, road & ancillary civil works at 220 KV/Botad (Samadhiyala) S/S, Tal. Botad & Dist. Bhavnagar under Amreli Tr. Circle.

41288014.58



11392280.68

He further stated that the above two projects have been completed by his firm and submitted the bills to GETCO. Further his firm has received the payments, the details, have been submitted by him vide their letter dtd. 22-04-2010, as per which his firm had

16

received the total amount of Rs. 46892417.00 from M/s GETCO, the details of which were as under :

Sr. No. Date of receipt Amount of bill received 1 15-01-2009 3188574.002 03-02-2009 6100490.00

9289064.003 21-03-2009 3766120.004 19-06-2009 4801980.005 27-07-2009 4913399.00

9715379.006 08-10-2009 12085024.007 11-11-2009 473501.008 11-12-2009 2941190.00

3414691.009 21-04-2010 8621869.00

TOTAL 46892417.00

His firm had not paid the amount of Service Tax payable as per the rates given in the two letters dtd. 06-11-2008 and 07-11-2008 issued by M/s GETCO, as they were not aware of the leviability of Service Tax and due to the same they were not registered with Service Tax department. However, after the search at his firm’s office premises, as explained by the DGCEI officers, they obtained the Service Tax registration on 19-04-2010 and thereafter, they had paid the amount of Service Tax of Rs. 16,09,802.82 payable by his firm @ 10.30 %, vide the following e-payment receipts :

Sr. No. Amount of Service Tax paid Date of E-payment01 928000.00 29-04-201002 376600.00 29-04-201003 341000.00 17-05-2010

1645600.00

10.2. A further statement of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad was recorded on 25-09-2010, under section 14 of Central Excise Act, 1944 readwith section 83 of the Finance Act, 1994 whrein he inter alia stated as follows :-

He perused the panchnama dated 23-03-2010 drawn at the office premises of M/s. N. P. Patel & Co and his earlier statement dtd. 18-08-2010 and in token of his complete agreement with the facts mentioned therein, he put his dated signature on both of them..

He stated that his firm is a Proprietorship firm and he is the Proprietor of the firm, looking after the overall work including the work of the said firm.

His firm M/s N. P. Patel & Co. has been functioning since 1997 and it was engaged mainly in the business of securing and executing contracts of Sewerage Pipe Lines and other construction activities like Government housing projects, Railway projects and other different types of construction projects. He further stated his firm was functioning as Government Approved AA-Class Contractor and had carried out many projects of above-mentioned types. He again confirmed that, as part of the work, his firm submitted the bids for the tenders issued by various Govt. Departments, agencies, boards, etc., subject to the terms and conditions of the tenders and on approval of the same, they execute the work, as specified in the tender. Further, he specified that in his case, most of the works allotted to his firm were given on Sub-contract basis by his firm to various Sub-contractors and labour Contractors, however, the entire billing procedure was followed by his firm.

17

Their main clients have been Ahmedabad Municipal Corporation, Ahmedabad Urban Development Authority, Western Railway, Gujarat Police Housing Corporation Ltd., Central Public Works Department, Gujarat Energy Transmission Company Limited, Sardar Sarovar Narmada Nigam Ltd., Gujarat Industrial Development Corporation, Commissioner of Health, Gujarat Govt., Roads & Building department, Govt. of Gujarat, Navsari Agricultural university, etc. He further stated that over the years, his firm had carried out different projects for the above-mentioned organizations and department of State and Central Government.

On being asked to once again explain the details of Service Tax registration of his firm he stated at the time of search carried out at the office premises of his firm, under Panchnama dtd. 23-03-2010, his firm was not registered with Service Tax Authorities. However, during the course of search, as per the details explained to him by the DGCEI officers, the services provided by his firm to M/s Gujarat Energy Transmission Company Ltd. were liable to Service Tax, so his firm had obtained Service Tax registration on 19-04-2010 and presently, his firm hold Service Tax registration No. AASPP5751DSD003 for “Works Contract Services”.

He was shown the file, listed at Sr. No. 5 in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the same he stated that the said file comprises of the Agreements, which were executed by his firm with the different sub-contractors, from whom, his firm carried out the different works on sub-contract basis. He further stated that as most of work allotted to his firm by different Government agencies and bodies, they entered into such agreements with the sub-contractors, in order to bind them of fulfillment of time limit within which the projects were to be completed. Further, as per the details given in the agreements, his firm generally received 2 % registration commission of the total amount of the project, from the Sub-contractors. Further, he also specified that the amount of deposit i.e. EMD or Earnest Money deposit or the security deposit to be deposited by his firm, with the agency allotting the tender or work to his firm, was usually paid to them by the sub-contractors only and the same were returned to them, when his firm received back the same after completion of work. All the above details were specified in the agreement placed in the above-mentioned file.

He was shown the file, listed at Sr. No. 6 in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After carefully perusing the different documents placed in the above-mentioned file, listed at Sr. No. 6 in Annexure-A to the Panchnama dtd. 23-03-2010, he stated that the documents placed in the said file consisted copies and originals of documents pertaining to the work orders issued by different Government agencies, other documents issued by the Government agencies and correspondences pertaining to various projects allotted to our firm. In this regard, after perusal of the documents placed in the said file, I also state that during the past five years, my firm has mainly carried out the projects pertaining to laying of pipe line of Sewerage in different parts of Ahmedabad city and other areas; various construction works of Western Railways; Electric substation and related construction work of GETCO, Gujarat Electricity Board and M/s Gujarat State Electric Corporation Ltd.; construction work pertaining to Police housing, police station and quarters under different projects allotted by Gujarat State Police Housing Corporation Ltd.; different types of other construction projects allotted by Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority; Earth filling work of Sabarmati River front project; Irrigation construction projects pertaining to GWSSB and Sardar Sarovar Narmada Nigam Ltd., and other construction projects.

He perused the documents placed in the filed listed at Sr. No. 7 of Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm, and he stated that

18

the said file consisted of the Audited Balance sheets of his firm for the financial year 2005-06, 2006-07, 2007-08 and 2008-09.

He was shown the file, listed at Sr. No. 8 in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the above-mentioned file, he stated that the said file contains the Ledger accounts of all the transactions carried out by his firm during the financial year 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10, in respect of the various projects carried out by his firm.

He perused the documents placed in the file listed at Sr. No. 9 of Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm, and he stated that the said file consists of the Account ledgers of the transactions carried out by his firm with the sub-contractors.

He perused the documents placed in Files listed at Sr. No. 10, 11 and 12, in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the documents placed in the above-mentioned files, he stated that the said files contain the Bank Accounts ledgers maintained by his firm in their computer system and it pertains to the transactions carried out by his firm in different bank accounts, which his firm holds at different places in Gujarat. The Bank ledgers were for the period from 2005-06 to 2009-10, till the date of the search conducted at the office premises of his firm on 23-03-2010. He further stated that his firm holds accounts with various banks at different places, as per the requirements of the tender or work order allotted to them by various Govt. agencies.

He perused the documents placed in File, listed at Sr. No. 13, in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the above-mentioned file, he stated that said file consists of some miscellaneous papers, pertaining to his firm.

He perused the Dairy, listed at Sr. No. 14, in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the same he stated that the said dairy comprises of the details regarding the day to day transactions and works carried out by them. The details were recorded in the said dairy by him or his staff members for ready reference please.

He was shown the copies of the two letters of Intent i.e. Acceptance of Tender dtd. 06-11-2008 and 07-11-2008, placed in File listed at Sr. No. 3 of Annexure-A to the Panchnama dtd. 23-03-2010, for the contracts of construction, issued by the Chief Engineer, (Project), GETCO. After perusal of the same he stated that under the said contracts, his firm was required to carry out the construction and all other related work as provided under the Schedule to the above-mentioned letters of intent. The details like value of the project and the time schedule in which the work to be completed were given in the above two letters itself. The details of the work to be carried out and the value/price of the projects were as under :

Sr. No




1 CE(Proj)/SE©/LOI/AMR/220KV Botad/8540 dtd. 06-

Construction of Control room building (on 1st floor), Structure

41288014.58

19

11-2008 & equipment foundation, C. Wall, road & ancillary civil works at 220 KV/Botad (Samadhiyala) S/S, Tal. Botad & Dist. Bhavnagar under Amreli Tr. Circle.



11392280.68

Further, in the above-mentioned letters, it has been specifically mentioned that “Service Tax is payable at the rate of 12.36 % or 33.33 % of the Contract Value i.e. 4.12 % of Contract value as a Service Tax which shall be reimbursed on production of proof of such payments made by you to the appropriate department”. So, for the services provided by his firm in the above-mentioned two projects were liable to Service Tax.

On being asked, he stated that the specification of the works were given in the schedule to the two letters dtd. 06-11-2008 and 07-11-2008.. In the schedule, all the types of work were specified, alongwith the measurements. During the course of entire work, the materials consumed or the equipments used during the projects were to be procured or managed by the contracts i.e. his firm only. Therefore, the above two works allotted to his firm by M/s GETCO were composite contracts, where, the cost of the contract, covers the total cost of materials consumed, the labour and other related costs. Further, as per the conditions of the contract, they raise ‘Running account bills’ to M/s GETCO, which specifies all the items of work carried out and the same were certified by the concerned Engineers of M/s GETCO or their nominated agencies, if any. So, the bills were raised comprise of the total cost, including the cost of the materials, etc.

He further stated that, as part of the contract allotted to his firm, they carry out the construction work as the specifications given in the schedule to the letters issued by M/s GETCO and raise the Running accounts bills, covering the entire cost. So, the after completion of the projects, the entire construction carried out automatically becomes the property of M/s GETCO.

He stated that, the above two projects have been completed by his firm and submitted the Running account bills to GETCO. In this regard, his firm has received the payments, the details, have been submitted by him vide their letter dtd. 22-04-2010, as per which his firm has received the total amount of Rs. 46892417.00. Further, at the time of release of the payments to his firm, M/s GETCO, deducts, the EMD amount and TDS. After 22-04-2010 also, their firm has received payments, so, he furnished the Account ledger of his firm, shown the details of the amounts of the bills submitted, date-wise payments received from M/s GETCO, the deductions made by M/s GETCO, etc. As per the details of the account ledger, the payments received by his firm including the amount of TDS deducted by M/s GETCO, were as under :

Details of payments received by M/s N. P. Patel & Co., Ahmedabad from M/s GETCO

Sr. No.

Date Amount received

Type of payment

Cheque No.

Remarks (Name of the work. Etc.)

1 15-01-2009

73338 TDS deduction N.A. TDS deducted by GETCO

20

2 3/2/2009 2972832.19 Payment for works contract

574605 Civil work in GETCO projects

3 6/3/2009 140312 TDS deduction N.A. TDS deducted by GETCO

4 21-03-2009

88621 TDS deduction N.A. TDS deducted by GETCO

5 25-03-2009

322067.92 Payment for works contract


6 25-03-2009

5000000 Payment for works contract


7 31-03-2009


N.A. Civil work in GETCO projects

8 19-06-

20094175433.83 Payment for

works contractN.A Civil work in GETCO

projects9 19-06-

2009110446 TDS deduction N.A. TDS deducted by

GETCO10 27-07-

20094800390.44 Payment for

works contract590082 Civil work in GETCO

projects11 27-07-

2009113009 TDS deduction N.A TDS deducted by

GETCO12 8/10/2009 277956 TDS deduction N.A TDS deducted by

GETCO13 12/10/2009 11701672.63 Payment for


projects14 2/11/2009 200000 Payment for


projects15 2/11/2009 10891 TDS deduction N.A TDS deducted by

GETCO16 2/11/2009 200000 Payment for


projects17 2/11/2009 62610.34 Payment for


projects18 11/12/2009 2855893.99 Payment for


projects19 11/12/2009 67648 TDS deduction N.A TDS deducted by

GETCO 20 20-04-

20108421869 Payment for


projects21 20-04-

2010198067 TDS deduction N.A. TDS deducted by

GETCO22 7/5/2010 2132685.37 Payment for


23 7/5/2010 56317 TDS deduction N.A. TDS deducted by GETCO

24 13-05-2010



25 13-05-2010



26 13-05-2010



27 8/6/2010 107300 Payment for works contract


28 18-06-2010



21

29 18-06-2010



49184504.42

He was told that in his reply to question No. 16, he had stated that as per the letter of intent i.e. Acceptance of Tender dtd. 06-11-2008 and 07-11-2008 issued by M/s GETCO, his firm was required to pay Service Tax on the amount of payment received from GETCO. However, from letters dtd. 22-04-2010, 30-04-2010 and 18-05-2010, submitted by him, it was found that instead of either paying Service Tax @ 12.36 % or 10.30 % on the gross value or @ 4.12 % of the gross value received, as per the option of payment of Service Tax applicable, under Works Contract Service. However, it was found that he had not paid Service Tax on the 33.33 % value of the amount received by his firm from M/s GETCO, which was not appropriate. He was asked to explain the same. To this he stated that as stated by him in his earlier statement dtd. 18-08-2010, he once again confirmed that at the time of initiation of investigations against his firm on 23-03-2010, his firm had not been registered with Service Tax department and not paid the amount of Service Tax payable as per the rates given in the two letters dtd. 06-11-2008 and 07-11-2008 issued by M/s GETCO, as they were not aware of the leviability of Service Tax. However, after the search at his firm’s office premises, as explained by the DGCEI officers, they obtained the Service Tax registration on 19-04-2010 and thereafter, they had made the payment of Service Tax @ 10.30 % of the 33.33 % of the total value received by his firm from M/s GETCO. In this regard, as stated above, they do not know the exact method of calculation of taxable value, on which they were required to pay Service Tax under Works Contract Service. Further, in the above-mentioned letters of GETCO, it has been specified that Service tax is payable at the rate of 12.36 % on the 33.33 % of the Contract Value i.e. 4.12 % of contract value, so they had worked out Service Tax, considering the 33.33 % value of the total value received and paid the following amount of Service Tax @ 10.30 % vide e-payment receipts :

Sr. No. Amount of Service Tax paid Date of E-payment01 928000.00 29-04-201002 376600.00 29-04-201003 341000.00 17-05-2010

1645600.00

He further confirmed that while considering the total value, they had not considered the amount of TDS deducted by M/s GETCO.

On being asked regarding Work order for Development of Passenger Amenity Centre with Bus Station at Jasdan, Dist. Rajkot, from M/s Gujarat State Road Transport Corporation (M/s GSRTC) he stated that M/s GSRTC vide their letter of intent No. STG-CE-Com.Cell-551 dtd. 15-02-2005 allotted Work order for development of Passenger Amenity Centre with Bus Station at Jasdan, Dist. Rajkot. His firm M/s N. P. Patel & Co., Ahmedabad entered into a “BTL agreement” with M/s GSRTC, for construction and development of Passenger Amenity Centre with Bus Stattion. As per the said agreement, his firm was required to construct the Bus Terminus at Jasdan and develop a Passenger Amenity Centre, as per the detailed Project report, the Build, Transfer and Lease agreement and its specifications. M/s Gujarat State Road Transport Corporation, provided space to his firm, for construction and development of a Commercial Complex, consisting of Shops and units, which can be after development, be given on lease for 90 years, to the members/lessees identified by his firm and the proceeds of the same will be received by his firm. Further, the entire expense of construction of Bus Station and the Commercial Complex, wouldl be borne by his firm and as per the agreement, between his firm and M/s GSRTC, his firm was required to pay a Development Premium of Rs. 93,02,001/- to M/s GSRTC in six equal installment from the date of Commencement of the construction.

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He further submitted that after receipt of the above-mentioned work order, his firm had entrusted the work to one sub-contractor M/s Bindra Construction. Further, the work of construction has completed in November’2009, completion is received and put up for public use on 09-10-2009. As per the agreement and specifications, the commercial complex constructed has total 149 shops, out of which 52 were located in the ground floor, 66 shops were located at the first floor and 31 shops were located at the second floor. As per the terms and conditions of the agreement with GSRTC, as regards the commercial complex, his firm was required to identify the members/prospective parties, to whom the shops of the commercial complex were to be leased out. Further, as per the agreement, the work of construction of the Bus terminus and the Commercial complex was started in 2005 and during the course of construction, they had identified the prospective parties, to whom, some particular shops were to be leased out and booked the said shops of the Commercial complex for them, after receiving amounts in advance. His firm started identifying such prospective parties from the financial year 2005-06 and they had received the advance amounts from them from 2005-06. However, during the 2006-07, and the project was delayed, so some of the advance amounts were returned back and in the same year, new prospective parties were identified, from which, his firm received advances. He furnished the year-wise and individual ledgers for the financial year 2006-07 of his firm showing the amount of advances received from the prospective parties to whom the shops of the commercial complex were to be leased out.

On being asked as to who decides the design and specifications of the Commercial complex, like the number of shops to be constructed on each floor, size of shops, the prospective parties for the shops, to be identified, etc. he submitted that as per the BTL agreement, GSRTC provided his firm, space for construction of Commercial complex at Jasdan, Dist. Rajkot, alongwith the specifications that of area for which the construction can be carried out by his firm on each floor. It was also specified that the commercial complex would be consisting of two floors apart from the ground floor. However, the entire design and specifications like the number and size of the shops were decided by his firm and after allotment of the work, the drawing comprising of the design and size of the shops, was submitted to GSRTC. The design and specifications of the complex, were decided by his firm based on the research of business prospects carried out by his firm for the sale of shops, in the said area and the market demand, as they carried out some advance booking of the shops of the said complex. Further, after obtaining the approval for start of construction from the concerned local authority, the construction work of the Commercial construction was initiated by his firm. Further, as stated by him earlier, his firm identifies the prospective clients, to whom the shops of the Commercial complex were to be leased.

On being asked as to who decides the rates and the amount of proceeds to be received from the Prospective parties for the shops of commercial complex, which were to be leased he stated that the rates and the total amount for shops to be given on lease in the Commercial complex at Jasdan, had been decided by his firm only. Further, after negotiations about the rate and amount, with the prospective parties, they submit their details to GSRTC, who enters into the lease agreement with the said parties. The lease agreement, consists the details of the number and size of the shop/s being leased, the terms and condition of the lease and the amount of stamp duty. In this regard, he furnished the Shop-wise details, showing the name of the lessee, the carpet area of the shop, the floor on which it was located, etc. As per the said Shop-wise details, except the following shops, all other shops have been leased out, as on date and the above-mentioned details of the shops leased have been submitted to M/s GSRTC and the agreement of leasing of the shops, have been completed.

Details of Shops, which were not leased till date : Sr. No. Floor Shops Nos.===== ======== ============================1. Ground 29.

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2. First 59, 64 to 67, 71 to 76, 79, 86, 92, 93, 101, 103,108 & 109.

3. Second 129 to 136.

On being asked to give the details of the payments made by his firm to M/s GSRTC, as development premium for the commercial complex constructed and developed by his firm he stated that as regards the payment details, he furnished the year-wise account ledgers for the period from 2005-06 to 2010-11, of his firm to M/s GSRTC, showing the details of the payments made by his firm to M/s GSRTC, as Development Premium. As per the year-wise Account ledgers, they have made the following payments to M/s Gujarat State Road Transport Corporation (GSRTC):

Date of payment

Cheque No. & Date

Amount of payment made

Name of the Bank (Account No.)

2/2/2006 2810 400000 Bank of India (1258)28-03-2006 553896 600000 Punjab National Bank – 92031-03-2006 21205 200000 Punjab National Bank – 9204/4/2006 21206 350000 Punjab National Bank 1/8/2006 693036 300000 Punjab National Bank8/9/2006 871197 300000 Punjab National Bank25-11-2006 699997 100000 Punjab National Bank25-11-2006 644315 600000 ICICI Bank 5/12/2006 687626 500000 Punjab National Bank15-12-2006 687642 350000 Punjab National Bank23-12-2006 687690 200000 Punjab National Bank7/2/2007 2235545 300000 Punjab National Bank16-02-2007 246165 500000 Punjab National Bank18-08-2007 252846 400000 Punjab National Bank8/9/2007 708817 600000 ICICI Bank (7564)11/10/2007 244406 400000 Punjab National Bank5/2/2008 304120 500000 State Bank of Saurashtra8/3/2008 810766 700000 ICICI Bank A/c (7564)17-04-2008 219629 500000 Punjab National Bank18-09-2009 234440 500000 Punjab National Bank21-09-2009 234441 200000 Punjab National Bank24-09-2009 817112 150000 ICICI Bank Ltd. (7564)29-09-2009 817114 300000 ICICI Bank Ltd. (7564)5/10/2009 234450 150000 Punjab National Bank 22-10-2009 566976 150000 Punjab National Bank14-11-2009 2920 250000 Bank of India 16-01-2010 374931 300000 Punjab National Bank9/2/2010 952556 200000 ICICI Bank Ltd. (7564)26-07-2010 56092 200000 ICICI Bank A/c (0019) 10200000

On being asked to give the details of the payments received by his firm from the persons, to whom the shops of the Commercial complex constructed by their firm at Jasdan have been leased out, on his recommendations by M/s GSRTC he stated that the Commercial complex constructed by his firm has been completed and as regards the payments received from the persons, to whom, the shops of the said Commercial complex have been leased out, on their recommendations, he furnished the year-wise account ledgers for the period from 2005-06 to 2010-11, of his firm to M/s GSRTC, showing the details of the payments received by his firm from the buyers of the shops in the Commercial complex constructed by his firm. As per the year-wise Account ledgers, they have received payments the details of which were given in the Annexure-A to the statement of his, which

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was prepared on the basis of the Account ledgers submitted by his firm. Further, as per the table given in the Annexure-A, his firm has received Rs. 91,87,488/-, from the parties to whom the shops of the Commercial complex, at Jasdan, has been leased out. On being asked as they had designed, constructed and booked the said commercial complex, in Jasdan on the land provided by GSRTC, had they obtained any Service Tax registration under Commercial Construction service and paid Service on the proceeds received from the persons, for whom, they had booked the shops before or during the construction stage he stated no, though they carried out the booking of the shops of commercial complex constructed by his firm in Jasdan, before and during the construction of it, but they had not obtained any Service Tax registration, nor they had charged any Service Tax from their persons, to whom the shops have been leased out.

11.3. Further statement of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad was recorded on 20-10-2010, under section 14 of Central Excise Act, 1944 readwith section 83 of the Finance Act, 1994 wherein he inter alia stated as under :-

He perused the panchnama dated 23-03-2010 drawn at the office premises of M/s. N. P. Patel & Co and his earlier statements dtd. 18-08-2010 and 25-09-2010 and after perusal of the same, in token of his complete agreement with the facts mentioned therein, he put his dated signature on both of them.

He was once again shown the file, listed at Sr. No. 6 in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedaba. After carefully perusing the different documents placed in the above-mentioned file, he stated that the documents placed in the said file consisted copies and originals of documents pertaining to the work orders issued by different Government agencies, other documents issued by the Government agencies and correspondences pertaining to various works projects allotted to their firm. Further, he reiterated that during the past five years, his firm has mainly carried out the projects pertaining to laying of pipe line of Sewerage and drainage pipelines in different parts of Ahmedabad city and other areas; various construction works of Western Railways; Electric substation and related construction work of GETCO; construction work pertaining to Police housing, police station and quarters under different projects allotted by Gujarat State Police Housing Corporation Ltd.; different types of drainage construction projects allotted by Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority; Earth filling work of Sabarmati River front project; Irrigation construction projects pertaining to Narmada Canal and Sardar Sarovar Narmada Nigam Ltd., and other construction projects.

He was shown the file, listed at Sr. No. 8 in Annexure-A to the Panchnama dtd. 23-03-2010 drawn at the office premises of his firm M/s N. P. Patel & Co., Ahmedabad. After perusal of the above-mentioned file, he stated that the said file contains the Ledger accounts, showing the details of the transaction made like the Value of transaction for the services provided by his firm and the amount of income received by his firm against the contracts executed, which were being allotted to firm by different agencies, mentioned above. These Account ledgers were showing the details of the transactions carried out by his firm during the financial year 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 (Upto February’2010), in respect of the various projects carried out by his firm.

He was shown the copies of the Acceptance letters, Commencement of work permission and other related documents issued by M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar (Placed in the File listed at Sr. No. 06 of Annexure-A to the Panchnama dtd. 23-03-2010), as per which, his firm has been engaged in construction of following construction works at different locations in Gujarat for them. He was asked to explain in detail about the projects mentioned therein alongwith its specifications?

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DETAILS OF THE PROJECTS WORKS ALLOTTED BY M/s GUJARAT STATE POLICE HOUSING CORPORATION LTD., GANDHINAGAR IN FAVOUR OF M/S N. P. PATEL & CO., AHMEDABAD DURING THE PERIOD FROM 2005-06 TO 2009-10Sr. No.

Year Name of the Agency with whom project carried out


Title of Work



Construction of Standard B-12, C-01 and D-01 units of Police Housing at Bhiloda Taluka of Sabarkantha.



Construction of Police Station at Savarkundla of Dist. Amreli



Repairing of Gents & ladies toilets, from Second Floor to Seventh Floor of Police Bhavan at Gandhinagar



Construction of B-12 level units at Ambaliyara, Dist. Sabarkantha.


Sanction order No. GPH/Tech/Tender, MD/3815/1722/2008 dtd. 25-02-2009

Construction of B-12 level units at Ambaliyara, Dist. Sabarkantha. (With Electrification)


Sanction order No. GPH/Tech/TenderMD/2774/4232/2005 dtd. 01-10-2005

Construction of Police Quarters of B-32 level at Police lines of Amreli City (with electrification)


GPH/Tech/Tender/MD/3263/2452/2007 dtd. 03-07-2007

Chainlink Fenching 26urrounding the Gandhinagar Police Bhavan



Construction of C.C. Road and Compound Wall at the Ahmedabad City’s Bombay Housing Police line



Putting up of Crimpsion grill at Police Bhavan at Gandhinagar

10 2006-07 Gujarat State Police Housing Nigam Ltd.,

GPH/Tech/Tender/MD/3097/4682/2008

Doing the work of Water proofing and putting water pipelines for disposal of Rain

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Gandhinagar dtd. 20-10-2006 water at Police Bhavan, Gandhinagar



Doing the repaid work of cabs of I.P.S. at 1st and 6th floor of Police Bhavan, Gandhinagar



Putting up of fiber dome on Guard room and increasing the length of Main Entrance at Police Bhavan, Gandhinagar



Repairing and Colour work at Science Experiment Centre at Gandhinagar.

After careful perusal of the above-mentioned documents, he stated that from the financial years 2006-07, his firm has been engaged in bidding, securing and execution of different types of construction works, for which M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar, bring out the tenders. These types of work include the construction of different types of residential accommodations for the Policemen at different locations, construction of Police station building at different locations and different types of construction, maintenance and repairing work at Police Bhawan Building, Gandhinagar. His firm submits the bids and in all the above cases, tenders of his firm have been accepted. On selected of their bid, acceptance letters were issued in their favour, after which his firm submits the security deposits and then the letter for commencement of construction were issued. Further, he stated that of the above-mentioned works allotted to his firm, the works mentioned at Sr. No. 02 to 13, have been completed, while the work listed at Sr. No. 01, has been under process

He was shown the copies of the Account ledgers of his firm for M/s Gujarat State Police Housing Corporation ltd., Gandhinagar for the financial years 2006-07 to 2010-11 (Till August’2010). After carefully perusing the details mentioned in the Account ledgers of his firm for the financial years 2006-07 to 2010-11 (Till August’10), pertaining to M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar, he confirmed that during the respective financial years, his firm has received the amounts mentioned against it, from M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar, as per the details given in table below :

Sr. No.

Financial Year Amount received

1 2006-07 8290937.002 2007-08 8044612.003 2008-09 3395049.004 2009-10 14713340.005 2010-11 (Upto August’10) 1372131.00

In this regard, he clarified that the above-mentioned year-wise income received by his firm was for all the different types of work carried out by his firm for M/s Gujarat State Police Housing Corporation Ltd., which includes the construction of quarters, and other construction works. He further stated that out of the above-mentioned amounts, his firm has received total amount of Rs. 2,60,46,236/- towards the residential construction work carried out by his firm for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar and the remaining amount of Rs. 97,69,833/-, has been received for the other types of construction works carried out by his firm.

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On being asked to specify that whether, his firm had paid any Service Tax on the amount mentioned in above reply, received from M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar he stated that his firm has not charged or paid Service Tax on the amount of payments received by his firm for the construction work carried out by his firm for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar, during the financial years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11. He further stated that as M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar was a Govt. of Gujarat Enterprise, which was exclusively engaged in construction work of residential quarters, police stations and other construction and maintenance work as per the required of Gujarat Police. Therefore, as per the prevailing market practice followed by other contractors, the construction work carried out as per work orders of M/s Gujarat State Police Housing Ltd., Gandhinagar was not liable to Service Tax, so they had not charged, collected or paid Service Tax on the works carried out for M/s Gujarat State Police Housing Ltd., Gandhinagar.

He was shown the copy of the Account ledger for the financial year 2009-10 of his firm in case of M/s Central Public Works Department (CPWD), Gandhinagar, showing the payment of Rs. 43,26040/-. He was asked to explain the details of the work carried out by his firm for CPWD, Gandhinagar, for which his firm has received the above-mentioned payment. In reply he confirmed that his firm has received the above-mentioned payment from M/s CPWD, Gandhinagar and he further stated that M/s CPWD, Gandhinagar, had allotted the work of construction of a Fitness Centre, inside the Sports Authority of India Complex, located at Sector-15, Gandhinagar. He further stated that for the said complex also, they had not charged or collected Service Tax, because, as per their knowledge, construction of Fitness Centre at the above-mentioned Sports complex was non-commercial in nature, so it was not covered under the definition of Commercial or Industrial Construction Service.

He was shown the Account ledger for the financial year 2005-06, of his firm in case of M/s Electro Steel Casting Ltd., wherein the payment of Rs. 5,10,067/-. He was asked to give the details of the work carried out by his firm in the said contract? In reply he stated that in the said project, his firm had carried out the construction of a Water Storage tank for storage of water of Narmada river, which is in turn, used for distribution of water to farmers.

He was further shown Account ledger for the Financial years 2006-07 and 2008-09, showing the payments received by his firm, from Executive Engineer, Salinity Control Division, Bhavnagar. He was asked to explain about the said project and the work carried out by his firm in the said contract. In reply he stated that, in the said project, the work of construction of Check-dam of water was carried out by his firm at Bhavnagar. In the said project, the Check-dam has been constructed by his firm to store the normal water from the saline water, so that the normal water was distributed to farmers for drinking as well as for irrigation purpose.

He was told that from the income ledgers of his firm, withdrawn under Panchnama dtd. 23-03-2010, it was found that during the financial year 2009-10, his firm had received, Rs. 17,54,456/- from M/s Navsari Agricultural University, located at Navsari. He was asked to give the details of the work carried out by his firm for M/s Navsari Agricultural University. He was asked to specify that whether his firm had charged or paid Service Tax in the said project?In reply he stated that his firm has been engaged in the construction of Boys Hostel Building at the Navsari Agricultural University Campus and the above-mentioned payment has been received by his firm. His firm has been allotted the above-mentioned work by the Executive Engineer’s office, Navsari vide Work order No. NAU/EE/B-3/9617-22/2009 Dtd. 09-09-2009. As regards Service Tax payment, he stated that the above-mentioned project was not a commercial project, as the Navsari Agricultural

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University was under Govt. of Gujarat, so my firm has not charged or collected any Service Tax in it.

He was shown the income ledger of his firm, wherein, an income of Rs. 19,35,007/- during 2006-07, from Gujarat Housing Board, Baroda. He was asked to specify the work done by his firm in the said project and whether, his firm had charged and paid Service Tax on the above-mentioned income. ?In reply he stated that during the year 2001-02 and 2002-03, his firm had carried out the construction work of 76 H.I.G. Houses, at Gorwa area of Baroda and the above-mentioned income in the final income received by his firm for the said work done. In this regard, he furnished the copy of Work Completion Certificate issued by the Executive Engineer, Gujarat Housing Board, Baroda, wherein the date of completion of work (at Sr. No. 6) was mentioned as 10-11-2002. Further, they had not charged or paid Service Tax in the said project.

He was further shown the income ledgers of Project Implementation Unit, Commissionerate of Health, Civil Hospital Campus, Gandhinagar, wherein his firm has received payments from them, during the financial years 2007-08, 2008-09 and 2009-10. He was asked to give the details of work carried out by his firm, for which the income shown in the above-mentioned financial years have been received?In reply he stated that his firm has been engaged in execution of the construction and Renovation of Operation Theatres, Other construction work, X-ray unit and drainage System at Civil Hospital at Surat, drainage system, which have been allotted to his firm, as per the work orders issued by Project Implementation Unit, Commissionerate of Health, Civil Hospital Campus, Gandhinagar. Further, said projects were of non-commercial nature, so his firm has not charged or collected Service Tax in the said project.

He was told that from the Income ledgers of his firm for the financial years 2005-06 to 2009-10, it was found that his firm has received payments from Western Railways. He was asked to clarify the types of projects carried out by his firm for Western Railways?He stated that his firm has been engaged in different types of work pertaining to laying of Railway lines for Western Railways, which includes different types of construction work for Rail laying and related work.

He was shown the Income ledgers of his firm for the financial years 2005-06 to 2009-10, wherein it was found that his firm had received payments from M/s Gujarat Industrial Development Corporation. He was asked to explain about the work carried out by his firm for M/s Gujarat Industrial Development Corporation and whether his firm had paid any Service Tax in the said work/s.In reply he stated that his firm has been allotted a work order No. GIDC:XEN:ADB:TENDER:/2091 dtd. 23-11-2005, as per which, they were allotted the work of construction of Common Facility Centre at the Apparel Park, Ahmedabad. In this project his firm had received payments during 2006-07 to 2009-10 from M/s Gujarat Industrial Development Corporation. He further stated that the Apparel park was an approved SEZ located in Ahmedabad, so in the said project, Service Tax was not applicable in the case.

He was shown the income ledgers of payments received from M/s Ahmedabad Municipal Corporation and M/s Ahmedabad Urban Development Authority during the financial years 2005-06 to 2009-10 and asked to explain the works carried out by his firm for above-mentioned Authorities.He stated that his firm has been engaged in construction work of mainly drainage and sewerage system in the areas covered under the Ahmedabad Municipal limits and the limits of Ahmedabad Urban Development Authority. Further, his firm was also engaged in Development of Ghodasar Lake for Water Storage, Deepening of Maleksaban Talav in

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the Bapunagar area and other water storage works. All the above-mentioned projects were Infrastructure projects, which were non-commercial in nature.

He was told that it was also seen from the Income ledgers of Narmada Control Canal and other divisions of Sardar Sarovar Canal, that his firm has received payments from them during the financial years 2005-06 to 2009-10. He was asked to explain about the work carried out by his firm, against which his firm has received the payments.He stated that his firm has been engaged in construction work of sub-minors i.e. Lined field Channels and Blind Minors in different blocks of Narmada Canal project. The above-mentioned facilities were also the infrastructural facilities and so Service Tax was not payable on it.

He was shown the Income ledgers for the financial years of the Sabarmati River Front Development Corpn. Ltd. for the financial years 2008-09 and 2009-10? It was found that during the above two financial years, his firm had received payments of Rs. 1,99,26,584/- and Rs. 2,72,44,646/- from them. He was asked to explain the work carried out by his firm in the said project. He was also asked as to whether his firm had paid any Service Tax for the Service provided in the said project. In reply he stated that the Sabarmati River Front Development Corporation Limited, located at Bal Bhavan Opp. Vidhyanagar High School, Nr. NABARD House, Usmanpura, Ahmedabad had vide their Letter of Intent No. 1187 dtd. 11-04-2005 allotted the work of “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash bridge to 575 mts down stream on river Sabarmati”. As per the said work order, his firm has been engaged in the back filling work of earth in the part of Sabarmati River front mentioned in the letter of intent. As regards Service Tax payment on the income received in the above-mentioned project, it was submitted that as the said project was a Infrastructure related project and as per the prevailing market practice, they had not charged or collected Service Tax in the said project.

12.1. In the statements dtd. 18-08-2010, dtd. 25-09-2010 and 20-10-2010 of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad, has categorically submitted the details of the services provided by them to the above-mentioned agencies. As per the details given in the above-mentioned statements, it was found that his firm M/s N. P. Patel & Co., Ahmedabad was not registered with the Service Tax /Central Excise department and that they had not paid any Service tax on any of the services provided by them, till the time of investigations had been initiated against it. He has also accepted about the receipt of income from the above-mentioned agencies and given the details of why service tax has not been paid by them.

12.2. In this regard, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad has in his above-mentioned statements has confirmed that his firm was liable for payment of Service Tax in case of the services provided by them in the two contracts allotted by M/s GETCO, under the taxable services of “Works Contract Service” as mentioned in Para 4 of this show cause notice. Further, he has given the details of the payments received against the said services provided by them and the amount of Service Tax paid by them, after obtaining Service Tax registration on 19-04-2010. However, as regards, the aspect of Service Tax on the construction of Commercial complex at Jasdan, as per the work allotted to them by M/s GSRTC, he has stated that they had not charged any service tax, but the said reason was not appropriate, because, the Service provider was required to pay service tax on the taxable services provided by them. M/s N. P. Patel & Co., Ahmedabad had carried out the construction of the Commercial complex and during the course of construction only, they had received the advances from the prospective parties, to whom the shops had been leased out, as per their agreement with M/s GSRTC. Therefore, the said Service Provider was required to

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pay service tax on the payments received for the leasing of shops of the commercial complex constructed by them at Jasdan.

12.3 Further, as regards, the services provided by them to M/s Sabarmati River Front Development Corpn. Ltd., in his above-mentioned statements, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad has stated that the work of backfilling of earth, thereby reclamation of land for different types of construction, is a infrastructural project and as per the prevailing market practice, they had not paid the Service tax on the payments received by them from M/s Sabarmati River Front Development Corpn. Ltd. However, as explained in the para no. 7 of the show cause notice, the services provided under the said project by M/s N. P. Patel & Co., Ahmedabad were covered under the definition of “Site formation and Clearance, Excavation and Earth moving and Demolition service”, given under section 65(97a) of the Finance Act, 1994, as amended.

12.4 Similarly, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad, for the services provided in the projects carried out by them from Gujarat State Police Housing Corporation Ltd., Ahmedabad Municipal Corporation, Ahmedabad Urban Development Authority and Navsari Agriculture University, have been the projects, which are non-commercial in nature and they had not charged any service tax in the said projects, so they had not paid any Service Tax in it. However, during the course of investigations, it was noticed that services provided by M/s N. P. Patel & Co., Ahmedabad in case of the projects carried out for the above-mentioned agencies, were taxable under the taxable services, as per the details given under Paras 8 to 10 of this show cause notice.

13. From the discussion and facts mentioned above, it was found that M/s N. P. Patel & Co., Ahmedabad, who has been functioning as Government approved ‘AA’ class contractor and carrying out various projects related to drainage, irrigation, transmission and others, had provided the different taxable services as discussed above to M/s Gujarat Energy Transmission Company Ltd. (GETCO), M/s Ahmedabad Municipal corporation, Ahmedabad Urban Development Authority, Gujarat State Road Transport Corporation, Gujarat State Police Housing Corporation Ltd., Sabarmati River Front Development Corporation Ltd., Navsari Agricultural University, Commissionerate of Health, Project Implementation Units, Govt. of Gujarat.

14.1. The income received from the above-mentioned activities carried out by M/s N.P. Patel & Co. were liable to Service Tax under the different categories of taxable services, which were mentioned below :

14.2 COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICE :

14.2.1 During the period from 2005-06 M/s GSRTC provided the vacant land to M/s N.P. Patel & Co., Ahmedabad, for construction of Commercial Complex, consisting of Shops, as per the details given in the Para 5 above. During the construction stage itself, M/s N. P. Patel & Co., Ahmedabad received amounts in the form of advances from the prospective parties, for the shops of the said commercial complex. The amount received by M/s N. P. Patel & Co., Ahmedabad for the Commercial complex, constructed by them at Jasdan, Dist. Rajkot were liable to Service Tax under the definition of Commercial and Industrial Construction service. Further, in the statements dtd. 18-08-2010, 25-09-2010 and 20-10-2010 of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N.P. Patel & Co., Ahmedabad, it was confirmed that M/s N. P. Patel & Co., had carried out the construction of commercial complex at Jasdan and they had received the payments from the members of the units of the said Commercial complex, during the course of construction of the complex.

14.3 WORKS CONTRACT SERVICE :

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14.3.1 During the financial years 2008-09 and 2009-10, M/s N.P. Patel & Co., Ahmedabad received the work of construction of control room building and other related work in two different projects of M/s Gujarat Energy Transmission Company Ltd. (GETCO), as per the details given under Para 4 above. The services provided by M/s N. P. Patel & Co., Ahmedabad in the two projects, were covered under the definition of Works Contract Service as defined under Section 65(105) (zzzzb) of the Finance Act, 1994.

14.3.2.1 In this regard, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad in his statements dtd. 18-08-2010 and 25-09-2010, had specifically admitted that the services provided by his firm in the work of construction & related work of Electric sub-stations, in the two projects of M/s GETCO, were liable to Service Tax under the Works Contract Service category of Service. After the initiations of the investigation proceedings, they had obtained Service Tax registration on 19-04-2010 under the “Works Contract Service” category. Apart from that, they had also submitted the details of Service Tax payments of Rs. 16,45,600/-, made by them under the head of the above-mentioned services, vide their letter dtd. 30-04-2010 and 17-05-2010. However, scrutiny of the Service Tax payment details submitted by M/s N.P. Patel & Co., Ahmedabad revealed that they had made the calculation of the taxable value @ 33.33 % of the net amount received from GETCO and worked out Service Tax payable @ 10.3 %.

14.3.2.2 As per the provisions of Section 67 of the Finance Act, 1994, given under Works Contract Service, the value of taxable service is required to be computed as the gross amount charged by the Service provider. The term ‘gross amount charged’ shall include (i) any amount received towards the service before, during and after provision of such service, and (ii) payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and book adjustment. Further, the Rule 2 A of the Valuation Rules, provides that the value of taxable service in relation to services involved in execution of a work contract shall be determined by the service provider, in the manner prescribed therein.

14.3.2.3.1 The works contracts in the present case have been composite contracts, wherein the Service provider was required to procure and utilize all the materials required in execution of the Works contract. Vide Notification No. 32/2007-ST dtd. 22-05-2007, the “Works Contract (Composition Scheme for Payment of Service Tax Rules, 2007” were notified. As per Rule 3 (1) of the above Rules,

“Notwithstanding anything contained in section 67 of the Act and rule 2 A of the Service Tax (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided instead of paying Service Tax at the rate specified in section 66 of the Act, by paying an amount equivalent to four percent of the gross amount charged for the Works contract”.

14.3.2.3.2. Further, vide the Explanation given further thereto in the above Rules, the details of the gross amount charged for the works contract, have been specified.

In this regard, if works contracts is a composite contract, two options were available to Service provider :

1. Calculate value of service as per Rule 2 A of the Service Tax (Determination of value) Rules, 2006 and pay service tax at normal rate @ 10.30 % inclusive of education cess and Secondary and Higher Education cess) on such ‘value’. In such case, assessee can avail Cenvat credit of inputs services, inputs and capital goods.

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2. Pay service tax under ‘composition scheme’ at 4.12 % of ‘gross amount charged for works contract’ (inclusive of education cess and Secondary and Higher Education cess) under ‘Works contract (Composition scheme for payment of Service Tax) Rules, 2007’. As per Rule 3(2) of Composition Scheme, the assessee cannot avail Cenvat credit of inputs. Thus, the assessee can avail Cenvat credit of input services and Capital goods.

14.3.2.5 In addition to above, the most important aspect under works contract service is that the Service provider has the option to choose for each works contract.

14.3.2.6 Therefore, in the two contracts executed by M/s N.P. Patel & Co., Ahmedabad for M/s GETCO at Botad and Bhavnagar, they were required to exercise one of the above options. However, from the details of Service Tax payments made by M/s N. P. Patel & Co., Ahmedabad in case of the Works contract executed for GETCO, it appeared that they had not followed the proper assessment of Valuation of services and the payment of Service Tax at the appropriate rate. In this regard, M/s N. P. Patel & Co., Ahmedabad, had obtained Service Tax Registration under Works Contract Service category and made the payments of Service Tax under the Works Contract Service category, which was evident from the copies of Cyber Receipt of E-payments of Service Tax made and presented to this office by M/s N. P. Patel & Co., Ahmedabad. As per the details of Service Tax payment worked out, submitted by M/s N. P. Patel & Co., Ahmedabad, they had paid Service Tax @ 10.30 % on 33.33. % of the net amount received from M/s GETCO. But, in case of ‘Works Contract Service’ Category of Service, there was no such option of considering the Taxable value @ 33.33 % of the value received. Therefore, the said Service provider, M/s N. P. Patel & Co., Ahmedabad had not correctly assessed the Taxable value under the Works contract service category and had not paid appropriate amount of Service Tax payable by them.

14.3.2.7.1 Further, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad, in his statement dtd. 25-09-2010, submitted the account ledger showing the details of the payments received by his firm from M/s GETCO, for the two projects carried out by them. The details mentioned in the said ledger, comprised of the payments made by M/s GETCO to them as well as the deduction of TDS made. As per the valuation Rules, the amount of TDS deducted was also required to be included in the gross amount. Therefore, after including the TDS deducted amount also, the total taxable value worked out to Rs. 49184504.42, which has been accepted by Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad in his above-mentioned statement. The details of the said value were as under :

Details of payments received by M/s N. P. Patel & Co., Ahmedabad from M/s GETCO

Sr. No.

Date Amount received

Type of payment

Cheque No.

Remarks (Name of the work. Etc.)

1 15-01-2009

73338 TDS deduction

N.A. TDS deducted by GETCO



3 6/3/2009 140312 TDS deduction


4 21-03-2009

88621 TDS deduction


5 25-03-2009



6 25-03-2009

5000000 Payment for works


33

contract7 31-03-

20093395999.71 Payment for

works contract


8 19-06-

20094175433.83 Payment for

works contract

N.A Civil work in GETCO projects

9 19-06-2009

110446 TDS deduction


10 27-07-2009



11 27-07-2009


N.A TDS deducted by GETCO

12 8/10/2009 277956 TDS deduction






15 2/11/2009 10891 TDS deduction








19 11/12/2009 67648 TDS deduction


20 20-04-

20108421869 Payment for

works contract


21 20-04-2010




607709 Civil work in GETCO

23 7/5/2010 56317 TDS deduction


24 13-05-2010



25 13-05-2010



26 13-05-2010



34



28 18-06-2010



29 18-06-2010



49184504.42

14.3.2.7.2 In view of the details given in the preceding para, the total value on which M/s N. P. Patel & Co., were required to pay Service Tax was worked out to Rs. 4,91,84,504.42. But, as per the Service Tax payment details and copies of E-payment challans, submitted by M/s N. P. Patel & Co., Ahmedabad, it was found that they had considered the amount received as Rs. 4,68,92,417/- and paid Service Tax of Rs. 16,45,600/- considering the taxable value @ 33.33 % of the above value. However, on 13-10-2010, M/s N. P. Patel & Co., Ahmedabad vide E-payment, made payment of Service Tax of Rs. 3,82,134/- for the Works contract Service provided to GETCO. In their letter dtd. 13-10-2010, they had submitted that as stated in his statement dtd. 25-09-2010, he was explained that total taxable value for the projects carried out for GETCO was Rs. 4,91,84,502/- and that they had erred in calculation of Service Tax. So, they had worked out the total Service Tax payable @ 4.12 % of the above value, which comes to Rs. 20,26,402/-. Out of the above Service Tax amount, they had already paid Service Tax of Rs. 16,45,600/- and the remaining amount of Rs. 3,80,802/-, has been paid by them on e-payment on 13-10-2010.

14.3.3 M/s N. P. Patel & Co., Ahmedabad has during the period from 01-06-2007 to 30-09-2010 provided the Works Contract Services for executing the Drainage and Sewerage network pipeline laying and related construction work in the various areas of Ahmedabad Municipal limits. Similarly, they had provided similar services during the same period, to M/s Ahmedabad Urban Development Authority, Ahmedabad for the above-mentioned type of work of Drainage and Sewerage pipeline network in the areas of Ahmedabad, which had been outside the Ahmedabad Municipal Limits. The payments received from Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority from 01-06-2007 to 30-09-2010 were liable to Service Tax under the Works Contract Service.

14.4 CONSTRUCTION OF COMPLEX SERVICE :

14.4.1 During the period from 2006-07 to 2010-11, M/s N.P. Patel & Co., Ahmedabad, carried out construction of Residential Police Quarters at various locations like Bhiloda, Ambaliyara and Amreli in Gujarat for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar. Against the above-mentioned Residential construction work carried out by M/s N. P. Patel & Co., Ahmedabad, they had received income from M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar during the financial years 2006-07 to 2010-11 (Upto September’2010). The amount received by M/s N. P. Patel & Co., Ahmedabad for the construction of residential Police quarters were liable to Service Tax under the definition of Construction of Complex Service. Further, in the statement dtd. 20-10-2010 of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N.P. Patel & Co., Ahmedabad, has confirmed that M/s N. P. Patel & Co., had carried out the construction of Residential Police quarters at Bhiloda, Ambaliyara and Amreli locations and they had received the payments from M/s Gujarat State Police Housing corporation Ltd., Gandhinagar for the construction of Residential units. Further, in his statement dtd. 20-10-2010, it was found that Shri Narendrabhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad had deposed that the total amount received by his firm for the

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residential construction work carried out by them has till 30-06-2010 has been Rs. 2,60,46,236/-

14.4.2.Apart from the above-mentioned work carried out by M/s N. P. Patel & Co., Ahmedabad, during the financial year 2009-10 and 2010-11, they had also carried out the work of construction of Boys Hostel building at Dediyapada, dist. Narmada for the Navsari Agricultural University, Navsari, as per the work order allotted to them by the Executive Engineer, Navsari Agricultural University. M/s N. P. Patel & Co., Ahmedabad has received Rs. 5898204.00 as payments towards the services provided by them for the period upto October’2010. In the work of construction carried of Boys Hostel Building, M/s N. P. Patel & Co., Ahmedabad has rendered the Taxable services covered under the definition of Construction of Complex Service.

14.5 SITE FORMATION AND CLEARANCE, EXCAVATION AND EARTH MOVING AND DEMOLITION SERVICE :

14.5.1 From the details given in the Para 7 above, it was found that during the period 2009-10 and 2010-11, M/s N.P. Patel & Co., Ahmedabad, carried out General Earth filling work for the embankment construction behind the retain wall i.e. reclamation of land, near Subhash Bridge on river Sabarmati in Ahmedabad for Sabarmati River Front Development Corporation Ltd., Ahmedabad. M/s N. P. Patel & Co., Ahmedabad, had received income from M/s Sabarmati River Front Development Corporation Ltd. Ahmedabad during the financial years 2008-09 to 2009-10. The amount received by M/s N. P. Patel & Co., Ahmedabad for the Land Reclamation work was liable to Service Tax under the definition of Site Formation and Clearance, Excavation and Earth moving, Demolition Service. Further, in the statement dtd. 20-10-2010 of Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N.P. Patel & Co., Ahmedabad, has confirmed that M/s N. P. Patel & Co., had carried out the Earth Filing work for the Land Reclamation at Subhash bridge, Ahmedabad and they had received the payments for the Land Reclamation work from M/s Sabarmati River Front Development Corporation Ltd. Ahmedabad. The total amount received by M/s N. P. Patel & Co,. Ahmedabad during the period from 2008-09 to 2009-10 for the Site Formation services provided to M/s Sabarmati River Front Development Corporation Ltd., Ahmedabad has been Rs. 5,12,46,176/-

15. RESULT OF INVESTIGATION:

15.1 Investigation conducted by DGCEI, Ahmedabad against M/s. N. P. Patel & Co., Ahmedabad as discussed in the foregoing paras, revealed that M/s N. P. Patel & Co., functioning from 9, 2nd Floor, Sukh Sagar Complex, Opp. Dinesh Chamber, Bapunagar, Ahmedabad was engaged in the business of construction under works contract. During the course of the search, it was found that in the financial year 2008-09, M/s N. P. Patel & Co., Ahmedabad was allotted the construction of control room and related works by M/s Gujarat Energy Transmission Corporation Ltd., for the electric sub-stations located at Botad and Bhavnagar. M/s N.P. Patel carried out the above-mentioned works allotted to them under the two contracts in the time period from 2008-09 to 2009-10, after issuance of Letter of intent to them by M/s GETCO. As per the terms of the contract allotted to M/s N. P. Patel & Co., Ahmedabad by M/s GETCO, the contractor was required to pay the Service Tax and the same was to be reimbursed by M/s GETCO, on production of the proof of the payment made by them to M/s GETCO. However, during the course of search conducted at the premises of M/s N. P. Patel & Co., Ahmedabad on 23-03-2010, it was found that M/s N. P. Patel & Co., Ahmedabad had not even been registered with the Service Tax department. Therefore, M/s N. P. Patel & Co., Ahmedabad was required to pay Service Tax on the payments received by them for the two works carried out by them at Botad and Bhavnagar for M/s GETCO.

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15.2 Further, during the course of investigation, it was noticed that during 2005, M/s N. P. Patel & Co., Ahmedabad had been awarded a contract, wherein, they entered into an agreement with M/s Gujarat State Road Transport Corporation Ltd. (GSRTC), as per which M/s GSRTC provided a vacant land for construction of Commercial Complex. The commercial complex was constructed by M/s N. P. Patel & Co., Ahmedabad and received amounts from the members of the said commercial complex, during the period of construction from 2005-06 to 2009-10. Therefore, the services provided by M/s N. P. Patel & Co., Ahmedabad in construction of commercial complex at Jasdan, are covered under the definition of Commercial & Industrial Construction services.

15.3. Investigation conducted by DGCEI, Ahmedabad against M/s. N. P. Patel & Co., Ahmedabad as discussed in the foregoing paras, also revealed that M/s N. P. Patel & Co., Ahmedabad has been engaged in providing ‘Construction of Complex service’ for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar. During the period from 2006-07 to 2010-11. M/s N. P. Patel & Co., Ahmedabad has provided construction services for the residential Police quarters at Bhiloda, Ambaliyara and Amreli location in Gujarat for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar under different work orders allotted to them. The payments received by M/s N. P. Patel & Co., Ahmedabad against the construction services provided by them for the residential quarters, during the period from 2006-07 to 2009-10 were liable for payment of Service Tax. However, during the course of search investigation, it was found that M/s N. P. Patel & Co., Ahmedabad had not even been registered with the Service Tax department under Construction of complex service. Therefore, M/s N. P. Patel & Co., Ahmedabad was required to pay Service Tax on the payments received by them for the construction services provided by them for construction of residential quarters for M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar.

15.4 It was also found, as a result of the Investigation that M/s N. P. Patel & Co., Ahmedabad had been engaged in providing of “Site Formation and Clearance, Excavation and Earth Moving and Demolition Services’ to M/s Sabarmati River Front Development Corporation Ltd., Ahmedabad. M/s N. P. Patel & Co., Ahmedabad, during the period from 2008-09 to 2009-10, as they carried out the General Earth filling work for the Embankment construction behind the retaining wall of the River Front project on the River Sabarmati, located in Ahmedabad city areas. The services provided by M/s N. P. Patel & Co., Ahmedabad was filling of General Earth for Land Reclamation, which will be going for development of commercial spaces. Therefore, the payments received by M/s N. P. Patel & Co., Ahmedabad against the Land Reclamation work under the Site Formation and clearance services provided by them, during the period from 2008-09 to 2009-10 were liable for payment of Service Tax.

15.5. During the period from October’2005 to September’2010, M/s N. P. Patel & Co., Ahmedabad had provided Works Contract Services to Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority in the Drainage and Sewerage network pipeline laying and related construction work in the various areas of Ahmedabad Municipal limits and Drainage and Sewerage pipeline network in the areas of Ahmedabad, which have been outside the Ahmedabad Municipal Limits. Therefore, M/s N. P. Patel & Co., Ahmedabad was required to pay Service Tax on the payments received by them for the services provided by them to Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority, during the above period.

15.6 Investigation has revealed that M/s N. P. Patel & Co., Ahmedabad had rendered their services for the construction of boys hostel building at Dediyapada, Dist. Narmada for Navsari Agricultural University, as per the work order allotted to them by the Executive Engineer, Navsari Agricultural University, during the period 2009-10 & 2010-11, and received payments for the taxable services covered under the Construction of Complex services, rendered by them. However, it was observed that M/s N. P. Patel & Co., Ahmedabad had not paid the amount of Service Tax payable on the payments

37

received by them from Navsari Agricultural University, for the taxable services rendered by them.

15.7 Therefore, though M/s N. P. Patel & Co., Ahmedabad had provided taxable Services covered under the definition of Works Contract Service, Commercial & Industrial Construction Services, Construction of Complex Service and the Site formation and Clearance, Excavation and Earth moving and Demolition service, they had not obtained Service Tax registration and not paid any Service Tax payable by them on the payments received by them for the services provided.

16. DETERMINATION OF INCOME TO BE CONSIDERED AS TAXABLE INCOME FOR VARIOUS TAXABLE SERVICES :

16.1 From the facts mentioned in the above paras, it was found that M/s N. P. Patel & Co., Ahmedabad had provided taxable services covered under the definitions of Works Contract Service, Commercial & Industrial Construction Services, Construction of Complex Service and the Site formation and Clearance, Excavation and Earth moving and Demolition service. However, during the course of investigation, it was found that M/s N. P. Patel & Co., Ahmedabad had neither obtained any Service Tax registration, nor made any payments of Service Tax.

16.2. Scrutiny of the Accounts and Bank ledgers for the period from 2005-06 to 2008-09 withdrawn under Panchnama, as well as the Account ledgers for 2009-10 and 2010-11 (Upto September’10), obtained from M/s N. P. Patel & Co, Ahmedabad, it was found that they had received payments for the taxable services of Works Contract Service, Commercial & Industrial Construction Services, Construction of Complex Service and the Site formation and Clearance, Excavation and Earth moving and Demolition service, provided by them during the period from October’2005 to September’2011.

16.3. Further, Shri Narendrabhai Popatbhai Patel, the Proprietor of M/s N. P. Patel & Co., Ahmedabad in his statements dtd. 18-08-2010, 25-09-2010 and 20-10-2010 has accepted the above facts and confirmed that the figures given in the Year-wise Account ledgers and Bank ledgers were correct and acceptable to him.

16.4 In view of the above, the amount of income received from the above-mentioned Service receivers, i.e. the income details given in the income ledgers of M/s GETCO, “GSRTC – Commercial Complex- Jasdan”, M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar, M/s Sabarmati River Front Development Corporation Ltd., M/s Ahmedabad Municipal Corporation, M/s Ahmedabad Urban Development Authority, Navsari Agricultural University, during the period from October’2005 to September’2011 by M/s N. P. Patel & Co., Ahmedabad has been taken into consideration for determining the taxable value and working out of the Service Tax liability of M/s N. P. Patel & Co., Ahmedabad.

17. SERVICE TAX PAYABLE BY M/s N. P. PATEL & CO., AHMEDABAD :

17.1 From the details of the income receipt shown under the Party-wise Income Ledgers and the Bank Ledgers withdrawn from the M/s N. P. Patel & Co., Ahmedabad under Panchnama dtd. 23-03-2010 and the Party-wise income ledgers and income figures for the period for 2009-10 and 2010-11 (Upto September’2010) furnished by M/s N. P. Patel & Co., Ahmedabad, subsequently, during the course of investigation, the taxable value and the amount of Service Tax payable by M/s N. P. Patel & Co., Ahmedabad for the period from 01-10-2005 to 30-10-2010 under different Services provided by them has been worked out as under :

38

17.2. Works Contract Service : Period 01-11-2008 to 30-06-2010.

17.2.1 The Service Tax payable on the taxable value of the Service provided by M/s N. P. Patel & Co., Ahmedabad under the Works Contract Service during the period from 01-11-2008 to 30-06-2010 to M/s GETCO, Vadodara, on the taxable income of Rs. 4,91,84504/- received by them, was worked out as under :

Taxable value (in Rs.

Rate of Service Tax payable

Amount of Service Tax payable (Rs.)

Rate of Edu cess payable

Amt. of Edu. Cess payable

Rate of H. Edcn. Cess appl-icable

Amt. of H. Edn. Cess payable

Total amount of Service Tax payable

49184504 4 1967380 0.08 39348 0.04 19674 2026402

17.2.2.The details of the income receipt during 2005-06 to 2010-11, by M/s N.P. Patel & Co., Ahmedabad from M/s Ahmedabad Municipal Corporation and M/s Ahmedabad Urban Development Authority, Ahmedabad for the Works Contract for construction work of laying of various drainage and sewerage pipelines an related work in the areas of Ahmedabad. In case of Works Contract Service for the period from 01-06-2007 to 29-02-2008, the rate of Service Tax payable was 2 % of the total value of the contract and vide Service Tax Notification No.7/2008 dated 1st March 2008, the rate of Service tax payable has been increase to 4 %, alongwith the payment of Education cess and Higher Education cess at the applicable rates. Therefore, the Service Tax payable on the taxable value Works contract services provided by M/s N. P. Patel & Co., Ahmedabad, to M/s Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority during the period from 01-06-2007 to 30-09-2010, was worked out as under :

Period Taxable value (in Rs.




Amt. of Edu. cess payable




01-06-07 to 29-02-08

43687413 2 873748 0.4 174750 0.2 87375 1135873

01-03-08 to 30-09-10

463636476 4 18545459 0.8 3709092

0.4 1854546 24109097

TOTAL 507323889 19419207 3883841

1941921 25244969

17.2.3.So, the total amount of Service Tax payable by M/s N. P. Patel & Co., Ahmedabad under the Works Contract Services to the different service receivers as mentioned above is as under :

Name of the project

Amount of Service Tax payable worked out

Amt. of Edcn. Cess worked out

Amt. of H. Edn. Cess worked out

Total Service Tax payable

GETCO, 1967380 39248 19674 2026402

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http://allindiantaxes.com/pdf/8f00028b.pdf

VadodaraDrainage and Sewerage projects of AMC & AUDA

19419207 3883841 1941921 25244969

TOTAL 21386587 3923089 1961595 27271371

17.3. Commercial or Industrial Construction Service : Period 01-10-2005 to 30-09-2010

17.3.1 From the details of the amounts received by M/s N.P. Patel & Co., Ahmedabad from the parties to whom the shops of the Commercial complex constructed by them at Jasdan, it was found that they had received total amount of Rs. 91,87,488/-, during the period from 01-04-2006 to 30-06-2010. However, in case of Commercial or Industrial construction Services, the Service provider was eligible to avail the benefit of abatement of 67 % of the gross value and pay the Service Tax leviable on the remaining 33 % value as per the provisions of Notifn. No. 15/2004-S.T. dtd. 10-09-2004 as amended by Notifn. No. 01/2006-ST dtd. 01-03-2006. Further, M/s N. P. Patel & Co., Ahmedabad has received the payments during different period, wherein the rates of Service Tax leviable were different, so the period-wise taxable value after availing the benefit of abatement @ 67 %, has been worked out as under :

Period Total amount received (Rs.)

Amount of Abatement available @ 67 % (Rs.)

Taxable Value (Rs)

A. B C. D (B-C)18-06-2007 to 23-02-2009

7465488 5001877 2463611

24-02-2009 1722000 1153740 568260TOTAL 9187488 6155617 3031871

17.3.2. The Service Tax payable on the taxable value of the Commercial Construction Services provided by M/s N. P. Patel & Co., Ahmedabad for the services provided to GSRTC, during the period from 01-04-2006 to 30-06-2010, was worked out as under : Period Taxable

value (in Rs.




Amt. of Edu. Cess payable




18-06-2007 to 23-02-2009 2463611 12 295633 0.24 5913 0.36 2956 30450224-02-2009 to 30-06-2010 568260 10 56826 0.08 1137 0.04 568 58531 3031871 352459 7049 3525 36303318.4. Construction of Complex Service : Period 01-04-2006 to 30-06-2010.

18.4.1 From the Income ledgers of M/s N. P. Patel & Co., Ahmedabad, it was found that during 2006-07 to 2010-11 (Upto 30-06-2010), they had received payments from M/s Gujarat State Police Housing Corporation Ltd., Gandhinagar for the construction of Residential Police Quarters carried out by them at Bhiloda, Ambaliyara and Amreli. However, in case of Construction of Complex Services, the Service provider was eligible to avail the benefit of abatement of 67 % of the gross value and pay the Service Tax leviable on the remaining 33 % value as per the provisions of Notifn. No. 19/2005-S.T.

40

dtd. 18-05-2005 as amended by Notifn. No. 01/2006-ST dtd. 01-03-2006. Further, M/s N. P. Patel & Co., Ahmedabad had received the payments during different period, wherein the rates of Service Tax leviable were different, so the period-wise taxable value after availing the benefit of abatement @ 67 %, was worked out as under :



Taxable Value (Rs)

A. B C. D (B-C)01-04-2006 to 17-04-2006

00 00 00

18-04-2006 to 23-02-2009

90616066071276 2990330

24-02-2009 to 30-06-2010

1698463011379702 5604928

TOTAL 8595258.00

18.4.2.The Service Tax payable on the taxable value of the Construction of Complex Services provided by M/s N. P. Patel & Co., Ahmedabad, during the period from 01-04-2005 to 30-06-2010, was worked out as under :









18-04-2006 to 23-02-2009

2990330 12 358840 0.24 7177 0.12 3588 369605

24-02-2009 to 30-06-2010

5604928 10 560493 0.2 11210 0.1 5605 577308

8595258 919332 18387 9193 946912

18.4.3 The Income ledgers of M/s N. P. Patel & Co., Ahmedabad, show that during 2009-10 and 2010-11, they had received payments from Navsari Agricultural University, Navsari for the construction of Boys Hostel Building at Dediyapada, Dist. Narmada. However, in case Construction of Complex Services, the Service provider was eligible to avail the benefit of abatement of 67 % of the gross value and pay the Service Tax leviable on the remaining 33 % value as per the provisions of Notifn. No. 01/2006-ST dtd. 01-03-2006. Further, M/s N. P. Patel & Co., Ahmedabad has received the payments during different period, wherein the rates of Service Tax leviable were different, so the period-wise taxable value after availing the benefit of abatement @ 67 %, was worked out as under :



Taxable Value (Rs)

A. B C. D (B-C)01-04-2009 to 30-09-2010

5898204 3951797 1946407

TOTAL 5898204 3951797 1946407

18.4.4.The Service Tax payable on the taxable value of the Construction of Complex Services provided by M/s N. P. Patel & Co., Ahmedabad to Navsari Agrucultural University, during the period from 01-04-2009 to 30-09-2010, was worked out as under :

41









01-04-2009 to 30-09-2010

1946407 10 194641 0.2 3893 0.1 1946 200480

1946407 10 194641 0.2 3893 0.1 1946 200480

18.4.5.So, the total amount of Service Tax payable by M/s N. P. Patel & Co., Ahmedabad under the Construction of complex service provided by them to M/s Gujarat State Police Housing Corporation Ltd. and Navsari Agricultural University is as under :

Name of the Service Receiver

Amount of Service Tax payable worked out

Amt. of Edcn. Cess worked out

Amt. of H. Edn. Cess worked out

Total Service Tax payable

Gujarat State Police Housing Corporation Ltd.

919332 18387 9193 946912

Navsari Agricultural University

194641 3893 1946 200480

TOTAL 1113973 22280 11139 1147392

18.5. Site Formation and Clearance, Excavation and Earth moving and Demolition Service : Period 01-04-2008 to 30-06-2010.

18.5.1 From the Income ledgers of the payments received by M/s N.P. Patel & Co., Ahmedabad from the M/s Sabarmati River Front Development Corporation Ltd., Ahmedabad, for the General Earth Filling Services provided by them for land reclamation in the River Front development project on river Sabarmati in Ahmedabad, it was found that they had received total amount of Rs. 5,12,46,176/-, during the period from 01-04-2008 to 31-03-2010. The Service Tax payable on the taxable value of the Commercial Construction Services provided by M/s N. P. Patel & Co., Ahmedabad, during the period from 01-04-2008 to 31-03-2010, was worked out as under :









18-06-2007 to 23-02-2009

3973057 12 476767 0.24 9535 0.12 4768 491070

24-02-2009 to 30-06-2010

47273119 10 4727312

0.08 37818 0.04 18909 4784040

51246176 5204079

47354 23677 5275110

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19. From the details of Service payable work out in the preceding para, under different Taxable Services provided by M/s N. P. Patel & Co., Ahmedabad to different Service Receivers like Gujarat Energy Transmission Corporation Ltd., Vadodara and Mehsana, Gujarat State Police Housing Corporation Ltd., Gandhinagar, Sabarmati River Front Development Corporation Ltd., Ahmedabadm Ahmedabad Municipal Corporation, Ahmedabad Urban Development Authority, Commissioner of Health, Executive Engineer, Panchayat(R & B), Amreli and the construction of Commercial complex, at Jasdan, Rajkot during the period from October’2005 to Sept’2010, it was found that total Service Tax payable by M/s N. P. Patel & Co., Ahmedabad, was worked out as under :

Name of the Taxable Service provided Amount of Service Tax payable worked out. (Rs.)

Works Contract Service 27271371.00Commercial construction Service 363033.00Construction of Complex Service 1147392.00Site Formation and clearance, Excavation and Earth moving and Demolition Service

5275110.00

TOTAL AMOUNT OF SERVICE TAX PAYABLE

34056906.00

20. From the above, it appeared that the said Service provider had not paid Service Tax amounting to Rs. 3,40,56,906/- (Rupees Three Crores Forty Lacs Fifty Six Thousand Nine Hundred Six only) on services provided by them falling under category of Works Contract Service, Commercial & Industrial Construction Services, Construction of Complex Service and the Site formation and Clearance, Excavation and Earth moving and Demolition service.

21. It appeared that the non payment of service tax payable on the amount of taxable income received by M/s N. P. Patel & Co., Ahmedabad for the taxable services provided under the category of Works Contract Service, Commercial & Industrial Construction Services, Construction of Complex Service and the Site formation and Clearance, Excavation and Earth moving and Demolition service is deliberate and intentional. The said Service provider did not provide the required information even after repeated reminders and summons. These acts on the part of the said Service provider appears acts of suppression of the material facts from the authority inquiring into the matter with clear intention to evade payment of Service Tax due from them, and appear in clear contravention of Section 66, Section 68, Section 69 and Section 70 of the Finance Act, 1994 and Rule 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994.

22 All the above acts of contravention of provisions of sections of Finance Act 1994 & Service Tax Rules 1994 as discussed in above paras on the part of the said Service provider for the taxable services provided by them, the said Service provider appeared to have suppressed the facts and have also failed to discharge their liability towards the payment of service tax applicable on them. Therefore, the amount of Service Tax of Rs. 3,40,56,906/- (Rupees Three Crores Forty Lacs Fifty Six Thousand Nine Hundred Six only) was required to be recovered from the said Service provider by invoking the extended period of five years, under the provisions of Section 73(1) of the said Act, alongwith the interest leviable at appropriate rate under Section 75 of the said Act. All these acts of contravention of the provisions of Section 68, Section 69 and Section 70 of the Finance Act, 1994 read with Rules 4, Rule 6 and Rule 7 of the Service Tax Rules, 1994 are punishable under the provisions of Section 76, Section 77 and Section 78 of the Finance Act, 1994.

26.1. During the course of investigation, M/s. N. P. Patel & Co., Ahmedabad admitting to the evasion of Service Tax, had voluntarily paid Rs. 20,27,734/- in the Govt. Account vide following E-payment challans : Sr. No. Amount of Service Tax paid Date of E-payment

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01 928000.00 29-04-201002 376600.00 29-04-201003 341000.00 17-05-201004 382134.00 13-10-2010

2027734.00

26.2. This voluntary payment of Rs. 20,27,734/- was made by them towards the Service Tax liability on the taxable services provided by them to their customers. Hence, the amount voluntarily deposited was required to be appropriated against the Service Tax demanded in this Show cause notice.

27. Therefore a Show Cause Notice bearing F.No.DGCEI/AZU/36-224/2010-11 dated 18.03.2011 was issued to M/s. N. P. Patel & Co., functioning from 9, 2nd Floor, Sukhsagar complex, Opp. Dinesh Chamber, Bapunagar, Ahmedabad to show cause to the Commissioner, Service Tax, Ahmedabad having his office at the 1st Floor, Central Excise Bhavan, Opp. Polytechnic, Near Panjrapole, Ambawadi, Ahmedabad, as to why :-

(a) Service tax amounting to Rs. 2,72,71,371/- (Rupees Two Crores Seventy Two Lacs Seventy One Thousand Three Hundred and Seventy One only) towards the Works Contract Services provided by them, should not be recovered from them under the proviso to section 73 (1) by invoking extended period of 5 years from the due date of Service Tax payable,

(b) Service tax amounting to Rs. 3,63,033/- (Rupees Three Lacs Sixty Three Thousand Thirty Three only) towards Commercial and Industrial Construction services, should not be recovered from them under the proviso to section 73 (1) by invoking extended period of 5 years from the due date of Service Tax payable,

(c) Service tax amounting to Rs. 11,47,392/- (Rupees Eleven Lacs Forty Seven Lacs Three Hundred Ninety Two only) towards the construction of Complex Services provided by them, should not be recovered from them under the proviso to section 73 (1) by invoking extended period of 5 years from the due date of Service Tax payable,

(d) Service tax amounting to Rs. 52,75,110/- (Rupees Fifty Two Lacs Seventy Five Thousand One Hundred and Ten only) towards the Site Formation and Clearance, Excavation and Earth moving and Demolition services provided by them, should not be recovered from them under the provisions of section 73 (1)(a) read with Section 73(3) of Finance Act 1994 read with Rule 7(2) of the Service Tax Rules 1994 by invoking extended period of 5 years from the due date of Service Tax payable,

(e) Amount of Rs. 20,27,734/- paid by them during the investigation should not be appropriated against the aforesaid demand.

(f) Interest at the appropriate rate prescribed under Section 75 of the Finance Act 1994 should not be recovered from them from the due date on which the service tax was liable to be paid to till the date on which the said service tax is paid.

(g) Penalty prescribed under Section 76, Section 77 and Section 78 of finance act 1994 should not be imposed upon them for non payment of Service tax under the provisions of Section 68 of Finance act 1994; not obtaining Service Tax registration under the provisions of Section 69 of the Finance Act, 1994 as amended; for concealing the value of the taxable Services, receipt of the charges in respect of the same and wrong filing of ST- 3 returns under the provisions of 70 the finance Act 1994.

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DEFENCE REPLY & PERSONAL HEARING :-

28. M/s “N.P. Patel & Co.” did not file any reply to the show cause notice. Two opportunities of personal hearing were granted to them on 15.02.2012 and 29.02.2012. Nobody appeared for the hearing. Another opportunity for personal hearing was then granted on 13.03.2012. Mr. Rahul Patel, Chartered Accountant appeared for the personal hearing. He requested for short adjournment as the issues involved were complex and he was recently appointed by “N.P.Patel &Co.”. Hearing was adjourned to 19.03.2012. Mr Rahul Patel, Chartered Accountant appeared for personal hearing. He explained the issues involved in the show cause notice and also gave written submissions dated 19.3.2012 in support of his arguments which is as under:

29. It was submitted that show cause notice has proposed to demand and recover Service Tax of Rs. 2,72,71,371 under Works Contract Services on aggregate value of Rs. 55,65,08,393 at rate of 4.12% and 2.06% depending upon the period involved. As given in para 17.2 of the notice, demand of service tax of Rs. 2,72,71,371 is comprised of tax of Rs. 2,52,44,969/- in relation to certain projects of laying of various drainage and sewerage pipelines on behalf of Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority while tax of Rs. 20,26,402 pertains to a project of Gujarat Energy Transmission Corporation Limited.

29.1 In relation to demand of service tax of Rs. 2,52,44,969/- for the work of providing and laying of drainage and sewerage pipelines on behalf of AMC and AUDA, reference was made to para 8, 14.3.3, 15.5 and 17.2.2 of the notice. They submitted that it is a settled position of law that show cause notice serves as basis for demand and shall mandatorily bring corroborative facts as well as reasoning of taxability on record so as to put them against it, thereby providing sufficient opportunity as to why demand should not be confirmed which has not been done here.

29.2 They submitted that in the impugned notice, revenue has made it plain and clear that they : have been bidding for works of providing and laying of drainage and sewerage

pipelines was awarded stated works consistently by AMC and AUDA

On the basis of aforesaid observations, it appeared to the revenue that works undertaken by them were covered within the fold of works contract services as defined in section 65(105)(zzzza) of the Act which is extremely surprising to them and leaves a question behind as to what constitutes valid reasoning and basis for revenue to raise demand.

29.3 Having generally observed about the underlying facts of bidding, tendering and awarding of the projects by AMC and AUDA to them for providing and laying of drainage and sewerage pipelines, revenue formed an opinion as to taxability under Works Contract Service and immediately thereafter in another para running few pages thereafter, liability was confirmed and payments were held to be liable for Service Tax under Works Contract Service. They made further reference to paras 15.5 and 17.2.2 of the notice and submitted that revenue has completely failed to appreciate the facts, position of law and applicability to issue on hand in the notice and rushed to raise demand against the them in sheer anxiety of boosting revenue collection numbers. Therefore it was strongly pressed that : revenue has completely failed to appreciate facts underlying the issue revenue has completely failed in shifting its onus to the assessee as to refute the

demand of service tax revenue has arbitrarily framed charges against the assessee and attempted to

classify work of laying of drainage and sewerage pipelines on behalf of AMC and AUDA under Works Contract Services

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assessee shall not be required to refute charges of demand of Rs. 2,52,44,969/- under Works Contract Service, as revenue has not shifted its burden

30. Without prejudice to whatever stated hereinabove and rights of the assessee to refute charges leveled in the impugned notice, kind attention was invited to definition of Works Contract service contained in section 65(105)(zzzza) of the Act, which provides as under :“any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.Explanation : For the purposes of this sub-clause, ‘Works Contract’ means a contract wherein -

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purpose of carrying out,-(a) erection, commissioning or installation of plant, machinery, equipments

or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain lying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircase or elevators; or

(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry, or

(c) construction of a new residential complex or a part thereof, or(d) completion and finishing services, repair, alteration, renovation or

restoration of, or similar services, in relation to (b) and (c) or(e) turnkey projects including engineering, procurement and construction

or commissioning (EPC) projects”

30.1 Careful reading of definition of taxable service under Works Contract requires following conditions to be satisfied in order to bring particular activity within its fold :

a) service shall be provided ‘to any person’b) service shall be in relation ‘to a works contract’c) works contract shall involve transfer of property in goods involved in the

execution of such contract is ‘leviable to tax as sale of goods’d) works contract shall be relating to construction of a new building or a civil

structure or a part thereof, or of ‘a pipeline or conduit’, primarily for the purposes of ‘commerce or industry’

30.2 In the instant case , impugned notice emphasized on a mere fact that they had undertaken work of laying and providing pipeline for drainage and sewerage and being it in relation to pipeline it falls within the fold of works contract services. On the other hand, revenue has completely ignored vital conditions to get satisfied before forcefully bringing any activity within four corner of service tax. It was undisputed fact that services were rendered by them to AMC and AUDA insofar as it relates to issue on hand. The first and foremost condition of taxability was that service shall be provided to ‘a person’. Now who shall be considered as ‘person’ for the purpose of service tax as definition of term ‘person’ is not given anywhere in the Act. In the absence of specific definition available in the Act, reference is required to be made to definition of term ‘person’ as given in General Clauses Act, 1897 where section 3 defines that “person shall include any company or association or body of individuals, whether incorporated or not”. It is a categorical question whether AMC and AUDA shall be considered as ‘person’ in view of the definition as envisaged. Answer is certainly no as AMC or AUDA are neither company nor association of persons but were local authorities

46

constituted under respective enactments of State Government. Therefore AMC or AUDA shall not be treated as person and accordingly, condition stands unsatisfied.

30.2.1 Another condition presupposes to have examined and satisfied by the Revenue in the impugned notice was whether work undertaken by them amounts to a work contract which was subject matter of sales tax / VAT insofar as relates to sale of goods. As a token of evidence, copy of VAT registration certificate and VAT Audit report were attached herewith. Nowhere in the impugned notice, revenue could bring on record corroborative evidences or facts which suggest that works involved were subjected to state sales tax. Therefore second condition of taxability also stands unsatisfied.

30.2.2 Another condition required to be satisfied before bringing construction of a pipeline or conduit within the fold of service tax is that pipeline or conduit shall primarily used for the purposes of commerce or industry. Any construction, though satisfying to all other tests of taxability, not being used or intended to be used for commerce or industrial purposes, service tax cannot be demanded. In the instant case, revenue has failed to prove as to whether the pipelines were used for commercial or industrial purposes or not. It is imperative to mention that notice has not only failed to substantiate but also to observe whether the important condition of law stands satisfied or not. In the absence of such, work undertaken by them cannot be brought to taxability under Works Contract Service and therefore demand of service was liable for dismissal.

30.2.3 Without prejudice to whatever stated above and for better appreciation of non-taxability of work undertaken by the them, kind attention was invited to definition of term ‘industry’ as given in Industrial Disputes Act, 1947 which reads as under :“industry” means any systematic activity carried on by co-operation between an employer and his workmen ( whether such workmen are employed by such employer directly or by or through any agency, including a contractor ) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes ( not being wants or wishes which are merely spiritual or religious in nature ), whether or not –

(i) any capital has been invested for the purpose of carrying on such activity; or(ii) such activity is carried on with a motive to make any gain or profit, and includesa. any activity of the Dock Labour Board established under section 5A of the

Dock Workers ( Regulation of Employment ) Act, 1948 ( 9 of 1949 );b. -----

But does not include –(1) any agricultural operation ----(2) hospitals or dispensaries; or(3) educational, scientific, research or training institutions; or(4) institutions owned or managed by organizations wholly or substantially engaged

in any charitable, social or philanthropic service; or(5) khadi or village industries; or(6) any activity of the Government relatable to the sovereign functions of the

Government including all the activities carried on by the departments of the Central Government dealing with defense research, atomic energy and space; or

(7) any domestic service; or(8) any activity, being a profession practiced by an individual or body of individuals,

if the number of persons employed by the individuals or body of individuals in relation to such profession is less than ten; or

(9) ----

Definition of ‘industry’ as read above clearly keeps sovereign functions, charitable, social or philanthropic services out of its ambit. Providing drinking water to citizens and similarly disposal of waste and sewerage through drainage and sewerage pipelines are

47

also sovereign functions forming part of civic amenities and therefore cannot be treated as industrial purposes. Similarly said purposes cannot be equated with commercial purposes as there is not motive to make profit or gain involved. Accordingly, construction of pipelines for AMC and AUDA cannot be brought to taxability under works contract service as envisaged by revenue in the impugned notice.

30.2.4 To provide further support to their plea, reference was made to a circular dated 17.09.2004, though it relates to Commercial or Industrial Construction Services, find equal merit :“13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is ‘used, or to be used’ for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable.”

30.2.5 Circular clearly spells out intention of legislation behind introduction of service tax under commercial or industrial construction arena and works contract services was rolled out on the same footing. Abundantly, it is made clear, that constructions in relation to civic amenities are not taxable. It is requires no stretch of imagination in saying drainage and sewerage disposal network in domestic area to be of civic amenities especially when getting constructed by local authorities, who are bestowed of providing basic infrastructural and life support facilities / amenities to citizens.

30.2.6 Further reference was invited to list of projects awarded by AMC and AUDA and corresponding work orders, forming part of seized materials / relied upon documents in the impugned notice. They submitted that on perusal of said records, it would be clear that all the projects granted by AMC and AUDA are under JnNURM and for the purpose of creating drainage and sewerage infrastructure in domestic area of the Ahmedabad city as well as outskirts. None of the projects were specifically and solely intended for industrial disposal system to be used by industry for consideration. It was considered expedient at this stage to refer City Development Plan of Ahmedabad Municipal Corporation and rationale behind JnNURM to better appreciate the gravity of issue on hand and need for keeping such infrastructural constructions out of the taxation by legislation. City Development Plan was available on http://www.egovamc.com/cdp/AMC_CDP.pdf, running into hundreds of pages, throwing light on growing importance of urban area, various bottlenecks in urban development, plans and possibilities. Sewerage and drainage is, according to development plan, one of the key focal area, required to be strengthen in order to smoothen urban life and its development. Reference was also required to be made to overview of JnNURM under which city development plans were being prepared and projects were funded. Rational behind the mission, scope and coverage of the activities underlying the mission are self-explanatory and requires no appreciation. It leaves no doubt to it that development works undertaken under said plans and missions such as providing drainage and sewerage infrastructures under urban area, are part of civic amenities and treating same as industrial or commercial purpose would insult to its sovereignty. Therefore it was requested to help them in maintaining dignity of the work undertaken by them under stated projects and refrain from classifying same under Works Contract Service.

30.3 They relied on the following judgments: - L & T Ltd v. CST, Ahmedabad 2011-TIOL-218-CESTAT-AHM- Nagarjuna Construction Company v. CCE, Hyderabad 2010-TIOL-789-CESTAT-

BANG

48

http://www.egovamc.com/cdp/AMC_CDP.pdf

- Dinesh Chandra Agarwal Infracon Pvt Ltd v. CCE, Ahmedabad 2010-TIOL-1413-CESTAT-AHM

- Indian Hume Pipe Co Ltd v. CCE, Trichy 2008-TIOL-1665-CESTAT-MAD- LANCO Infratech Ltd v. CST, Hyderabad 2009-TIOL-2139-CESTAT-BANG

( Stay Granted )- IVRCL Infrastructures & Projects Ltd v. CCE, Hyderabad 2011-TIOL-991-

CESTAT-BANG- Ramky Infrastructure Limited v. CCE, Hyderabad 2010-TIOL-699-CESTAT-

BANG

30.4 Without prejudice to whatever stated above it was further submitted, in absence of specific finding by revenue in impugned notice as to classification, that services involved in the projects on hand namely construction of pipeline are classifiable under Commercial or Industrial Construction Services and not under Works Contract Services. Reference was invited to provisions of section 65A of the Act which clearly provides that where more than one categories of taxable services are capable of being classified, then sub-clause coming first amongst all other sub-clauses in section 65(105) shall prevail and merit for classification. It was needless to mention that category of Commercial or Industrial Construction Service which equally merits to apply to construction of pipeline along with Works Contract Service comes first in section 65(105) being listed in sub-clause (zzq) while Works Contract service in sub-clause (zzzza). Accordingly, classifying impugned services under Works Contract Services category was contrary to the provisions of section 65A and needs to be raised under Commercial or Industrial Construction category as defined in sub-clause (zzq) of section 65(105) of the Act and therefore show cause notice insofar as it relates to classification under section 65(105)(zzzza) was liable for dismissal.

30.5 They submitted that demand of service tax of Rs. 20,26,402 under Works Contract Services in relation to work undertaken on behalf of GETCO has also been raised. Issue is in relation to taxability of construction of control room building, foundation, cable trench, compound wall, road etc on behalf of GETCO. To better understand gravity of the issue and charges raised by revenue, reference was made to para 4, 10, 14.3 and 15.1. Further, Para 14.3, 10 and 4 deals with mere facts related to payment received, confirmation in statement and terms of the contract as to process of reimbursement of service tax.

30.5.1 From perusal of all the observations and more particularly para 15.1 of the notice, it was gathered that sole reliance placed by revenue for demand of service tax in relation to said projects, was upon a contractual covenant regarding payment of service tax by the them and reimbursement thereof by GETCO. Revenue has attempted to emphasis that despite of clear condition in the contract, they even not registered with Service Tax Department. It is imperative to mention that revenue has completely failed to understand and perceive it and tried to misdirect the case. It is the noticee who categorically observed that service tax paid by them would have been reimbursed by GETCO on production of documentary evidences. This very covenant shows that assessee had nothing to gain by not paying service tax nor it was the cost of the assessee to bear. Had it been leviable, they must have paid and collected from GETCO and GETCO must have reimbursed. Merely because other party is ready to pay service tax does not mean tax was leviable. Service Tax is levied in accordance with provisions of the Act and not by contractual covenants of parties. Revenue has instead of appreciating provisions of law and its applicability to present facts, simply relied upon contractual obligations and covenants and accordingly contended that service tax was applicable which in no way serves a basis for levy of tax. They further submitted that Revenue has failed again to discharge its onus in judiciously classifying the work undertaken by them under works contract services. As reiterated earlier, it is the revenue who was responsible to prove taxability of the project in light of available evidences and interpretation of law and unless revenue discharges its function in the show cause notice,

49

onus does not shift on to the assessee to refute. In the instant case, no where in the show cause notice revenue could positively bring on record basic reasons as to why such services to be classified under Works Contract Services category. Moreover it was stated that revenue had also failed in even pointing a specific sub-category of works contract services, proposing to classify works under consideration. As seen from the definition of Works Contract Services, it was a pool of different categories of taxable services and therefore it becomes duty of revenue to put the assessee as to exact sub-category under which proposed demand was to be classified. In the absence of such finding, they cannot be required to show causes as to why tax should not be demanded.

30.5.2 From perusal of seized and relied upon records , it was evident that work under consideration was in relation to civil construction of control room building along with ancillary constructions. Construction of a building or civil structure falls under sub-clause (b) of clause (ii) of Explanation to section 65(105)(zzzza) of the Act which reads as under :

“construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry, or”

Similar to their submission in above paras which dealt with taxability under works contract services category, revenue should have brought on record adequate and appropriate evidences and corroborative facts satisfying all the conditions of taxability under said category. It was stated that revenue has instead of appreciating facts vis-à-vis provisions of law, placed sheer finding of data and receipts in show cause notice running into several pages. Nowhere in the notice, revenue could prove to satisfaction of conditions as envisaged in para 30.1 above. Therefore submission as made in para 30.1 was mutatis mutandis applicable to projects under consideration. Control room building and other ancillary constructions cannot be held to be used for the purpose of commerce or industry. Like water supply, drainage and sewerage disposal network, electricity distribution and networking was also one of the vital requirement of human kind. It was indeed responsibility of the exchequer to provide food, shelter, cloth and electricity to its citizens. Providing of electricity has became part of sovereign function and accordingly constitutes a valid civic amenity. As discussed at length in foregoing para that civic amenities cannot be treated as for commercial or industrial purposes, control room buildings used by GETCO for distribution of electricity cannot be treated as used for commerce or industry. It was submitted at this stage that GETCO was an undertaking of Government of Gujarat and like other corporations, enterprises and boards, GETCO was instrumental in discharging sovereign function by State Government. Hence, it would be completely incorrect in contending constructions done on behalf of GETCO to be treated at par with other commercial or industrial constructions. Hence no service tax could be levied under Works Contract Service insofar as it relates to constructions done on behalf of GETCO.

30.5.3 If at all, it was desired by revenue to classify said services under Works Contract Services, it becomes the duty of revenue to prove that constructions done by them were used for commerce or industrial purposes and accordingly taxable under said category. Copy of work orders and all other relevant documents were available with the revenue, on the basis of which show cause notice was issued. In case revenue was of considerable opinion as to taxability, it must have unearthed corroborative facts from the available records or with the help of further investigation. Hence onus of proof cannot be shifted on them and therefore it should find it fair and reasonable in contending that revenue has failed to prove that construction undertaken by them was taxable under works contract services.

30.6 Without prejudice to whatever stated above it was further submitted, in absence of specific finding by revenue in impugned notice as to classification, that services involved in the projects on hand namely construction of pipeline were

50

classifiable under Commercial or Industrial Construction Services and not under Works Contract Services. Reference was invited to provisions of section 65A of the Act which clearly provides that where more than one categories of taxable services were capable of being classified, then sub-clause coming first amongst all other sub-clauses in section 65(105) shall prevail and merit for classification. It was needless to mention that category of Commercial or Industrial Construction Service which equally merits to apply to construction of pipeline along with Works Contract Service comes first in section 65(105) being listed in sub-clause (zzq) while Works Contract service in sub-clause (zzzza). Accordingly, classifying impugned services under Works Contract Services category was contrary to the provisions of section 65A and needs to be raised under Commercial or Industrial Construction category as defined in sub-clause (zzq) of section 65(105) of the Act and therefore show cause notice insofar as it relates to classification under section 65(105)(zzzza) was liable for dismissal.

30.7 In light of above discussion and in absence of specific finding by revenue in the impugned show cause notice, it was requested to refrain from confirming demand of service tax of Rs. 2,52,44,969/- and Rs. 20,26,402 under Works Contract Services as defined in section 65(105)(zzzza) of the Act.

31. Show cause notice further required them to show causes as to why demand of service tax of Rs. 3,63,033 should not be confirmed under Commercial or Industrial Construction Service insofar as it relates to construction of a bus station and related amenities forming part of bus station under Build, Transfer and Lease basis at Jasdan, Amreli as per award of GSRTC.

31.1 Show cause notice in para 5, 10, 14.2, 15.2 and 17.3 deals with the project under consideration and attempt to raise demand of service tax under Commercial or Industrial Construction Service. Para 5 inter alia discusses various facts underlying the project undertaken by them. Salient points of discussion emphasizing key facts of the project were summarized as under :

a) GSRTC entered into Build, Transfer and Lease ( ‘BTL’ ) agreement on 20-04-2005 with assessee

b) Assessee stepping into shoes of Developer, was required to construction of whole of bus station comprising of commercial as well as non-commercial complexes to be ultimately transferred to customers on lease

c) Assessee had to undertake construction at its own cost, resources and risk and in accordance with plans approved by Local Authority

d) Assessee was required to pay fixed premium of Rs. 93,02,001 to GSRTC for use of land

e) Letter for commencement of construction was issued by GSRTC on 10-06-2005 while construction Bus Terminus and Complex were completed in November, 2009.

f) Assessee constructed 149 shops as per its own design and specification like number and size of shops

g) While construction was undergone since 2005, assessee identified prospective buyers and booked the shops of the Commercial Complex and received amounts in advance after negotiating the rate and amount with prospective buyers

h) Having completion of construction and receipt of full amount of consideration by the assessee from prospective buyer, GSRTC was caused to enter into lease agreement being the land owner with prospective buyer.

31.2 Apart from above findings by revenue in the show cause notice, it was contended in para 5.7 that because in project of construction of Commercial complex at Jasdan for GSRTC by them, buyers of the shops in the commercial complex were identified by the assessee, before and during the course of construction, they received advance money from buyers, it shall amount to Commercial or Industrial Construction Service. Moreover in para 5.8, same fact and reasoning

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were reiterated in the notice that they had provided taxable commercial construction services by carrying out the construction of the said project and alongwith that also marketed the units in the said complex, for which they have received Deposits and advances from the members, during the course of construction of the project. It was also observed that payments received from the lessee were liable for payment of service tax. Again in para 15.2 of notice, revenue had observed that GSRTC had provided a vacant land while they constructed complex over it and received advance money from the members during the course of construction and therefore services provided by them to members shall be taxable service under Commercial or Industrial Construction Services.

31.3 From the facts observed by show cause notice itself and in the light of relied upon documents comprising of BTL Agreement entered into by them with GSRTC, it appeared that construction of shops under Bus Terminus as sold to the prospective buyers have been treated as Commercial or Industrial Construction Service by revenue. Therefore refuting to the contention of revenue, they placed submission as to why service tax was not levied in instant case.

31.4 They submitted that irrespective of the fact that they received advance money from the prospective buyer, the most important fact underlying the transaction cannot be ignored is that whole of construction and its objective was to set up a Bus Terminus at Jasdan. GSRTC was a pivotal institution of Government of Gujarat responsible for smooth and efficient transportation of passengers by road within the State of Gujarat. To achieve its objective of discharging sovereign function to provide basic infrastructure and support system for transportation of passengers, GSRTC owns and runs fleet of buses and set up its own transport terminals. To facilitate passengers, transport terminals were being equipped with various amenities such as food shops, news paper and book shops, waiting area etc. As it involves transportation of human, it was more important to provide basic recreational and accommodating facilities at terminals to satisfy vary objective of transportation. Therefore terminals were modernized to get equipped and comprised of all the ancillary amenities. With such an objective and continuing with the philosophy of Public Private Partnership popularly prevailing in the country, GSRTC has evolved a model of building transport terminals with commercial facilities with the help, skill, resources and finance of private developers. Private developers are invited to undertake feasibility of the project, construct the bus terminus along with commercial properties so as to cover up their cost of construction. In such model, GSRTC would not be required to infuse public money, albeit private developers will infuse its own finance and take risk. However, at bottom of all, the vary objective of the project does not get altered which was of to set up a bus terminus for transportation of passengers. As it known, State Road Transport Corporation are to providing transporting facilities to citizens and not to trade in commercial properties. Development of commercial properties and allowing private developers to make money out of it, was an incidental result of constructing modern bus terminus without infusion of public money. Nature and extent of the commercial properties developed thereunder, still forms integral part of bus terminus. If considered in isolation from the transporting terminal, commercial properties thus constructed have no value. Therefore, in the instant case , commercial complex constructed by the them cannot be considered in isolation of bus terminus. In fact, said complex was integral part of the bus terminus which was the pre-dominant objective of the whole transaction. To better appreciate the facts in light of agreement, reference was invited to second para at page 3 of the agreement which reads as under :

“Planning of the Passenger Amenity Center at Jasdan is of Developer which should be as per by-laws of Local Approving Authority for Jadan restricted to FSI available construction shall be started only after approval of planning. Construction shall be as per approved planning and in case of any deviation from approved planning, it shall have to be demolished. It would need to ensure that the Passenger Amenity Center is

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not exploited for any other use other than those specified by GSRTC reserves right to unilaterally change the scope of the Project.”

From above it was made abundantly clear and plain that premises constructed at the terminus shall not be freely exploited but to be used strictly in accordance with the objectives set by GSRTC which were none other than but transportation of passengers. Therefore it travels beyond any doubt that construction of premises under consideration is undisputedly of Bus Terminus and complex are forming integral part of it. Having nature of construction in mind, attention was invited to definition of Commercial or industrial construction given in section 65(25b) which reads as under :“Commercial or Industrial Construction means(a) Construction of a new building or a civil structure or part thereof; of (b) Construction of pipeline or conduit; or(c) Completion and finishing services such as glazing, plastering, painting floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or(d) Repair, alteration, renovation or restoration of, or similar services in relation to building or civil structure, pipeline or conduit;which is (1) used, or to be used primarily for; or(2) occupied, or to be occupied, primarily with; or(3) engaged, or to be engaged, primarily in,commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams”

From the definition cited, it was clear that such services in respect of transport terminals were not covered by Commercial or Industrial construction service and thus remains out of taxability. In the instant case , as already envisaged, constructions undertaken by the them were undisputedly of bus terminus and bus terminus was nothing but transport terminals and accordingly qualifies for exclusion from levy of service tax. It was of no relevance as to whether revenue was generated by them from sell of commercial complex or otherwise, but situs of construction was of greater connotation. Anything falling within the reach of transport terminals, shall be kept out of tax liability. Accordingly, question of levy under commercial or industrial construction does not arise.

31.5 Without prejudice to whatever stated above, it was further stated that service tax was otherwise not applicable being period involved was prior to 01.07.2010. Contention of the revenue was that they had, during the course of construction, accepted booking money from the prospective buyers and therefore it falls within the fold of taxability under commercial or industrial construction. To better appreciate the facts vis-à-vis position of law as applicable to it, they reiterated following broad propositions underlying the transaction :

- GSRTC provided vacant land to assessee- Assessee paid fixed amount of premium in lieu of gaining rights to construct

over land owned by GSRTC- Design, specification, size, number and plans in relation to commercial

complex are to be decided by assessee- Assessee steps into shoes of developer- Assessee, in the capacity of developer, designs, specifies, markets, books,

allots the commercial unit for consideration to prospective buyers- Allotment in form of 90 years lease is granted in favour of buyer only after

completion of construction and receipt of full amount of consideration- Prospective buyer does not get any right or privilege in constructions unless

and until lease is executed

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- Assessee designs and specifies the units as per its own and not as per GSRTC nor as per prospective buyers

Having above stated broad propositions in mind, definition of taxable service as prevailing prior to 01.07.2010 needs to be examined. Definition as provided in section 65(105)(zzq) reads as “any service provided or to be provided, to any person, by any other person, in relation to commercial or industrial construction”. Definition of ‘commercial or industrial construction’ is already discussed hereinbefore. Therefore, in accordance with provisions cited, activity of construction of a building or civil structure culminating into rendition of service by one person to another person shall amount to taxable service, subject to other conditions stands satisfied. The moot question in the case was, whether a property being constructed by them at its own will amount to provision of service of construction on behalf of the prospective buyer. Stark reading of provisions, makes it beyond any doubt that provision of service by one person to another presupposes two parties at a time having privy to each other under contractual obligations. Moreover, construction shall be done according to will of the recipient by the provider. While in the instant case, it was not always necessary that prospective buyer and they had privy of contract at the time of construction of respective unit. It was also not the case of construction by them according to will and wish of the buyer. Therefore it would be completely wrong in saying that construction activity had been undertaken by the assessee resulting into provision of service to buyer. In fact it was the case of self-service for them.

31.6 However, taxability as envisaged by revenue could be rightly sustainable if it involved period after 01.07.2010. W.e.f. 01.07.2010, an explanation was inserted by Finance Act, 2010 into definition of taxable service under section 65(105)(zzq) which reads as under :“any service provided or to be provided, to any person, by any other person, in relation to commercial or industrial construction.Explanation.- For the purposes of this sub-clause, the construction of an building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction ( except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force ) shall be deemed to be service provided by the builder to the buyer.”

Explanation was inserted w.e.f. 01.07.2010 creating a deeming fiction in the provisions of Service Tax to bring such transactions involving sale of immovable property but consideration was being received by the builder during the course of construction. Therefore from the said date, transaction similar to that involved in case might be hit by taxability under commercial or industrial construction services under guise of deeming fiction but in no case same shall purport to be applicable prior to such date. It was a settled position of law that once particular entry was inserted with effect from a particular date, same cannot be held taxable prior to such date. As the period involved in case was 18.06.2007 to 24.02.2009, explanation cannot be applied and therefore no liability could be demanded under said category.

31.7 In order to support their plea, they relied on the decision of Hon’ble Gujarat High Court in case of CST, Ahmedabad v. Sujal Developers Tax Appeal No. 1550 of 2010 dated 22.04.2011 and CST, Ahmedabad v. Shrinandnagar-IV Co-Operative Housing Society Limited Tax Appeal No. 382 of 2010 dated 30.06.2011.

31.8 Attention was invited to various circulars issued by Board from time to time such as TRU letter dated 17.09.2004, , 01.08.2006, 23.08.2007, 04.01.2008, 29.01.2009 and recently dated 10.02.2012. From all the circulars it was clear that intention of legislation was not to tax transaction of sale of immovable property between

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developer and buyer but intention was to tax on a transaction of actual construction being entered into between the developer and contractor. In the instant case if any person was engaged by them for actual brick by brick construction of complex, such contract must have come within the fold of service tax even prior to 01.07.2010.

31.9 In light of above discussion, they prayed that no liability of service tax can be confirmed in the instant case for period prior to 01.07.2010.

32 They submitted that show cause notice further puts them to show causes as to why service tax should not be demanded under construction of residential complex services inasmuch as it amounts to Rs. 11,47,392. Proposed demand was arising out of two projects – construction of Residential Police Quarters on behalf of Gujarat State Police Housing Corporation Limited, service tax involved of Rs. 9,46,912 and construction of Hostel Building on behalf of Navsari Agricultural University involving service tax of Rs. 2,00,480.

32.1 In both the cases stated above, it was evident from the available records relied upon in the show cause notice, that residential units being constructed by the them were intended for personal use by respective authorities. In case of Gujarat State Police Housing Corporation Limited, residential quarters were intended to be occupied for residential purposes of police staff while in case of Navsari Agricultural University, hostel building was to be used as residential purpose of students. Without going in further detail, attention was invited to definition of ‘residential complex’ as given in section 65(91a) of the Act which provides as under :“Residential complex means any complex comprising of –i) a building or buildings, having more than twelve residential units;ii) a common area; andiii) any one or more facilities or services such as park, lift, parking space,

community hall, common water supply or effluent treatment system,located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.

Explanation. – For the removal of doubts, it is hereby declared that for the purposes of this clause,-

(a) “personal use” includes permitting the complex for use as residence by another person on rent or without consideration;

(b) “residential unit” means a single house or a single apartment intended for use as a place of residence”

They submitted that from the definition of ‘residential complex’ it was very clear that complex intended for personal use shall not be treated as residential complex and therefore not exigible to service tax. In the instant cases, residential quarters constructed for Gujarat State Police Housing Corporation were intended for self-use by employees of Police Department while in case of Navsari Agricultural University’s hostel was intended to be occupied by students. In both the situations, it amounts to personal use as envisaged in the definition and therefore said constructions do not amount to ‘residential complex’ and therefore no service tax was levied.

In order to support their plea, reliance was placed upon decision in the case of Khurana Engineering Limited v. CCE, Ahmedabad 2010-TIOL-1712-CESTAT-AHM where Hon’ble Tribunal had an opportunity to examine identical issue in relation to construction of residential quarters of Income Tax Department. Hon’ble Tribunal had held that quarters constructed for employees of Income Tax Department shall be construed to be for ‘personal use’ in view of explanation and therefore service tax is not levied. They also relied on the case of Sima Engg Constructions and Others v. CCE,

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Trichy 2010-TIOL-1734-CESTAT-MAD where Hon’ble Tribunal prima facie examined that residential quarters constructed for police officials by Tamil Nadu Police Housing Corporation Limited was meant for personal use as envisaged in the explanation and therefore original authority was remanded the case to consider the case in light thereof.

In view of above, they crave to consider complexes constructed in both the cases on hand, as complex meant for personal use and accordingly be find it adequate to refrain from confirming demand of service tax under construction of complex services.

32.2 Without prejudice to whatever stated above, it was stated that work orders proposed to be made liable for service tax by revenue were undisputedly a case of work contracts as clearly evident from the copies of work orders issued and available on record. In that case, it would not be out of its place to mention that classification of said services under construction of complex would be incorrect as it deserves classification under works contract services. Having seen in the case of drainage and sewerage laying projects awarded by AMC and AUDA and in case of construction of control room building for GETCO, levy was proposed under works contract services, however in this case revenue proposed to demand under construction of complex services, which seems to be contradictory to each other. If for one project, works contract was classified under works contract services and for another project, it stands classified under another category was not convincing and indicates arbitrary approach of revenue in inflicting demands. Therefore it was requested to drop the show cause notice on a ground of arbitrary approach and substantial lacuna on part of revenue to substantiate its charges against them.

33 They submitted that Show cause notice further required to show causes as to why service tax was not to be demanded under site formation and excavation services to the extent of Rs. 52,75,110 in relation to project awarded by Sabarmati River Front Development Corporation Limited.

33.1 Reference was made to para 7, 12.3, 14.5 and 18.5 to precisely ascertain charges leveled by the show cause notice and rationale behind demand of tax. It was gathered that demand of service tax was proposed under Site formation and Excavation category of service in relation to work executed by them in relation to general earth filling for the embankment construction behind retaining wall for the length of 575 m on east bank on behalf of Sabarmati River Front Development Corporation Limited. Para 7.1, 7.2 and 7.3 deals with basic details of contract awarded by SRFDCL. While para 7.4 of the impugned notice discusses provisions of Finance Act, 1994 insofar as it applies to site formation and excavation services. Emphasis was placed by revenue of clause (d) of section 65(105)(97a) of the Act which deals with ‘Land reclamation work’. It appeared to them that revenue had proposed to consider work involved in the project on hand as related to Land reclamation and therefore considered to be taxable. However what amounts to land reclamation and what the exact reasons behind considering the work involved as Land reclamation were not categorically brought on record. Instead revenue consistently observed and attempted to contend that activity undertaken by them fell within the fold of site formation and excavation services and accordingly payment received from SRFDCL were subject to service tax. It was submitted that without categorically examining revenue has thus, leveled against them, charges of taxability under stated category, was certainly a matter of arbitrary approach taken under anxiety of inflicting demands against them. Hence, as stated earlier, revenue does not succeed in clearly confronting to the chargeability involved and shift on the onus of proof as to non-taxability upon them. In such circumstances, revenue completely failed in discharging its responsibility and shifting of burden upon them and therefore they should not have been put to show causes under impugned notice.

33.2 Without prejudice to whatever stated and their rights to challenge validity of the notice, further submission was being made in the interest of justice to avoid

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redundant litigation. They contended that work undertaken by them cannot be classified as taxable service under site formation and excavation services as defined in the Act. To better appreciate the issues involved, attention was invited to nature and extent of work involved as evident from the work order and related documents available in relied upon documents. General description of work reads as “General earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash Bridge to 575 mts down stream on river Sabarmati for Sabarmati River Front Development Corporation Ltd at Ahmedabad.” From the description of work and technical specifications thereof, it can be simplistically derived that work was intending to undertake series of activities such as clearance and removal of sediments, rocks, sand, debris, plants, trees etc from the site of excavation, dewatering, excavation, backfilling over the riverbed of Sabaramati at specified stretch. It was beyond any doubt that work was required to be executed at and in relation to riverbed of Sabaramati so that embankment constructions can take place paving way for road and other infrastructural structures. It was of no dispute that work undertaken by them involves excavation but at the same time important fact needs to be borne in mind was that said excavation was not in relation to building or plant or factory but related to a riverbed. There was a noticeable line of demarcation between excavation services covered within the provisions of section 65(105)(97a) and excavation not covered thereby. Not necessarily, every such excavation or related land reclamation results into taxable services under said category. To appreciate it in a better way, attention was invited to definition of site formation and excavation activity as defined in section 65(105)(97a) of the Act which reads as under :“Site formation and clearance, excavation and earthmoving and demolition includes,-

(i) Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; or

(j) Soil stabilization; or(k) Horizontal drilling for the passage of cables or drain pipes; or(l) Land reclamation work; or(m) Contaminated top soil stripping work; or(n) Demolition and wrecking of building, structure or road,but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water resources or water bodies.”

Exclusion part of definition was of greater connotation to the present facts which clearly keeps all such activities, which were otherwise taxable, from the ambit of taxation insofar as it relates to agriculture, irrigation, watershed development, water resources and water bodies. In the instant case, as already submitted, work of excavation was undertaken at the riverbed which was no other than a specific definition of water resources or water bodies. Therefore all such activities thought may be classifiable under first part of the definition but stays out of taxation by virtue of exclusion given thereafter. It was needless to mention that riverfront itself was being developed at the riverbank forming integral part of river and therefore cannot be construed in isolation from the exclusion part of definition. Views expressed were backed by circular issued by TRU vide No. B1/6/2005-TRU dated 27-07-2005 in which para 6.3 clarifies that “However, site formation and clearance, excavation and earthmoving and demolition services when provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies are specifically excluded and not within the scope of this service.”

To provide further strength to their arguments, attention was invited to definition of taxable service insofar as it relates to ‘dredging service’ as defined in section 65(36a) of the Act which reads as under :“dredging includes removal of material including silt, sediments, rocks, sand, refuse, debris, plant or animal matter in any excavating, cleaning, deepening, widening or lengthening, either permanently or temporarily, of any river, port, harbor, backwater or estuary.”

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From the definition of dredging, it was clear that services of excavation in relation to deepening, widening etc of river were classifiable under this category and therefore cannot be classified under earlier category of site formation and excavation. If at all services could be nearly classified, it was the dredging service which merits but in no case site formation and excavation services category be subjected for taxability. However, dredging service as defined in the Act is not subject matter of discussion in impugned show cause notice, therefore they do not find it proper to examine and discuss classifiability thereof under said category.

33.3 In order to strengthen their views on the basis of judicial interpretation, reference was invited to decision of Hon’ble Mumbai Tribunal in case of ITD Cementation India Limited v. CST, Mumbai 2011-TIOL-117-CESTAT-MUM, where Tribunal patently agreed plausibility of the argument involved and granted stay. It may be noted that facts under said case were similar in nature being related to Sabarmati river granted by Ahmedabad Municipal Corporation.

33.4 In light of foregoing discussion and in absence of plausible finding on part of the revenue, it was requested to drop the demand of service tax of Rs. 52,75,110 considering plausible explanations advanced.

34 They further submitted that Show cause notice further required them to show causes as to why service tax paid of Rs. 20,27,734 should not be appropriated against demands confirmed. It was submitted in view of foregoing discussion that in none of the cases, revenue has succeeded in confirmation of demand of service tax on judicious as well as judicial counts. Therefore appropriation of amount paid by them against nil demand was illegal and incorrect and accordingly liable for rejection. It was therefore to strongly reiterate, notwithstanding anything contained anywhere in the statements offered by them, that amount paid by them of Rs. 20,27,734 does not represent service tax nor it amounts to acceptance of demand by them and accordingly needs to be refunded. To that extent, their statements shall be considered to be retracted as revenue had failed to appreciate demand of tax in eye of law.

35 Without prejudice to their contentions and submissions, it was further submitted that demand of service tax as computed in impugned show cause notice was incorrect insofar as provision of section 67 were applicable. It was undisputed fact that they did not collect service tax. Accordingly, in terms of explanation to section 67 of the Act, amount of taxable service shall be deemed to be inclusive of element of service tax and shall be construed accordingly. Therefore demand of service tax in impugned notice must have been calculated on cum-tax basis. Hence, they requested to reduce demand of service tax accordingly.

36 Without prejudice to whatever stated hereinbefore, it was further submitted that show cause notice suffers from limitation of one year as provided in section 73(1) of the Act. Period involved in the impugned notice is 01.04.2006 to 30.06.2010 while notice was issued on 18.03.2011. Accordingly, in terms of provisions of section 73(1) of the Act, impugned notice should have been issued within one year from the relevant date and therefore demand pertaining to period 01.04.2006 to 30.09.2009 stands time barred as last date for issuance of show cause notice for period ending on September, 2009 shall be 25.10.2010. Revenue had invoked larger period merely based upon primary fact of non-payment of service tax by them. Having no other observations and findings on record, suggest it to strongly believe that apart from a reason of non-payment of service tax, revenue could not gather any corroborative evidences and / or facts supporting to invocation of extended period. Moreover it was stated in para 21 that despite of repetitive summons, they had not furnished information. However no records of such repetitive reminders and summons had been brought on record by revenue in the show cause notice. In fact, they had provided all the information, records, explanations as and

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when required for by the revenue in the matter and extended full co-operation to officials which was clearly emerging out from the flow of show cause notice and gathering of documents relied upon. Despite thereof, if revenue, in anxiety of covering maximum period for liability, raises wrong and misleading allegations, approach of revenue in the notice deserves to be criticized.

36.1 It was a settled position of law that onus of proof to invoke larger period lies on revenue and it was the revenue who shall bring all corroborative evidences / facts in the show cause notice. Rather than being submissive in nature, revenue should analyse facts, intentions, reasoning and possibility of deliberate efforts behind non-payment / short payment of tax / duty. Mere mentioning of facts and observing to a fact of non-payment does not automatically enable revenue to invoke larger period. Proviso to section 73(1) which enables revenue to issue show cause notice within a period of five years instead of one year, presupposes existence of one of the five specified states of affairs indulged into by them. It was the revenue who should gather sufficient evidences as to indicate which one of the five reasons, they have been indulged into, before invoking larger period. If careful perusal is made, it would be found that list of specified reasons starts with word ‘fraud’, ‘collusion’ and ‘willful mis-statement’. Using of words ‘fraud’ etc in the list shows degree of intensity legislature intended to exist before substituting period of one year with a larger period of five years. It was not the mechanical provision enabling revenue to depend upon under every circumstance where demand involves for a period more than one year. Words ‘fraud’ etc are of highest amplitude and involves deliberate and mala fide intentions on their part with an object to deceive the tax authorities by acting in sheer defiance of law to make unlawful and illegal monetary advantage. Therefore before taking recourse to proviso, it was expected from revenue that proper and adequate findings were brought on records having direct and proximate relation to stated practices of tax evasion by them. Merely because demand involved stands barred by normal period of one year, revenue tend to invoke larger period in anxiety of initiating actions will defeat the very purpose of drawing a legislative line of demarcation between situation where demands should be made within one year and those to be made within larger period. The way revenue has proposed to invoke larger period in present case , if accepted, every demand beyond one year would be attempted to be protected by revenue under proviso without differentiating between assessee having bona fide belief as to non-taxability and assessee having mala fide intention to act in defiance of law.

36.2 They submitted that views expressed in foregoing para get support from a landmark decision of Hon’ble Supreme Court in case of Pushpam Pharmaceuticals Company v. CCE, Bombay 1995 (78) ELT 401 (SC). Decision of the Apex court has been consistently followed in several other decisions by different forum. In the present case it was evident from various records such as Statements recorded and relied upon by the impugned notice, letters addressed by them to office of DGCEI and part of this submission that :

a) All the issues involved were prima facie of the nature that service tax stands exempted being either works related to infrastructural support or personal use

b) It was a belief, not only possessed by assessee but amongst the entire fraternity that projects having bearing on impugned notice are not attracting service tax.

c) Hon’ble Tribunals have also taken consistent view as to non-taxability.d) Show cause notice itself was substantially lacking in bringing exact and

adequate charges on record in order to justify demand of tax

36.3 In order to support their submission, relevant parts of statement recorded of proprietor of assessee were reproduced as under :-

Para 10.1 – Q.6 Page 17 of Notice“Q.6 Please give the details of Service Tax registration of your firm ?

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A.6 Sir, it is to inform you that at the time of search carried out at the office premises of my firm, carried out under Panchnama dtd. 23-03-2010, my firm was not registered with Service Tax Authorities. However, during the course of search, as per details explained to me by the DGCEI officers, the services provided by my firm to M/s Gujarat Energy Transmission Company Ltd. are liable to Service Tax, so my firm has obtained Service Tax registration on 19-04-2010 and presently, my firm hold Service Tax registration No. AASPP5751DSD003 for the “Works Contract services”.

Para 1.1 Q.11 Page 19 of Notice“Q.11 : As stated by you in your reply to question No. 9, as per the letter of intent i.e. Acceptance of Tender dtd. 06-11-2008 and 07-11-2008 issued by M/s GETCO, your firm was required to pay Service Tax on the amount of payment received from GETCO, at the prescribed rate specified in the above letters. Please state that whether your firm had paid the amount of Service tax on receipt of the parts amounts from GETCO and if so the details thereof ?A.11 Sir my firm had not paid the amount of Service Tax payable as per the rates given in the two letters dtd. 06-11-2008 and 07-11-2008 issued by M/s GETCO, as we were not ware of the leviability of Service Tax and due to the same we were not registered with Service Tax department.,…”

Para 11.3 Q. 16 Page 34 of Notice“Q.16 Shri Narendrabhai Patel, please peruse the income ledgers of payments received from M/s Ahmedabd Municipal Corporation and M/s Ahmedabd Urban development Authority during the financial year 2005-06 to 2009-10 and explain the works carried out by your firm for above-mentioned authorities ?A.16 My firm has been engaged in construction work of mainly drainage and sewerage system in the areas covered under the Ahmedabad Municipal limits and the limits of Ahmedabad Urban Development Authority. Further, my firm is also engaged in Development of Ghodasar Lake for Water Storage, Deepening of Maleksaban Talav in the Bapunagar area nad other water storage works. All the above mentioned projects are infrastructure projects, which are non-commercial in nature.”

Para 11.3 Q.18 Page 34 of Notice“Q.18 Shri Narendrabhai Patel, please peruse the income ledgers for the financial years of the Sabarmati River Front Development Corpn. Ltd. for the financial years 2008-09 and 2009-10 ? It is found that during the above two financial years, your firm has received payments of Rs. 1,99,26,584 and Rs. 2,72,44,646 from them, so please explain the work carried out by your firm in the said project ? Please also state that whether your firm has paid any Service Tax for the Service provided in the said project ?

A.18 The Sabarmati River Front Development Corporation Limited located at Bal Bhavan Opp. Vidhyanagar High School, Nr. NABARD House, Usmanpura, Ahmedabad had vide their letter of intent No. 1187 dated 11-04-2005 alloted the work of “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on east bank from Subhash bridge to 575 mts down stream on river Sabarmati. As per said work order, my firm has been engaged in the back filling work of earth in the part of Sabarmati River front mentioned in the letter of intent. As regards Service Tax payment on the income received in the above-mentioned project, it is to submit that as the said project is a Infrastructure related project and as per the prevailing market practice, we have not charged or collected Service tax in the said project.”

They submitted that from all the above stated findings, it clearly emerged out that they were under considerable belief that infrastructural government projects were not subjected to service tax and there was no opportunity with them to even imagine about their liability. It was submitted that reason of non-payment of tax as assigned by them in

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above stated statements was not assignable to ignorance of law but it was the matter of interpretation of law leading to a common belief as any man of reasonable prudence would have otherwise possessed of.

From above facts and findings already accepted by revenue at various stages and not disputed, it clearly appeared that none of the reason as required in terms of proviso to section 73(1) could be assigned to them and with no stretch of imagination if could be confirmed that they had contravened provisions of the Finance Act, 1994 with intention to evade payment of duty or suppressed the facts from department.

36.4 Therefore in light of given facts and position of law as applicable to present case, they submitted that that revenue had failed to gather corroborative evidences / facts to support invocation of larger period and thus also failed to discharge its onus to justify existence of any reasons as contemplated by proviso to section 73(1) to cover demand prior to one year. Accordingly it was submitted to decide impugned show cause notice as barred by limitation of one year under section 73(1) of the Act and demand may be reduced accordingly.

36.5 In support of their contentions and submissions, reference was made to several decisions applicable to question of law as well as facts under consideration.

CCE v. Chemphar Drugs & Liniments 1989 (40) ELT 276 (SC)Padmini Products v. CCE 1989 (43) ELT 195 (SC)Continental Foundation Jt. Venture v. CCE 2007 (216) ELT 177 ( SC)Bharat Alluminium Co. Ltd v. CCE (2007) 8 STR 27 ( Tri-Del )Velji P Sons & ( Agencies ) P Ltd 2007 (8) STR 236 ( Tri-Ahd )Nexcus Computers (P) Ltd v. CCE, Pondicherry 2008 (9) STR 34 ( Tri-Chennai )

36.6 It was clear from cited decisions that mere inaction, non-payment of duty does not amounts to deliberate and intentional defiance of law and liable for invocation of larger period. A positive and intentional act was required on part of the assessee and that too established by revenue in the show cause notice, before invoking larger period. Many a times, stand was taken by adjudicating authority that law puts total trust, faith and confidence upon the taxpayer and therefore if tax payer was not discharging its liability it amounts to deliberate efforts with intention to evade payment of duty. It was also a stand taken by revenue that if there was a single doubt, they could have approached to department for clarification. Therefore it was submitted in anticipation that in a country like India it was a fundamental presumption, unless and until proven contrary that every person is innocent and acting in bona fide manner. It was a matter of pride that tax structure in our country has made a bold move to a self-assessment regime and in such a system trust and faith upon the them was of utmost superiority. However, it must be borne in mind while expecting positive actions from the tax payer in reciprocation of self-assessment facility that laws must be drafted with utmost clarity and are free from ambiguities. Intention of legislation behind the laws must be communicated to the trade in a way it is intended for, so that any man of reasonable prudence must perceive and act upon the law in the same way it is intended by legislation. If there was likeliness of doubts, possibility of divergent interpretation, chances of overlapping same must be distinguished and administration should not expect it from a common man. At the same time, it should not be expected that tax payer will approach to department for clarification as at all the tax payer had an opportunity, he must have taken due care and caution by consulting to experts of law or trade unions to safeguard his own interest. Many a times it happen that tax payer does not have reasonable opportunity to even anticipate a possible liability under given statute. It may be noted that they were not attempting to demonstrate concept of ignorance of law, however it was that law who ignored its spirit and to communicate its true message to the tax payer about taxability. In a nutshell, expecting the tax payer to approach the department does not serve as a plausible reason for invocation of larger period. Reference was made to a very recent

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decision of Hon’ble Ahmedabad Tribunal in case of Aadishwar Motors Pvt Ltd v. CST, Ahmedabad – 2011 (24) STR 81 ( Tri-Ahmd ) in which it was categorically observed that mala fide cannot be attributed for a reason of non-approach by them to department.

36.7 In light of foregoing discussions, clarifications and submissions, they craved to contend show cause notice suffer from limitation as provided in section 73(1) without invoking larger period of five years under proviso and therefore demand stands barred by limitation.

37 As regards levy of interest u/s 75, they craved to grant consequential relief.

38 As regards imposition of penalties u/s 76, 77 and 78 of the Act, they craved to submit that no penal action was warranted as violation of provisions of law is technical in nature and flowing from bona fide belief as to non-taxability. It was also submitted that entire fraternity has been following same practice and therefore they done in the same fashion as a man of reasonable prudence must have acted upon. It was also submitted that they relied upon clarification issued by TRU as to non-taxability and supportive decisions of Tribunals. Having the projects involved in relation to infrastructural support and personal use, they carried a genuine, reasonable and bona fide belief as to non-applicability of Service Tax. A detailed discussion has already been made in foregoing paras, same was not repeatedly submitted at this juncture. In a nutshell, they find it most reasonable and appropriate in submitting that penal actions, looking to the facts, circumstances and explanations advanced, were not warranted and all the penalties should be waived in terms of provisions of section 80 of the Act. In light of above discussion, it would be reasonable to conclude that they had a sufficient and reasonable cause in non-payment of service tax and a technical breach of provisions of the law. Therefore penalties u/s 76, 77 and 78 of the Act as proposed to be imposed in impugned notice were requested for waiver under section 80 of the Act.

38.1 Without prejudice to whatever stated above, it was stated that no penalty u/s 76 can be imposed when penalty u/s 78 is demanded in terms of proviso to section 78 as amended from May 2008. Period involved in the impugned notice pertains to period after amendment in section 78 and show cause notice also stands issued thereafter, fifth proviso to section 78 was applicable. As impugned notice has proposed to demand penalty u/s 78, no penalty u/s 76 can be imposed in terms of proviso to section 78. Therefore earnestly requested to refrain from imposing penalty u/s 76. Though the period involved in the show cause notice was comprised of period prior to insertion of proviso to section 78 w.e.f 16.05.2008 and thereafter, no penalty u/s 76 can be imposed for entire period as show cause notice has been issued after the date of enactment. Moreover it was submitted that when rigours of law were cleared by subsequent amendment, benefit shall always be given to assessee retrospectively and therefore entire period shall be kept out of imposition of penalty u/s 76. Reliance was placed upon decision of Hon’ble Ahmedabad Tribunal in case of Chansama Taluka Sarvoday Mazoor Kamdar Sahakari Mandali Ltd v. CCE, Ahmedabad 2012-TIOL-41-CESTAT-AHM.

38.2 Without prejudice to whatever stated above, it was further stated that they had sufficiently brought on record reasons for non applicability of proviso to section 73(1) of the Act for invocation of extended period of limitation. It was also submitted that revenue had not sufficiently and appropriately brought on record anything suggesting to existence of reasons for invocation of extended period. Therefore in light of given facts, circumstances and believes, it was submitted that show cause notice suffers from limitation of one year and no reason for invocation of extended period were attributable to the case. It was submitted that factors and reasons for invocation of extended period and imposing of penalty u/s 78 were same and identical. Therefore, if extended period was not to be invoked, certainly penalty u/s 78 cannot be imposed. However, at all, if the penalty u/s 78 was to be imposed, revenue must have brought on record corroborative evidences confronted to the facts leading to existence of any of the reasons being pre-requisite for

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infliction of penalty u/s 78. As revenue failed to discharge its onus, they crave to refrain from travelling beyond scope of show cause notice in imposing penalty u/s 78.

38.3 It was further submitted that revenue has erred in para 27(g) by observing to “for concealing the value of the taxable services, receipt of the charges in respect of the same and wrong filing of ST-3 returns under the provisions of 70 the Finance Act, 1994”. It was submitted that observation of revenue was contradictory and misleading. Question of concealment had never been raised anywhere in the notice while filing of wrong ST-3 is a misleading fact. It was fairly observed that they were not registered with service tax department as it was engaged in only infrastructural development services which were believed to be non-taxable and accordingly no returns were filed. Under such circumstances, question of filing of wrong ST-3 does not come at all and therefore such an observation of revenue in impugned notice was liable for dismissal.

Discussion and Findings:

39. I have carefully gone through the records of the case, written submissions made by “N.P.Patel & Co.” in their defence replies to the show cause notice as well as the submissions made during the course of personal hearings and the records/documents produced by them. I find that the issues to be decided in this case are:

i) whether, the Construction work (Construction of control Room building, structure & equipment foundation, Compound Wall, road, cable trench and ancillary civil work) carried out by “N.P.Patel & Co.” for M/s Gujarat Energy Transmission Corporation Ltd. (GETCO, Vadodara) is a taxable service under “Works Contract Service”?

ii) whether, the Construction work of laying of drainage/sewerage pipeline and related construction work carried out by “N.P.Patel & Co.” for Ahmedabad Urban Development Authority (AUDA) and Ahmedabad Municipal Corporation (AMC) is a taxable service under “Works Contract Service”?

iii) whether, the Construction of commercial complex consisting of shops at Jasdan Bus terminus carried out by “N.P.Patel & Co.” for Gujarat State Road Transport Corporation Ltd (GSRTC) is a taxable service under “Commercial or Industrial Construction Service” as per Section 65(25b) of the Finance Act, 1994 taxable under Section 65 (105)(zzq) of the Finance Act, 1994?

iv) whether, the Construction of residential complexes carried out by “N.P.Patel & Co.” for Gujarat State Police Housing Corporation Ltd is a taxable service under “Construction of Complex Service” as per section 65(30a) of the Finance Act, 1994 taxable under section 65(105) (zzzh) of the Finance Act, 1994?

v) whether, the Construction of residential complexes carried out by “N.P.Patel & Co.” for Navsari Agricultural University is a taxable service under “Construction of Complex Service” as per section 65(30a) of the Finance Act, 1994, taxable under section 65(105) (zzzh) of the Finance Act, 1994?

vi) whether, the work of “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash bridge to 575 mts down stream on river sabarmati, located in Ahmedabad” carried out by “N.P.Patel & Co.” for M/s Sabarmati River Front Development Corporation Ltd is a taxable service under “Site formation and clearance, excavation, earth moving & demolition service” as per Section 65 (97a) of the Finance Act, 1994, taxable under Section 65 (105(zzza)) of the Finance Act, 1994?

DEMANDS UNDER “WORKS CONTRACT SERVICE”

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A. Construction works carried out for M/s Gujarat Energy Transmission Corporation Ltd. (GETCO, Vadodara)

40. It is the contention of ‘N.P.Patel & Co.’ that construction work done (Construction of control Room building, structure & equipment foundation, Compound Wall, road, cable trench and ancillary civil work) for GETCO is not classifiable under the category of “works contract service” as the essential conditions of the definition under the said service are not satisfied in the present case. I find from the definition of taxable service under section 65(105)(zzzza) of the Finance Act, 1994, that following conditions are required to be satisfied in order to bring particular service within it’s ambit:

a) service shall be provided to any person, by any other personb) service shall be in relation to execution of a works contractc) it should be a contract where transfer of property in goods involved in the

execution of such contract is leviable to tax as sale of goodsd) such contract should be for the purpose of carrying out construction of a new

building or a civil structure or a part thereof or of a pipeline or conduit, primarily for the purposes of commerce or industry.

40.1 The term ‘person’ is not defined in the Finance Act, 1994. The definition under section 3 of the General Clauses Act, 1897 is an inclusive definition which reads as “person shall include any company or association or body of individuals, whether incorporated or not”. I find from the site ‘www.getcogujarat.com” that Gujarat Energy Transmission Corporation Limited (GETCO) was set up in May’1999 and is registered under the Companies Act, 1956. Therefore, GETCO certainly is a ‘person’ within in the above definition of the General Clauses Act, 1897. In view of this the first condition at a) above stands fulfilled that the service shall be provided to any other person who is GETCO in the present case by any other person who is ‘N.P.Patel & Co.’ in the present case. I place reliance on the judgment of Tata Consultancy Services v/s Union of India reported at 2006(2) STR 386(Kar) wherein it is held that tax being on the service provided, the Act made no distinction between different categories of service providers, be they individuals, partnership concerns or incorporated companies and making any such classification would create and perpetuate anomalies. This clearly implies that the term ‘person’ has not been given a restrictive meaning.

40.2 The second condition is that the transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods. A works contract is a contract for the sale of goods as well as the provision of service but is indivisible in nature. Therefore, it is difficult to break the value relatable to sale of goods and the value relatable to provision of service. Taxable value of works contract service is that part of the value of the works contract which is relatable to the services provided in the execution of a works contract. Therefore an option to opt for the composition scheme has been provided and service tax at the rate of 2% for the period prior to 1.3.2008 and at the rate of 4% for the period from 1.3.2008 onwards is required to be paid on the total value of the works contract. Accordingly, the demand in the show cause notice has been worked out. I also find that the condition is with regard to leviability of tax and not the actual payment of tax and therefore, the VAT Audit report submitted by ‘N.P.Patel & Co.’ is not of much relevance. Thus conditions b) & c) above are satisfied. I also find from para 4.6 of the show cause notice that ‘N.P.Patel & Co.’ has on 19.4.2010 obtained service tax registration under the category of ‘Works Contract Service” and has also paid service tax under the said category. Therefore, their contention that the services provided by them are not ‘Works Contract Services’ is contrary to their own stand.

40.3 There is no dispute to the fact that the work contract is for the purpose of carrying out construction of a new building or a civil structure. The contention of the ‘N.P.Patel & Co.’ is that the said construction cannot be held to be used for the purpose of commerce or industry. I observe that the Explanation to the statutory definition of 'works contract service' uses the word 'commerce'. The plain meaning of 'commerce' is the activity of

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buying and selling. The achievement of profit or the motive being profit-oriented is neither relevant, nor obliterates the nature of activity as a commercial activity, once the activity is that of buying and selling and deriving income from the activity. As per New Oxford dictionary, the word 'commerce' means the activity of buying and selling. As per Webster's ninth new Collegiate Dictionary, a commercial activity is 'exchange or buying and selling of commodities on a large scale involving transportation from place to place'. In the instant case, it is neither un-deniable nor disputed that the electricity distributed by GETCO is on sale basis and price is charged from the customers. Therefore, GETCO is a commercial concern engaged in distribution and selling of electricity. As such, the construction carried out by “N.P.Patel & Co.” for GETCO is clearly identifiable as being used for the purposes of commerce or industry. I find that the said assessee has also failed to give any submission as to how the activity of GETCO cannot be treated as an activity of 'commerce' or in what manner or form, the said activity is distinguishable from a commercial activity. I also find that the activity of GETCO is clearly within the definition of 'industry' as per the Industrial Dispute Act, 1947 and in view of its activity being covered there in, GETCO's activities can not be said to be covered within 'sovereign functions' of the State. Hence, they come within definition of 'industry' as per the above Act.

40.4 In order to determine whether use of any construction is commercial or non commercial it is very decisive to examine the meaning of word “commercial”. In this regard I would also like to find the meaning of “commercial” as defined by the Government of India, (Ministry of Finance), Department of Revenue, Central Board of Excise and Customs, Tax Research Unit in their D.O.F. No. 334/1/2010-TRU, dated 26-2-2010 related to the Budget 2010-11 — Changes and Clarifications on Service Tax. The said word was defined as under “Redefining the scope of Commercial Training and Coaching Service” giving retrospective effect w.e.f. July, 2003. The relevant portion of the said circular is reproduced as under.

6. Redefining the scope of Commercial Training and Coaching Service6.1 Commercial training and coaching service was introduced in Budget 2003 with a view to tax the mushrooming coaching institutes and training centres which either provide coaching classes for examinations or unrecognized courses in various areas such as, management, marketing, engineering etc. The schools, institutes, colleges and universities providing courses that lead to award of recognized diplomas/degrees and sports education were kept out of tax net. These include universities created under a Central or State Act, institutes recognized by UGC as universities or deemed universities, institutes granted recognition professional councils like AICTE, Medical Council of India, Bar Council of India etc. To distinguish the former types of institutes/centres from the latter, the word ‘commercial’ was used in the definitions of ‘Commercial training and coaching’, ‘Commercial training and coaching centres’ and ‘taxable service’.6.2 The use of the word ‘commercial’ in these definitions has led to certain unintended consequences. A view has been taken that the term ’commercial’ appearing in various definitions implies that the institute must be run with a profit motive to fall under the taxable service. A number of taxpayers resisted paying tax on this ground. In order to clarify the legislative intent, the definition of the taxable service is being suitable amended, through insertion of an Explanation, to clarify that the word ‘commercial’ means any training or coaching that is provided for a consideration irrespective of the presence or absence any profit motive. This amendment is being carried out retrospectively (from July 2003) so as resolve the disputes pending at different levels of the dispute settlement system.

40.4.1 Thus, I find that the meaning of word “commercial” stands clarified as above, as any training or coaching that is provided for a consideration irrespective of the presence or absence any profit motive. This amendment is being carried out retrospectively (from July,2003) so as to resolve the disputes pending at different levels

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of the dispute settlement system. Therefore, with regard to the applicability of the meaning assigned to the word “commercial” as mentioned in para 6.2 of the aforesaid D.O. letter, I find that the intention of the Government is very clear that the said meaning is not exclusively meant for the service of “Commercial training and coaching centres’ but can also be applied in the cases wherever the word “commercial” have been used in the statue i.e. Finance Act,1994.

40.4.2 Therefore, what transpires from the above is (i) “commercial” means any activity which is carried out for a consideration is considered to be a commercial activity and the presence or absence of any profit motive either of service provider or service recipient it is not at all relevant and (ii) information has to be gathered with regard to usage of the construction in question from the approved plan of the building or civil construction for deciding taxability of the services rendered by the service provider to the recipients of the services.

40.5 I further observe that the services provided by ‘N.P.Patel & Co.’ also do not satisfy the criteria of educational, religious, charitable, health, sanitation or philanthropic purposes as given in CBEC Circular No. 80/10/2004-S.T. dated 17 th

September, 2004 which is reproduced as under:-

Leviability of service tax would depend primarily upon whether the building or civil structure is “used or to be used” for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purpose like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax.

40.6 Further, their contention that their services are categorized under “commercial or industrial construction service” and not under “works contract” is unfounded. It is mistakenly understood by the said assessee that certain services were replaced by one combined service of “works contract”. The difference between the existing taxable services and the taxable service inserted by the Finance Act, 2007, as “works contract service” was that in addition to the activities mentioned in the existing taxable services, there is supply of goods. Thus, “works contract” service covers contracts where both rendering of service and supply of goods are involved. As per section 65A, the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description. As discussed above, Contracts of “commercial or industrial construction services” are covered under “works contract”, it is optional on the part of a service provider to pay service tax under “works contract service” under the composition scheme. However, the service provider opting for composition scheme for payment of service tax is required to exercise the option prior to payment of service tax. I have also discussed in the foregoing paras that ‘N.P.Patel & Co.’ has on 19.4.2010 obtained service tax registration under the category of ‘Works Contract Service” and has also paid service tax under the said category. Therefore, their contention that the services provided by them are classifiable under “commercial or industrial construction service” and not ‘Works Contract Services’ is contrary to their own stand. Therefore, condition d) above is also satisfied.

40.7 In view of the above, all the contentions made by ‘N.P.Patel & Co.’ stand

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negated and I hold that the above services provided by “N.P.Patel & Co.” fall under the taxable category of “Works Contract Service” and are liable to service tax under sub-clause(zzzza) of clause (105) of section 65 of the Finance Act, 1994. Therefore, the gross amount received by “N.P.Patel & Co.” for providing the said service is the taxable value liable to service tax.

40.8 In view of the above discussions, I find that an amount of Rs. 4,91,84,504/- received by “N.P.Patel & Co.” during the period from 1.11.2008 to 30.6.2010 from M/s GETCO Ltd, as detailed in para 17.2.1 of the show cause notice, is the taxable value under the category of “Works Contract Services” as defined under Section 65 (105) (zzzza) of the Finance Act, 1994 and service tax of Rs. 20,26,402/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

B. Drainage laying and related construction work carried out for Ahmedabad Municipal Corporation and Ahmedabad Urban Development Authority.41. I find that the allegation in the show cause notice and the contentions made in the written submission are on similar lines to the demand on Construction works carried out by ‘N.P.Patel & Co.’ for M/s Gujarat Energy Transmission Corporation Ltd. (GETCO, Vadodara) except that here the service recipients are Ahmedabad Urban Development Authority (AUDA) and Ahmedabad Municipal Corporation (AMC) and the service provided is that of laying sewerage/drainage pipelines and other related construction. The contention in the written submission is also common for construction work carried out for GETCO and the construction work carried out for Ahmedabad Urban Development Authority (AUDA) and Ahmedabad Municipal Corporation (AMC). Therefore, I do not find it necessary to repeat the discussion already made by me in the paras under ‘A’ above. The only issue that requires discussion is that whether the services provided by ‘N.P.Patel & Co.’ to AUDA and AMC satisfy the criteria as given in CBEC Circular No. 80/10/2004-S.T. dated 17th September, 2004 which is reproduced as under to remain outside the purview of taxability under “Works Contract Service”:-


41.1 I find that in view of the above circular, constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit are not taxable, being non-commercial in nature. I find that laying of sewerage/drainage pipelines is meant for sanitation purpose, however, neither Ahmedabad Municipal Corporation (AMC) nor Ahmedabad Urban Development Authority (AUDA) is an organization established solely for the purpose of sanitation. AUDA is an organization set up for sustained planned development of areas falling outside the periphery of Ahmedabad Municipal Corporation in addition to providing civic

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amentities and AMC in addition to providing civic amentities looks after the sustained planned development of areas within it’s own periphery. It is a well known fact that the civic services of providing water, sewerage etc are not free to the residents of housing complexes and owners/users of commercial complexes but these services are provided by charging fees. Therefore, AUDA and AMC by no stretch of imagination are engaged solely in any charitable or philanthropic activity. I have dealt the issue of what is meant by ‘commerce’ in “A” above and as such, the construction carried out by “N.P.Patel & Co.” for AUDA and AMC is clearly identifiable as being used for the purposes of commerce or industry. I find that “N.P.Patel & Co.” has also failed to give any submission as to how the activity of AUDA and AMC cannot be treated as an activity of 'commerce' or in what manner or form, the said activity is distinguishable from a commercial activity. I find that the services provided by ‘N.P.Patel & Co.’ do not satisfy the criteria as given in CBEC Circular No. 80/10/2004-S.T. dated 17 th

September, 2004 and therefore cannot escape taxability under the category of “Works Contract Service”.

41.2 I also find that “N.P.Patel & Co.” has not disputed the fact that they have executed the work of laying of sewerage/drainage pipelines for AMC/AUDA. They have relied on the judgment of Hon'ble Tribunal in the case of Larsen & Toubro Ltd reported at 2011 (22) STR 459 (Tri. Ahmd.) and Nagarjuna Construction Co. Ltd. V/s.Commissioner of Central Excise, Hyderabad reported at 2010 (19) STR 259 (Tri. Bang.) and other judgments. I find that the above decision of Nagarjuna Construction Co. Ltd has been relied on by the Hon’ble CESTAT, West Zonal Bench, Ahmedabad in the case of Larsen & Toubro Ltd reported at 2011 (22) STR 459 (Tri. Ahmd.). The Hon’ble CESTAT Ahmedabad has allowed the appeal following the ratio laid down by the Co-ordination Bench of the Tribunal in the case of M/s Nagarjuna Construction Co. Ltd. I find that by doing so, the Hon’ble CESTAT, WZB, Ahmedabad has failed to appreciate that in M/s Nagarjuna Construction Co. Ltd case, the Hon’ble Tribunal did not go into the detailed definition of commercial or industrial activity and just held that because the revenue earned was less than the cost incurred to maintain water supply by the Board and as the Board is run by substantial grants released by the State Government, the laying of pipe line for supply of water is not a commercial activity.

41.2.1 I find that the Bombay High Court in the case of M/s Ulhas Oil and Chemical Industries (P) Ltd – 1988 (36) ELT 462 (Bom.) has clearly held that while citing precedents a clear distinction has to be made between a point which is necessary for the determination of a case and a point which is not necessary for the determination of the case. If the point does not arise at all, the observations pertaining to such a point are casual observations which cannot have any effect as a precedent. Similarly, in SPIE CAPAG S.A. – 2009 (243) ELT 50 (Tri. Mum), the Tribunal has held that an opinion of the court on any issue, not necessary for deciding the dispute, cannot be considered as ratio of that case.

41.2.2 In the M/s Nagarjuna Construction case, the Tribunal has tried to canvass the point that the sale of water to the local bodies is at a loss because water is sold at a rate less than the cost incurred to maintain water supply by the Board. Thus, it cannot be termed as a commercial activity. The Tribunal has tried to equate commercial activity with profit. I have already discussed what is meant by “commercial” and the Board’s view in this regard in the foregoing paras.

41.2.3 I find that the Final order no. A/190/WZB/AHD/2010 dated 30.09.2010/25.01.2011 in appeal no. ST/184/2007 filed by M/s L & T, Ahmedabad passed by Hon’ble CESTAT, WZB, Ahmedabad was not found legal and proper by the department and appeal was preferred against the same before the Hon’ble High Court of the Gujarat, Ahmedabad for deciding the Question of Law. Further both these cases deal with the taxability on the construction of pipeline for supply of water, whereas in the case

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before me the demand is for recovery of service tax on construction of drainage/sewerage pipelines and other related construction for AMC and AUDA. In view of this, the ratio of the cited cases can not be applied in the case before me.

41.2.4 They have also relied on the judgment of Dinesh chandra Agarwal Infracon Pvt Ltd v. CCE, Ahmedabad 2010-TIOL-1413-CESTAT-AHM. I find that again this is case on the construction of pipeline for supply of water by Gujarat Water Supply and Sewerage Board. In view of this, the ratio of the cited case also can not be applied in the case before me.

41.2.5 Their reliance on the judgment of M/s Indian Hume Pipe Co. Ltd. vs. CCE, Trichy [2008 (12) STR.363 (Tri-Chennai)] = 2008-TIOL-1665-CESTAT-MAD is also misplaced as the said case pertains to taxability of an activity under 'erection, commissioning & installation service' and not with the present entry 'Works Contract Service'. Therefore, the said decision is not applicable to the present case as. Also, the said decision has not been accepted by the Department and has been challenged before the Hon'ble High Court at Madras. In view of this, the ratio of the cited case can not be applied in the case before me. 41.2.6 The remaining three judgments are stay orders. The cases have not attained finality. In view of this, the ratio of the cited cases can not be applied in the case before me. 41.3 In view of the above, all the contentions made by ‘N.P.Patel & Co.’ stand negated and I hold that the above services provided by “N.P.Patel & Co.” fall under the taxable category of “Works Contract Service” and are liable to service tax under sub-clause(zzzza) of clause (105) of section 65 of the Finance Act, 1994. Therefore, the gross amount received by “N.P.Patel & Co.” for providing the said service is the taxable value liable to service tax. 41.4 Applying the analogy of the above discussions at “A” above and , I find that an amount of Rs. 50,73,23,889/- received by “N.P.Patel & Co.” during the period from 1.6.2007 to 30.9.2010 from AMC and AUDA, as detailed in para 17.2.2 of the show cause notice, is the taxable value under the category of “Works Contract Services” as defined under Section 65 (105) (zzzza) of the Finance Act, 1994 and service tax of Rs. 2,52,44,969/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

41.5 Therefore, total service tax recoverable under the category of “Works Contract Service” is Rs 2,72,71,371/- (Rs. 20,26,402/- + Rs. 2,52,44,969/-).

DEMAND UNDER “Commercial or Industrial Construction Service”

Commercial or Industrial Construction Service at Jasdan to M/s GSRTC

42. I find that demand of Rs. 3,63,033/- after giving abatement as provided under Notification No. 1/2006-ST dated 1.3.2006 has been raised on the amount collected by “N.P.Patel & Co.” from the persons to whom the shops have been leased out. It is the contention of “N.P.Patel & Co.” that the commercial complex constructed by them cannot be considered in isolation of bus terminus and the said commercial complex is integral part of the bus terminus which is the predominant objective of the whole transaction.

42.1 I find that “N.P.Patel & Co.” has not disputed the fact that they have executed the work of construction of commercial complex consisting of 149 shops as per the Build

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Transfer and Lease (BTL) agreement with M/s Gujarat State Road Transport Corporation (GSRTC).

42.2 I further observe that taxable service as per clause 105(zzq) of Section 65 of the Finance Act, 1994 is a service provided or to be provided to any person, by a commercial concern, in relation to commercial or industrial construction service.

42.3 In view of the above definitions, it is evident that the “Construction of a new building or a civil structure or part thereof” is a taxable service subject to the following conditions:-

(i) such “new building or a civil structure or part thereof” are used, or to be used, primarily for commerce or industry;

(ii) the service provider shall be a commercial concern.

42.4 I find that there is neither a dispute nor it is a contention by “N.P.Patel & Co.” that the said shops were not used for commercial purpose. This satisfies the first condition. There is also no dispute to the fact that the said service provider “N.P.Patel & Co.” who constructed the commercial complex was not a commercial concern. They are definitely a commercial concern and hence the second condition also stands fulfilled.

42.5 I have dealt the issue of what is meant by ‘commerce’ in “A” above and as such, the construction carried out by “N.P.Patel & Co.” for Gujarat State Road Transport Corporation (GSRTC) is clearly identifiable as being used for the purposes of commerce or industry. Therefore, I do not find it necessary to repeat the same. I further find that “N.P.Patel & Co.” has also failed to give any submission as to how the activity of Gujarat State Road Transport Corporation (GSRTC) cannot be treated as an activity of 'commerce' or in what manner or form, the said activity is distinguishable from a commercial activity.

42.6 I further observe that the services provided by “N.P.Patel & Co.”also do not satisfy the criteria of educational, religious, charitable, health, sanitation or philanthropic purposes as given in CBEC Circular No. 80/10/2004-S.T. dated 17 th

September, 2004 which is reproduced as under:-


42.7 It is explicitly clarified in the said circular that when local government bodies get shops constructed for letting them out, the activity would be commercial and builders would be subjected to service tax.

42.8 I observe that Circulars issued by the Board are binding on the departmental officers as has been held by the Hon’ble Supreme Court in the case of Ranadey

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Micronutrients Vs 1996(87)ELT19(SC) and Paper Products Ltd Vs CCE 1996(112)ELT 765(SC).

42.9 I find that “N.P.Patel & Co.” has contended that prior to 1.7.2010 such services and such transactions were not exigible to service tax. They contended that this issue has been decided by the Hon’ble High Court of Gujarat in Tax Appeal No. 382 of 2010 dated 30.6.2011 and 1550 of 2010 dated 22.4.2011 in their favour in the case of Shrinandnagar-IV Co-operative Housing Society Ltd and Sujal Developers.

42.9.1 I find that the facts of the case before me are different from the questions of law decided by the Hon’ble High Court of Gujarat as here, there is neither a Co.operative Housing society neither are there its members. In both the cited cases, the issue was of providing “Construction of Complex Service” by Shrinandnagar-IV Co-operative Housing Society Ltd and Sujal Developers. I further find that the above judgments of the Hon’ble High Court of Gujarat have not been challenged by the department in the Hon’ble Supreme Court of India because of the monetary limit imposed by the Board as per Circular No. 390/Misc/163/2010-JC dated 20.10.2010 and not for any other reasons. I observe that decisions which are not appealed against based on the monetary limit should not be taken as having any precedent value as is clearly mentioned in para 7 and 8 of the Board’s instruction F.No. 390/Misc./163/2010-JC dated 20.10.2010. In view of the above cited Circular there can be no presumption that the Department has acquiesced in the decision on the disputed issues in the case of same assessee or in case of other assessees, if the amount involved exceeds the monetary limits. Therefore, there is no breach of judicial discipline in not applying the ratio of the above cited order of the Hon’ble High Court of Gujarat. I observe that Circulars and instructions issued by the Board are binding on the departmental officers as has been held by the Hon’ble Supreme Court in the case of Ranadey Micronutrients Vs 1996(87)ELT19(SC) and Paper Products Ltd Vs CCE 1996(112)ELT 765(SC).

42.10 I further find that “N.P.Patel & Co.” relying on CBEC Circular No. 108/02/2009-ST dated 29.1.2009 and 151/2/2012-ST dated 10.2.2012 have contended that since the facts in the present case are completely covered within the scope of the said circulars the case may be disposed off accordingly in view of the instructions given in the said circulars. I have carefully gone through the Circular No. 151/2/2012-ST dated 10.2.2012. I find that “N.P.Patel & Co.” has not specifically mentioned the model out of the three models mentioned in the said circular, in which their transactions fall. However, it appears that they intend to take benefit of the clarifications under para 2.6 ‘Build –Operate-Transfer’ (BOT) Projects in the said circular. I have gone through the BTL Agreement dated 20.4.2005 entered between “N.P.Patel & Co.” and GSRTC, para 2, 4, 12 and 19 of the said agreement are reproduced here under:

Para 2: “ Thus it is agreed between the parties that the ownership of the land situated at Jasdan shall remain with the Corporation and the Developer has only right to make construction on the land in question and after construction, the commercial and non commercial complex shall be transferred to GSRTC by Developer. Then after GSRTC shall transfer the commercial complex on lease for 90 years for allotting the same to different uses/companies as per the terms mentioned in the agreement. However, the Developer is entitled to receive the amounts for the area, which is to be allotted by him to the users in consideration of the cost of the commercial / residential premises.

Para 4: “The Developer will be given tentative carpet areas as mentioned below on each floor for the purpose of allotment of the third party i.e. users and recover the revenue as under from users. In case of limitation of use of FSI, the carpet area may be less than anticipated, developer shall pay fix premium of Rs.93,02,001/- irrespective of even higher cost of construction and reduction in carpet area for sale

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also developer shall give total 2281.37 sqm built up area for GSRTC are as per original planning of GSRTC without any extra cost to GSRTC.”

Para 12: “It is also further agreed that the Developer will bear the expenses for entering into this agreement as well as the Lease Agreement between the Corporation and the third party where the Developer will be conforming party and it is also further agreed that the developer will bear all expenses including the legal expenses for entering into this agreement as well as for entering into tripartite agreement in respect of allotment which may be made to the third party i.e. actual users.”

Para 19: “That the developer agrees to enter into an agreement of lease with the allottees as a confirming party. However, the corporation reserves its right to reject any of the allotment made by the Developer. Also, building and the premises constructed by the developer, shall always be of the ownership of the corporation and the corporation reserves its right to reject any of the allotment made by the developer.”

42.10.1 It is quite clear from the language of the above reproduced paras of the agreement that “N.P.Patel & Co.” shall pay a fixed premium of Rs. 93,02,001/- to GSRTC and after completion of the construction of the commercial complex, “N.P.Patel & Co.” has to transfer the complex to GSRTC. Ownership of the said complex as well as the land will remain with GSRTC. The lease agreement for 90 years will be entered between the actual users and the GSRTC while “N.P.Patel & Co.” will be the confirming party. “N.P.Patel & Co.” is entitled to receive amount for the area allotted to actual users in consideration of the cost of the commercial complex.

42.10.2 I find that the facts of the case before me are not covered under para 2.6 ‘Build –Operate-Transfer’ (BOT) Projects in the said circular. It is clarified that consideration for this taxable service may be in the nature of upfront lease amount or annual charges paid by the concessionaire to the Government or its agency. Here, the said amount is a fixed premium of Rs. 93,02,001/- to be paid by “N.P.Patel & Co.” to GSRTC which is not in the nature of upfront lease amount or annual charges. In the next para it is clarified that in this model, though the concessionaire is undertaking construction of a building for furtherance of business or commerce on the land provided by the government or its agency for temporary use, he will not be treated as a service provider since such construction has been undertaken by him on his own account and he remains the owner of the building during the concession period. In the case before me, “N.P.Patel & Co.” is neither the owner of the land nor the owner of the commercial complex constructed by him. The ownership of the land and the commercial complex remains with GSRTC. It is then clarified that at the third level, the concessionaire enters into agreement with several users for commercially exploiting the building developed/constructed by him during the lease period. For example, the user may be paying a rent or premium on the sub-lease for temporary use of immovable property or part thereof, to the concessionaire. Here in the case before me the lease agreement is entered between GSRTC and the third parties i.e. actual users and “N.P.Patel & Co.” is the confirming party. No sub-lease is executed by “N.P.Patel & Co.”. However, “N.P.Patel & Co.” is only entitled to receive the amount for the area which is to be allotted by him to the users in consideration of the cost of the commercial premises.

42.10.3 In view of the above I find that the facts of the case before me are different from the one mentioned in the said circular. Moreover, “N.P.Patel & Co.” is the developer as well as the contractor who has actually carried out the construction of the commercial complex at Jasdan for GSRTC. “N.P.Patel & Co.” is the service provider and GSRTC is the service receiver. Therefore, the amount so received by “N.P.Patel & Co.” from the actual users is the amount received by them towards the “Commercial or

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Industrial Service” provided by them to GSRTC. I find that GSRTC instead of directly paying to “N.P.Patel & Co.” the consideration towards the “Commercial or Industrial Service” provided by them devised a way to make payment in the manner discussed above. There remains no doubt in my mind that the amount of Rs. 91,87,488/- received by “N.P.Patel & Co.” from actual users after allowing permissible abatement is liable to service tax which is recoverable from “N.P.Patel & Co.” under the category of “Commercial or Industrial Construction Service”.

42.11 In view of the above, the services of construction of commercial complex provided by “N.P.Patel & Co.” to Gujarat State Road Transportation Corporation Ltd, (GSRTCL) fall under the taxable category of “Commercial or Industrial Construction Service” and are liable to service tax under sub-clause (zzq) of clause (105) of section 65 of the Finance Act, 1994. Therefore, the gross amount received by “N.P.Patel & Co.” from the actual users for providing the said services to GSRTC after allowable abatement is the taxable value liable to service tax.

42.12 In view of the above discussions, I find that an amount of Rs. 30,31,871/- arrived at after allowing abatement of 67% as provided under Notification No. 15/2004-ST dated 10.9.2004 and 1/2006-ST dated 1.3.2006 on the amount received by “N.P.Patel & Co.” during the period from 18.6.2007 to 30.6.2010 from the actual users / lessees of the Commercial Complex of Gujarat State Road Transportation Corporation Ltd, as detailed in para 17.3 of the show cause notice, is the taxable value under the category of “Commercial or Industrial Construction Service” liable to service tax under sub-clause (zzq) of clause (105) of section 65 of the Finance Act, 1994 and service tax of Rs. 3,63,033/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

DEMANDS UNDER “ Construction of Complex Service”

A-1 Construction of complex service to M/s Gujarat State Police Housing Corporation Ltd. Gandhinagar 43. It has been contended by “N.P.Patel & Co.” that the residential houses constructed by them under various work orders given by Gujarat State Police Housing Corporation Ltd are intended to be occupied by the Police staff for their residential purpose. This amounts to ‘personal use’ and it is clear from the definition of “Residential Complex” as per Section 65(91a) of the Act that complex intended for ‘personal use’ don’t get covered under the definition of the above definition and therefore not exigible to service tax.

43.1 In order to examine whether the activities as aforesaid carried out by “N.P.Patel & Co.” attract service tax under “Construction of Complex Service” or they are out of the purview of definition of “Residential Complex” on the basis of ‘personal use’ and consequently out of the purview of “Construction of Complex Service” as contended by them, I look into the history of ‘construction service’ as per Finance Act, 1994, since its introduction to till date. The same is mentioned as under:

43.1.1 The definition of ‘construction service” was introduced w.e.f. 10.09.2004 vide Finance (No.2) Act, 2004 by inserting sub-clause (30a) in clause 65 of the Finance Act, 1994. The said sub clause (30a) is as under:-

‘(30a) of the Finance Act, 1994 “construction service” means, —(a) construction of new building or civil structure or a part thereof; or(b) repair, alteration or restoration of, or similar services in relation to, building or civil structure,which is —(i) used, or to be used, primarily for; or

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(ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in,commerce or industry, or work intended for commerce or industry, but does not include road, airport, railway, transport terminal, bridge, tunnel, long distance pipeline and dam;’;

43.1.2 The said sub clause was substituted w.e.f. 16.06.2005 by section 88 of the Finance Act, 2005 (18 of 2005) as under.

(30a) “construction of complex” means —

(a) construction of a new residential complex or a part thereof; or

(b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acousticapplications or fittings and other similar services; or

(c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex;

43.1.3 Further w.e.f 16.06.2005 another sub-clause (91)(a) defining “Residential Complex” was introduced in clause 65 of the Finance Act,1994 which read as under.

(91a) “residential complex” means any complex comprising of—(i) a building or buildings, having more than twelve residential units;(ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.

Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this clause, —

(a) “personal use” includes permitting the complex for use as residence by another person on rent or without consideration;

(b) “residential unit” means a single house or a single apartment intended for use as a place of residence;

43.1.4 The said service is made taxable vide clause 65(105) (zzzh) of the Finance Act, 1994 which read as under.

65(105) (zzzh) The taxable service under this clause means the service rendered to any person, by any other person, in relation to construction of complex; 43.1.5 With effect from 01.07.2010 following explanation was introduced below the afore said sub clause of taxable service

Explanation.—For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authority competent to issue such

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certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer.

43.2 I observe that any residential complex to qualify as “residential complex” defined under sub clause 65 (91a) of the Finance Act, 1994 must satisfy the three ingredients of the said definition. I find that in the case before me, there is no contention that the residential complexes constructed by “N.P.Patel & Co.” for Gujarat State Police Housing Corporation Ltd comprise of less than twelve residential units, don’t have a common area and don’t comprise of any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is not approved by an authority under any law for the time being in force. The ingredients of “residential complex” as defined under sub clause 65 (91a) of the Finance Act, 1994 are satisfied in the case before me. I observe that “N.P.Patel & Co.” is wrongly trying to avail the exclusion as the said definition of “residential complex” does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. The said exclusion is meant to exclude only those cases where a person or group of persons buy a plot of land and hire the services of a person for construction of a residential unit. Whereas in the case before me, there is a premises having common area and common facilities, wherein more than 12 residential units have been constructed by “N.P.Patel & Co.”. Therefore, the services provided by “N.P.Patel & Co.” do not get covered under the exclusion provided in the said definition.

43.3 I find it pertinent to reproduce the Board’s clarification No.332/16/2010-TRU dated 24.05.2010 as under:

“Subject: Leviability of service tax on construction of residential houses by National Building Construction Corporation Limited (NBCC) for Central Government officers-regarding

Please refer to your letter No, E.D.(F)/Service Tax/2010 dated 20th May, 2010 seeking clarification on the above subject.

2. The matter has been examined. The activity of building new residential complexes falls within the definition of taxable service, namely, ‘Construction of Complexes'. Normally, the type of complex proposed to be built by NBCC falls within the definition of residential complexes. However, as per definition, the residential complex (for service tax purposes) does not include a complex which is constructed by a person directly engaging any other person for designing/planning/construction and is intended for personal use as residence by such person. The definition also explains that personal use includes promoting use of such property as residence by another person on rent or even without consideration. 3. As per the information provided in your letter and during discussions, the Ministry of Urban Development (GOl) has directly engaged the NBCC for constructing residential complex for central government officers. Further, the residential complexes so built are intended for the personal use of the GOI which includes promoting the use of complex as residence by other persons (i.e. the Government officers or the Ministers). As such the GOl is the service receiver and NBCC is providing services directly to the GOl for its personal use. Therefore, as for the instant arrangement between Ministry of Urban Development and NBCC is concerned, the service tax is not leviable. It may, however, be pointed out that if the NBCC, being a party to a direct contract with GOl, engages a sub-contractor for carrying out the whole or part of the construction, then the sub-contractor would be liable to pay service tax as in that case, NBCC would be the service receiver and the construction would not be for their personal use.

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(emphasis provided)

43.3.1 In view of the above clarification I find that since Gujarat Police Housing Corporation Ltd. have engaged the service of contractor or sub-contractor i.e. by “N.P.Patel & Co.” on behalf of Govt. of Gujarat, to construct residential complex, it will amount to rendering service under the category of “Construction of Complex service classifiable under section 65(30a) of the Finance Act,1994 and is liable to be taxed accordingly at the end of the contractor/sub-contractor by “N.P.Patel & Co.” .

43.4 In view of the above, I find that “N.P.Patel & Co.” had engaged itself in the construction of a residential complex and rendered services in relation to the same making the services taxable under Section 65(105)(zzzh) of the Act. The said construction had been carried out by “N.P.Patel & Co.” with all material required for construction against the payment as stipulated in the workorders. Therefore, the fact of the case on hand is that “N.P.Patel & Co.” had constructed the entire residential complexes including individual residential units and the construction of common facilities of the said housing complexes to get covered under the definition of the “residential Complex” as per sub clause (91a) of section 65 of the Finance Act, 1994. Consequently the services provided by “N.P.Patel & Co.” to Gujarat State Police Housing Corporation Ltd would be covered within the purview of definition of “Construction of Complex.Service” as defined under section 65(30a) of the Finance Act, 1994 which are taxable under section 65(105) (zzzh) of the Finance Act, 1994.

43.5 “N.P.Patel & Co’s.” reliance on the judgment of Khurana Engineering Ltd. 2011(21) STR 115(Tri.Ahmd.)=2010-TIOL-1712-CESTAT-AHM is also misplaced as the issue involved in the said case was whether CPWD and Income Tax department can be treated as separate agencies or otherwise and whether the said case was covered under the exclusion clause and the end use of the residential complex by Income Tax department which was constructed by CPWD would be covered under the definition of “personal use” in the explanation to definition of residential complex. Further, the said decision of M/s Khurana Engineering Ltd vs.CST has yet not reached to its finality as the department has filed Tax appeal in the Honb’le High Court of Gujarat, which is pending decision. I have already discussed above, that “N.P.Patel & Co.” has engaged himself in construction of “residential complex” as defined under section 65(91a) of the Finance Act, 1994 satisfying the ingredients of the definition. Therefore, the ratio of the said case law cannot be applied in the present case. They have also relied on the judgment of Sima Engg. Constructions and Others V/s CCE, Trichy 2010-TIOL-1734-CESTAT-MAD. Since the relied upon case has been remanded to the original authority and it has not attained finality, the ratio of the said case law also cannot be applied in the present case.

43.5.1. I place reliance on the judgment of CESTAT, South Zonal Bench, Bangalore in the case of Rohan Builders Ltd v/s Commissioner of Service Tax, Bangalore reported at 2009(13) STR 56 (Tri. Bang) wherein it was held that the development includes the construction of residential complex and before selling the property, the construction activity has to be undertaken with the help of various contractors. It was also held that M/s Rohan Builders are rendering the services of construction of residential complex and were thus liable to discharge the service tax liability.

43.6 Now, I come to the contention of “N.P.Patel & Co.” that since they were involved in undertaking composite contracts their services were classifiable under the category of “Works Contract services”. Accordingly, their services donot fall under the category of “construction of complex service”.

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43.6.1 As per the Explanation given in Section 65(105)(zzzza) of the Finance Act, 1994, a “works contract” is required to have two features to qualify as “works contract” to be liable to service tax:(i) It should be a contract where transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods;(ii) It should be in the nature of any of the following service contracts:

(a) contract of erection commissioning or installation service(b) contract of commercial or industrial construction service(c) contract of residential complex construction service(d) contract for turnkey projects including engineering,

procurement and construction or commissioning 43.6.2 I find that the said assessee has neither submitted any evidence to show that the contracts are such where transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods nor have they submitted any evidence of payment of tax as sale of goods so that the contracts gets qualified as “works contract” as per (i) above.

43.6.3 Further, their contention that their services are categorized under “works contract” service and not under “construction of complex service” is unfounded. It is mistakenly understood by the said assessee that the services listed in para above are being replaced by one combined service of “works contract”. The difference between the existing taxable services and the taxable service inserted by the Finance Act, 2007, as “works contract service” was that in addition to the activities mentioned in the existing taxable services, there is supply of goods. Thus, “works contract” service covers contracts where both rendering of service and supply of goods are involved. As per section 65A, the sub-clause which provides the most specific description shall be preferred to sub-clauses providing a more general description. As mentioned in para above, Contracts of “Construction of complex” are covered under “works contract”, it is optional on the part of a service provider to pay service tax under “works contract service” under the composition scheme. However, the service provider opting for composition scheme for payment of service tax is required to exercise the option prior to payment of service tax.

43.7 In view of the above, the services of construction of residential complexes provided by “N.P.Patel & Co.” to Gujarat State Police Housing Corporation Ltd, fall under the taxable category of “Construction of Complex Service” and are liable to service tax under sub-clause(zzzh) of clause (105) of section 65 of the Finance Act, 1994. Therefore, the gross amount received by “N.P.Patel & Co.” for providing the said services after allowable abatement is the taxable value liable to service tax.

43.8 In view of the above discussions, I find that an amount of Rs. 85,95,258/- arrived at after allowing abatement of 67% as provided under Notification No. 19/2005-ST dated 18.5.2005 and 1/2006-ST dated 1.3.2006 on the amount received by “N.P.Patel & Co.” during the period from 1.4.2006 to 30.6.2010 from Gujarat State Police Housing Corporation Ltd, as detailed in para 18.4.1 and 18.4.2 of the show cause notice, is the taxable value under the category of “Construction of Complex Service” as defined under Section 65 (105) (zzzh) of the Finance Act, 1994 and service tax of Rs. 9,46,912/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

A-2 Construction of complex service to Navsari Agricultural University for Boy’s Hostel Building

44 I find that the facts in this demand are identical to the demand for providing construction of complex service to Gujarat State Police Housing

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Corporation Ltd, except that “N.P.Patel & Co.” had constructed boys hostel at Navsari Agricultural University resulting in to allegation of providing of construction of complex service. The contention in the written submission is also common for both. Therefore, I do not find it necessary to repeat the discussion already made by me in the above paras at “A-1”.

44.1 As regards to their contention that their services are categorized under “works contract” service and not under “construction of complex service”, I have to say that enough discussion has been done in above paras at “A-1”. Therefore, I do not find it necessary to repeat the discussion already made by me in the above paras at “A-1”.

44.2 In view of the above, the services of construction of residential complexes provided by “N.P.Patel & Co.” to Navsari Agricultural University fall under the taxable category of “Construction of Complex Service” and are liable to service tax under sub-clause(zzzh) of clause (105) of section 65 of the Finance Act, 1994. Therefore, the gross amount received by “N.P.Patel & Co.” for providing the said service after allowable abatement is the taxable value liable to service tax.

44.3 Applying the analogy of the above discussions, I find that an amount of Rs. 19,46,407/- arrived at after allowing abatement of 67% as provided under Notification No. 1/2006-ST dated 1.3.2006 on the amount received by “N.P.Patel & Co.” during the period from 1.4.2009 to 30.9.2010 from Navsari Agricultural University, as detailed in para 18.4.3 and 18.4.4 of the show cause notice, is the taxable value under the category of “Construction of Complex Service” as defined under Section 65 (105) (zzzh) of the Finance Act, 1994 and service tax of Rs. 2,00,480/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

44.4 Therefore, total service tax recoverable under the category of “Works Contract Service” is Rs 11,47,392/- (Rs. 9,46,912/- + Rs. 2,00,480/-).

Site Formation and Clearance, Excavation and Earth Moving and Demolition Service: Period 1.4.2008 to 30.6.2010

45. It has been alleged in the show cause notice that “N.P.Patel & Co.” had carried out the work of “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash bridge to 575 mts down stream on river sabarmati, located in Ahmedabad” for Sabarmati River Front Development Corporation Ltd. It has also been derived from the scrutiny of documents that “N.P.Patel & Co.” had carried out the work of filling of general earth for reclamation of land on the bank of river sabarmati located in Ahmedabad and the land so reclaimed will be used for commercial purpose. Since, the “land reclamation work” is covered under the definition of “Site formation and clearance, excavation and earthmoving and demolition” given under Section 65(97a) of the Finance Act,1994, demand of service tax of Rs. 52,75,110/- has been raised under the said category. I find that the “N.P.Patel & Co.” has interalia contended that the excavation work undertaken by them was not in relation to a building or plant or factory but related to riverbed which is covered by the exclusion part of the definition.

45.1 I find that since, there is no dispute with regard to the work undertaken by “N.P.Patel & Co.”, the limited issue to be decided by me is whether the above said work undertaken by “N.P.Patel & Co.” is covered under the exclusion part of the definition or is covered under the inclusive part of the definition of “Site formation and clearance, excavation and earthmoving and demolition” given under Section 65(97a) of the Finance Act,1994 to be made taxable under Section 65(105)(zzza) of the Finance Act,1994.

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45.2 I look into the definition of “site formation and clearance, excavation, earth moving & demolition” under Section 65 (97a) of the Act which is reproduced as under:“site formation and clearance, excavation and earthmoving and demolition” includes, (i) drilling, boring and core extraction services for construction, geophysical,

geological or similar purposes; or(ii) soil stabilization; or(iii) horizontal drilling for the passage of cables or drain pipes; or(iv) land reclamation work; or(v) contaminated top soil stripping work; or(vi) demolition and wrecking of building, structure or road,

but does not include such services provided in relation to agriculture, irrigation, watershed development and drilling, digging, repairing, renovating or restoring of water sources or water bodies.”

45.3 I also find that taxable service relating to “site formation and clearance, excavation, earth moving & demolition” has been defined under Section 65 (105(zzza)) of the Act which is reproduced as under:

“Taxable service” means any service provided or to be provided to any person, by any other person, in relation to site formation and clearance, excavation, earth moving & demolition site formation and clearance, excavation, earth moving & demolition and such other similar activities.

45.4 I have carefully gone through the exclusion part of the definition under Section 65 (97a) of the Act. I find that it is explicitly clear that the services provided by “N.P.Patel & Co.” are not in relation to agriculture or irrigation so as to be covered under the exclusion part. I further find that the services are also not in relation to watershed development as a watershed can be defined as the drainage basin or catchment area of a particular stream or river. It refers to the area from where the water to a particular drainage system, like a river or stream, comes from. It is not out of place to observe that watershed development projects are aimed to reduce poverty and improve the standard of living of the people by improving the environment they live in. In the case before me neither the services are in relation to watershed nor there exists any such aim of Sabarmati River Front Development Corporation Ltd. to improve the quality and standard of living of the people. Therefore, the services provided by “N.P.Patel & Co.” are not in relation to watershed development so as to be covered under the exclusion part. I further find that in our country various water resources and water bodies have already lost their existence and many others are facing threat of extinction. It is to revitalize such water resources or water bodies that services provided in relation to drilling, digging, repairing, renovating or restoring have been excluded from the said definition. Thus, it can be conclusively said that the work executed by “N.P.Patel & Co.” for Sabarmati River Front Development Corporation Ltd. does not get covered under the exclusion part of the definition under Section 65 (97a) of the Act.

45.5 From the description of work “General Earth filling for the embankment construction behind retaining wall for the length of 575 m on East bank from Subhash bridge to 575 mts down stream on river sabarmati, located in Ahmedabad”, I find that “N.P.Patel & Co.” has carried out the land reclamation work behind the retaining wall which is nothing but an activity of site formation and getting the land leveled and ready for the commercial construction to be carried out by Sabarmati River Front Development Corporation Ltd. I observe that the purpose of the work done by “N.P.Patel & Co.” is primarily preparation of site and is squarely covered under the inclusive part of the definition of “site formation and clearance, excavation, earth moving & demolition” given under Section 65 (97a) of the Act.

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45.6 In view of the above discussion, the contention of “N.P.Patel & Co.” that if at all the services are taxable then the same are classifiable under category of “Dredging services” under Section 65(36a) of the Act is not found tenable.

45.7 The judgment of ITD Cementation India Ltd v. CST, Mumbai is a Stay order and hence the ratio of the said case cannot be applied in the case before me.

45.8 As regards their contention that facts are similar in nature to the one of providing services to Ahmedabad Municipal Corporation, I observe that I have already held above that services of Ahmedabad Municipal Corporation are not ‘non-commercial’ in nature.

45.9 In view of the above discussions, I find that an amount of Rs. 5,12,46,176/- received by “N.P.Patel & Co.” during the period from 1.4.2008 to 30.6.2010 from M/s Sabarmati River Front Development Corporation Ltd, as detailed in para 18.5.1 of the show cause notice, is the taxable value under the category of “site formation and clearance, excavation, earth moving & demolition service” defined under Section 65 (105(zzza)) of the Finance Act, 1994 and service tax of Rs. 52,75,110/- (inclusive of Edu.cess and Higher Edu. Cess) on the said taxable value is recoverable from them under proviso to Section 73(1) of the Finance Act, 1994 along with interest under Section 75 ibid.

46. Now, I look into the contention that in case service tax is to be levied, it should be levied on cum tax value of the services and not on the entire value. I observe that in the case before me it was their belief that no service tax under the above mentioned services was leviable on payments received by them from GETCO, AMC, AUDA, actual users/lessees of the commercial complex of GSRTC, Navsari Agricultural University and SRFDCL, therefore, they could not have included the service tax in the gross amount of the invoices raised to the said service recipients. Thus, “N.P.Patel & Co.” was in no position to collect any service tax from the aforesaid service recipients nor is there any evidence on record to show that the invoices specifically indicate that the gross amount charged included the amount of service tax. I place reliance on the judgment of M/s Shakti Motors reported at 2008(12) STR 710(Tri. Ahmd.) wherein, it has been observed as under:

“I am unable to agree with the advocate that the amount realized has to be treated as cum-tax value in view of the provision of Section 67(2) of Finance Act, 1994, which is reproduced below for ready reference:-

“Section 67(2). Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged”.

In terms of the above provision if the invoice does not specifically say that the gross amount charged includes service tax, it cannot be treated as cum-service tax price. Therefore, in the absence of any evidence to show that invoices had indeed been prepared in this manner, cun-tax value benefit cannot be extended.”

Accordingly, I find that claim made by the said assessee in this regard is not correct and hold that benefit of Cum-Tax value is not allowable to the assessee.

47. I observe that so far as ‘suppression of facts’ is concerned, the phrase implies that withholding of information is suppression of facts. P. Ramanatha Aiyar’s Concise Law Dictionary [1997 Edition Reprint 2003 – page 822] defines the phrase lucidly and accurately as – Where there is an obligation to speak, a failure to speak will constitute the “suppression of fact” but where there is no obligation to speak, silence cannot be termed “suppression”. It is manifestly clear from this that intention to evade

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payment of duty is implied in the suppression of facts. Since “N.P.Patel & Co.” was liable to self assess the liability to pay service tax, they had an obligation to furnish the correct and complete information and the value of services whether taxable or otherwise.

47.1 It is needless to recapitulate that the present show cause notice has arisen out of the investigation conducted by the Ahmedabad Zonal unit of the Directorate General of Central Excise Intellegence. Had they not taken up investigations in the case, the evasion of service tax would have remained unnoticed. Therefore, this is a case of improper assessment amounting to deliberate non-declaration and suppression of vital information with a willful intention to evade payment of service tax. Accordingly, the invoking of extended period under proviso to Section 73(1) of the Act in the case before me is fully justified.

47.2 I find that in the present system of self-assessment, documents like invoices and other transaction details are not supplied to the Department. Moreover, “N.P.Patel & Co.” neither obtained registration till the investigations were initiated by DGCEI, and did not file ST-3 returns nor furnished the required details of receipt of payment from GETCO, AMC, AUDA, actual users/ lessees of the commercial complex of GSRTC, Navsari Agricultural University and SRFDCL in any other way to the Department. Once the details are not submitted to the Department, mis-declaration or suppression is rightly invoked. I, therefore, conclude that the element of suppression with intent to evade payment of service tax is conspicuous by the peculiar facts and circumstances of the case as discussed above and, therefore, the extended period of limitation under Section 73(1) of the Finance Act, 1994 is rightly invokable for recovery of service tax demanded in the impugned show cause notice. In view of the above discussion and findings, the ratio of cases relied upon by “N.P.Patel & Co.” can not be applied in the case before me.

48. I now take up the issue of imposition of penalty under section 76, 77 and 78 of the Act.

48.1 In view of the above discussion, I hold that “N.P.Patel & Co.” have suppressed the facts with intention to evade payment of service tax. Thus penalty under Section 78 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, penalty is imposable on “N.P.Patel & Co.” under Section 78 of the Finance Act, 1994. In view of the above discussion the ratio of the judgments relied upon by “N.P.Patel & Co.” can not be applied in this case.

48.2 As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are mutually exclusive and once penalty under Section 78 is imposed, no penalty under Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f 10.5.2008 in this regard. Therefore, no penalty under Section 76 is imposable for the period from 10.5.2008 onwards. In the case before me, the demand of service tax is for the period 18.4.2006 to 30.9.2010, therefore, I hold that penalty under Section 76 of the said Act is not imposable on “N.P.Patel & Co.” for the period from 10.5.2008 onwards. However, for the period upto 9.5.2008, as “N.P.Patel & Co.” has not paid service tax within the stipulated time period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, I hold them liable to penalty under Section 76 of the Finance Act, 1994.

48.3 As regards imposition of penalty under section 77 of the Finance Act, 1994, I observe that as discussed above “N.P.Patel & Co.” was liable to pay service tax under the category of “Works Contract Services” defined under Section 65 (105)(zzzza) of the Finance Act, 1994, “Commercial or Industrial Construction Service” defined under

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Section 65 (105)(zzq) of the Finance Act, 1994, “Construction of Complex Service” defined under Section 65 (105) (zzzh) of the Finance Act, 1994 and “Site formation and clearance, excavation, earth moving & demolition service” defined under Section 65 (105(zzza)) of the Finance Act, 1994 as provider of service, but “N.P.Patel & Co.” failed to obtain registration as required under section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994. The said assessee had provided the aforesaid services prior to obtaining the service tax registration in the respective category. I have also discussed in the foregoing paras that ‘N.P.Patel & Co.’ has on 19.4.2010 obtained service tax registration under the category of ‘Works Contract Service” after the investigations were initiated by DGCEI and did not obtain registration under the remaining two categories. The said contraventions have made ‘N.P.Patel & Co.’ liable to penalty under section 77(1) (a) of the Finance Act, 1994.

48.4 As regards their contention for invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that ‘N.P.Patel & Co.’ has not produced any reasonable cause for the failure to pay service tax except suggesting that it was their bonafide belief that service tax was not payable by them and it was an interpretational issue. I have already discussed the issue of classification and taxability under the above three categories. I have already discussed that whatever payment of service tax has been made by ‘N.P.Patel & Co.’ it has been made after proceedings were initiated by DGCEI which does not establish the contention of bonafide belief raised by ‘N.P.Patel & Co.’. Therefore, I consider it appropriate to hold ‘N.P.Patel & Co.’ liable to penalty under Section 76, 77 and 78 of the Finance Act, 1994. In view of the above discussion and findings, the ratio of cases relied upon by ‘N.P.Patel & Co.’ can not be applied in the case before me.

49. In view of the foregoing discussion, I pass the following order:

O R D E R

(i) I confirm the demand of service tax of Rs. 2,72,71,371/- (Rupees Two crore seventy two lakh seventy one thousand three hundred seventy one only ), (including Education Cess and Secondary and Higher Education Cess) as detailed in para 17.2 of the show cause notice under the category of “Works Contract Services” under Section 73(2) of the Finance Act, 1994 and order to recover the same from “N.P.Patel & Co.”;

(ii) I confirm the demand of service tax of Rs. 3,63,033/- (Rupees Three lakh sixty three thousand and thirty three only ), (including Education Cess and Secondary and Higher Education Cess) as detailed in para 17.3 of the show cause notice under the category of “Commercial or Industrial Construction Service” under Section 73(2) of the Finance Act, 1994 and order to recover the same from “N.P.Patel & Co.”;

(iii) I confirm the demand of service tax of Rs. 11,47,392/- (Rupees Eleven lakh forty seven thousand three hundred ninety two only ), (including Education Cess and Secondary and Higher Education Cess) as detailed in para 18.4 of the show cause notice under the category of “Construction of Complex Services” under Section 73(2) of the Finance Act, 1994 and order to recover the same from “N.P.Patel & Co.”;

(iv) I confirm the demand of service tax of Rs. 52,75,110/- (Rupees Fifty two lakh

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seventy five thousand one hundred and ten only ), (including Education Cess and Secondary and Higher Education Cess) as detailed in para 18.5 of the show cause notice under the category of “Site formation and clearance, excavation, earth moving & demolition service” under Section 73(2) of the Finance Act, 1994 and order to recover the same from “N.P.Patel & Co.”;

(v) I order to recover interest on the above confirmed demand of Rs. 3,40,56,906/- [Rs. 2,72,71,371/- + Rs. 3,63,033/- + Rs. 11,47,392/- + Rs. 52,75,110/- ] (Rupees Three crore forty lakh fifty six thousand nine hundred and six only ) at the prescribed rate from “N.P.Patel & Co.”; under Section 75 of the Finance Act, 1994;

(vi) I order appropriation of the amount of service tax of Rs. 20,27,734/- (Rupees Twenty lakh twenty seven thousand seven hundred thirty four only ) already paid by “N.P.Patel & Co.”against the above confirmed demand;

(vii) I impose penalty of Rs.200/- (Rupees Two hundred only) per day for the period during which failure to pay the tax continued, or at the rate of 2% of such tax, per month, whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax upon “N.P.Patel & Co.” under Section 76 of the Finance Act, 1994, for the period from 18.4.2006 to 9.5.2008; provided further that the amount of penalty payable in terms of this section shall not exceed the service tax payable by “N.P.Patel & Co.” for the period upto 9.5.2008.

(viii) I impose penalty of Rs. 3,40,56,906/- [Rs. 2,72,71,371/- + Rs. 3,63,033/- + Rs. 11,47,392/- + Rs. 52,75,110/- ] (Rupees Three crore forty lakh fifty six thousand nine hundred and six only ) on “N.P.Patel & Co.” under section 78 of the Finance Act, 1994. In the event of “N.P.Patel & Co.”opting to pay the amount of service tax along with all other dues as confirmed and ordered to be recovered, within thirty days from the date of communication of this order, the amount of penalty liable to be paid by them under Section 78 of the Finance Act, 1994 shall be 25% of the said amount. However, the benefit of reduced penalty shall be available only if the amount of penalty is also paid within the period of thirty days from the communication of this order, otherwise full penalty shall be paid as imposed in the above order;

(ix) I impose penalty under section 77(1)(a) on “N.P.Patel & Co.” who shall be liable to pay a penalty of five thousand rupees or two hundred rupees for every day during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance as required under section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994.

-SD/- 29.3.2012

(A.K.Gupta) Commissioner

Service Tax, Ahmedabad.

F.No.STC/4-150/DGCEI-O&A/10-11 Date: 29/03/2012

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By RPAD.

To,M/s. N.P.Patel & Co.,9, 2nd Floor, Sukhsagar Complex,Opp. Dinesh Chamners, Bapunagar, Ahmedabad

Copy to : 1. The Chief Commissioner, Central Excise, Ahmedabad Zone, Ahmedabad.2. The Additional Director General, DGCEI, Ahmedabad Zonal Unit, 1st Floor,

Preema Chambers, Mithakali Six Roads, Ahmedabad.3. The Assistant Commissioner, Service Tax, Division-II, A’bad.4. The Supdt. Range-VI, Division-II, Service Tax, Ahmedabad.5. Guard file.

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