Writ Petition No. 7890 of 2015 with Central Excise Appeal No. 51 of 2014. Case: M/s. D. P. Jain and Company Infrastructure Pvt. Ltd. Vs The Union of India Through The Secretary and Anr.. High Court of Bombay (India)

Case NumberWrit Petition No. 7890 of 2015 with Central Excise Appeal No. 51 of 2014
CounselFor Appellant: Mr. V. Sridharan, Senior Advocate with Mr. Prakash Shah and Mr. Jas Sanghavi i/b. M/s. PDS Legal and For Respondents: Mr. Pradeep S. Jetly with Mr. Jitendra B. Mishra, Advs.
JudgesS. C. Dharmadhikari & G. S. Kulkarni, JJ.
IssueFinance Act, 1994 - Sections 73(1), 75, 76, 77, 78, 97, 98; Airport Authority of India Act, 1994 - Section 2(b); Central Excise Act, 1944 - Section 14; Code of Criminal Procedure, 1898 - Section 162; Indian Evidence Act - Section 145; Constitution of India - Article 226
Judgement DateJuly 18, 2016
CourtHigh Court of Bombay (India)


S.C. Dharmadhikari, J.

  1. On the above writ petition, we had granted Rule on 22nd February, 2016 and directed that it be heard along with Central Excise Appeal No. 21 of 2015.

  2. Rule on interim relief in the writ petition was made returnable on 21st March, 2016 and after both sides consented, we indicted to them that the writ petition itself will be disposed of finally at the stage of interim relief. Hence, by consent of both sides, we heard the matters and are disposing them of finally by this judgment.

  3. The writ petition is directed against the order-in-original dated 28th November, 2014 passed by respondent no. 2.

  4. The petitioner is a company incorporated under the Indian Companies Act, 1956, having registered office at the address mentioned in the cause title. The first respondent is Union of India and the second respondent is the Commissioner of Central Excise, Customs and Service Tax, Nagpur. The petitioner is holding Service Tax Registration No. AACCD1376KST001 under the categories of "Transportation of Goods by Roads" and "Site Formation and Clearance, Excavation and Earth Moving and Demolition Service"

  5. The petitioner is inter alia engaged in the business of:-

    (i) Construction of roads for NHAI (National Highway Authority of India), CPWD (Central Public Works Department) and NMC (Nagpur Municipal Corporation).

    (ii) Construction of runways for Airport Authority of India Ltd.

    (iii) Strengthening renewal of roads.

    (iv) Improving and surfacing of runways.

    (v) Site preparation, excavation for further construction of roads either on its own behalf or for the clients having contracts for construction of roads.

  6. The present dispute pertains to (i) repair and maintenance of roads; (ii) repair and maintenance of airport runways; (iii) site formation activity undertaken at roads. The dispute in the present case pertains to period from 2005-06 to 2009-10.

  7. In the month of July, 2010, investigations were conducted by the officers of Service Tax Cell of Central Excise Headquarters, Nagpur, in connection with the alleged non-payment of service tax on the services rendered by the petitioners.

  8. Following correspondences were exchanged between the department and the petitioners:-

    (i) The Superintendent, Service Tax, Headquarters, Nagpur, by his letter dated 9th July, 2010 called upon the petitioner to submit the details of work done and the receipts for the same, during the period 2004-05 to 2009- 12.

    (ii) The petitioner, vide letter dated 19th August, 2010, filed the documents as directed by the Superintendent in the aforesaid letter.

  9. Based on the scrutiny of the records of the services rendered during the financial years 2005-06 to 2009-10, a show cause notice dated 14th October, 2010 was issued to the petitioner, calling upon it to show cause as to why service rendered by it should not be classified under the categories of (a) Management, Maintenance or Repair; (b) Commercial and Industrial Construction Service and (c) site formation and excavation clearance service.

  10. Further, the petitioner had to show cause as to why service tax amounting to Rs.10,25,72,125/- should not be demanded from it under the provisions of section 73(1) of the Finance Act, 1994. Interest under section 75 was proposed to be recovered and penalties under sections 76, 77 and 78 of the said Act were proposed to be imposed on the petitioner.

  11. The petitioner filed an elaborate reply dated 1st August, 2011 to the show cause notice inter alia raising the following contentions:-

    (i) The activities of repair, alteration, renovation or restoration or similar services were covered by the definition of pre-existing category "commercial or industrial construction service" as defined in clause (25b) of section 65 of the Act and such services when rendered in respect of roads and airports were excluded from the levy of service tax and therefore, the same could not be levied under the category of "management, maintenance and repair" service.

    (ii) Amongst the various activities covered by the show cause notice were services of excavation and earth work carried out in respect of roads, which were totally exempt from service tax by Notification No. 17 of 2005-Service Tax, dated 7th June, 2005.

    (iii) Service tax was demanded on the gross receipts without allowing the cum-tax benefit in terms of section 67(2) of the Act.

    (iv) The Board's circular was prospective in effect and based on such circular, demand of service tax could not be raised for the past period.

    (v) The Board's circular dated 24th February, 2009 being an oppressive circular, had only prospective effect.

    (vi) The extended period of limitation under proviso to section 73(1) of the Act could not be invoked because the Department itself was in doubt about the taxability of the various activities in relation to road as was apparent from the Board's circular which was issued on a representation made by the Nasik Commissionerate and because the details of receipts made in respect of the services provided were reflected in the balance sheet of the petitioner's company which was a public document.

    (vii) Penalties under sections 76 and 78 of the Act could not be simultaneously imposed for the period in dispute.

  12. However, without appreciating the submissions made by the petitioners, respondent no. 2 passed the order-in-original dated 28th October, 2011 confirming the demand of service tax of Rs.10,25,72,125/- along with interest under section 75 of the Act. The respondent has also imposed penalties of Rs.200/- per day or 2% per month of service tax amount whichever is higher under section 76, of Rs.5,000/- under section 77 and of Rs.10,25,72,125/- under section 78 of the Act.

  13. While denying the benefit of exemption under Notification No. 17/2005-Service Tax on the services, excavation and earth work, respondent no. 2 observed that the exemption was applicable only to site formation performed during the course of construction of road and not to the service rendered at a very far of place for quarrying metal, etc. He further observes that the exemption is applicable only if the activity was undertaken in the course of construction of road and not for maintenance of road.

  14. On the point of limitation, respondent no. 2 records a finding that since the petitioner was also engaged in construction of roads, its activities of maintenance or repairs of road got camouflaged in the balance sheet and that it was after calling for the records from the petitioner that the Department came to know about the correct nature of the activities carried out.

  15. Being aggrieved with the order-in-original dated 28th October, 2011, the petitioner filed Appeal No. ST/26/2012 (along with Stay Application No. ST/Stay/125/2012) before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) on several grounds.

  16. Meanwhile, Finance Act, 2012 was enacted and, thereby, sections 97 and 98 have been inserted. Section 97 provide for retrospective exemption to activity of management, maintenance or repair of road with effect from 16th June, 2005. Similarly section 98 provides for retrospective exemption to activity of management, maintenance or repair of non-commercial Government building with effect from 16th June, 2005.

  17. Relevant portion of both the sections are reproduced herewith for ready reference:-

    "SECTION 97. Special provision for exemption in certain cases relating to management, etc. of roads. - (1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive)....."

    "SECTION 98. Special provision for exemption in certain cases relating to management, etc., of non-commercial Government buildings. - (1) Notwithstanding anything contained in section 66, no service tax shall be levied or collected in respect of management, maintenance or repair of noncommercial Government buildings, during the period on and from the 16th day of June, 2005 till the date on which section 66B comes into force....."

  18. The aforesaid stay application came up for hearing before the appellate tribunal on 30th July, 2012. The petitioner appeared for hearing and submitted that it is not liable to pay service tax.

  19. However, after hearing both sides, the appellate tribunal, vide Stay Order No. S/1059/12/CSTB/C-II dated 30th July, 2012 directed the petitioners to deposit a sum of Rs.3 crores.

  20. Being aggrieved and dissatisfied by Order No.S/1059/12/CSTB/C-I dated 30th July, 2012 in Appeal No.ST/26/12 passed by the Appellate Tribunal, the petitioner filed an appeal before this court. This court, vide order dated 29th November, 2012 quashed and set aside the stay order and directed the appellate tribunal to hear the appeal on its own merits without any requirement of pre-deposit.

  21. Thereafter, the appellate tribunal heard the appeal on merits and passed Final Order No. A/1264/13/CSTB/C-I dated 29th May, 2013. In this order, the appellate tribunal held that section 97 and section 98 of the finance Act, 1994, which provides retrospective exemption to the services, namely, "repairs and maintenance of roads" and "repairs and maintenance of non-commercial Governmental buildings" were not there in the statute book when respondent no. 2 passed the order as these sections were subsequently introduced.

  22. Accordingly, the appellate tribunal remanded the matter to the original adjudicating authority, namely, respondent no. 2 to grant the exemption provided under both these sections of the Finance Act, 2012. The appellate tribunal noted that maintenance or repair of roads was retrospectively exempted from the levy of service tax from 16th June, 2005 onwards and hence the petitioners are rightly eligible for exemption from service tax on the repair and maintenance of roads undertaken by them during the period from 16th June, 2005 to...

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