ST : Even if leased aircrafts were delivered abroad, leasing services received from abroad are liable to service tax as assessee had used it in travel business for flying from Indian destinations to foreign destinations and vice versa
ST : Where it was mandatory for assessee to undertake maintenance and repairs of aircraft in India i.e., no services were rendered from abroad, assessee could not be made liable to service tax even if it had kept a security deposit towards repair and maintenance of aircraft with lessor
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[2013] 33 taxmann.com 218 (Mumbai - CESTAT)
CESTAT, MUMBAI BENCH
Air India Charters Ltd.
v.
Commissioner (TAR), Service Tax*
P.R. CHANDRASEKHARAN, TECHNICAL MEMBER
AND ANIL CHOUDHARY, JUDICIAL MEMBER
ORDER NO.S/84/2013/CSTB/C-I 
APPLICATION NO. ST/S/1228 OF 2012 
APPEAL NO. ST/373 OF 2012
JANUARY  23, 2013 
I. Section 65(12), read with section 66A, of the Finance Act, 1994 - Banking and other financial services - Stay Order - Assessee procured aircrafts under equipment lease financing for which payment was made to various entities abroad - Department demanded service tax on reverse charge basis on financial leasing under 'Banking and Financial Services' - Assessee argued that aircrafts had been delivered abroad to its branches and, therefore, services were rendered outside India - HELD : Even though aircrafts had been delivered abroad, since Air India is in travel business and aircrafts were used for flying from Indian destinations to foreign destinations and vice versa, prima facie, it was liable to pay service tax as it had paid service charges to foreign lessor - Pre-deposit was ordered accordingly [Paras 5.1 and 5.3] [In favour of revenue]
II. Section 65(64), read with section 66A, of the Finance Act, 1994 - Management, Maintenance or Repair Services - Assessee procured aircrafts under lease financing and kept a deposit with lessor towards maintenance reserve - Department demanded service tax on reverse charge basis on maintenance reserve under "Management, Maintenance and Repairs" - Assessee argued that maintenance reserve kept abroad was only as a security deposit for repairs and maintenance of aircrafts and no service was actually received and all repairs had to be undertaken in India by DGCA approved authority - HELD : Since assessee had to undertake maintenance and repairs services in India by DGCA approved authority on their own, no services were rendered abroad - Prima facie, therefore, no liability could be attached merely because assessee had kept a security deposit towards repair and maintenance of aircraft with lessor [Para 5.1] [In favour of assessee]
Piyush Chhajed for the Appellant. P.N. Das for the Respondent.
ORDER
 
P.R. Chandrasekharan, Technical Member - The appeal and stay application are directed against Order-in-Original No. 30/ST/SB/2011-12 dated 28.2. 2012 passed by the Commissioner (TAR), Service Tax, Mumbai.
2. The appellant M/s Air India Charters Ltd. procured aircrafts for which they got equipment lease financing and for which payment was made by the appellant to various entities abroad, connected with lease finance. They also kept a deposit with the International Finance Corporation, lessor towards maintenance reserve. The department was of the view that the appellant is liable to discharge Service Tax in respect of the above activities undertaken under the category of 'Banking and Financial Services' namely, finance leasing. As regards the maintenance reserve, the department was of the view that they are liable to pay Service Tax under the category of "Management, Maintenance and Repairs". Accordingly, a show-cause notice was issued and Service Tax demand of Rs. 27.92 cores approximately was confirmed along with interest thereon apart from the penalties under Section 76, 77 and 78 of the Finance Act, 1994. Hence, the appellant is before us.
3. The learned Chartered Accountant for the appellant submits that as far as the maintenance reserve kept abroad is concerned, maintenance/repairs of the aircraft is undertaken in India by DGCA approved authority. However, the maintenance reserve kept abroad with the lessor is only as a security deposit for repairs and maintenance of the aircrafts. The activity of maintenance and repair takes place in India and, therefore, the amount kept in reserve is not for the payment of services rendered and hence, the same does not come within the ambit of Management, Maintenance or Repairs services.
3.1 As regards Financial Lease services, he submits that the aircraft has been delivered abroad and they have various branches situated abroad and hence, the services have been rendered abroad and, therefore, the same is not taxable as per the Indian law. Hence, he prays for waiver of pre-deposit of dues adjudged against the appellant at the interim stage.
4. The learned Commissioner (AR), on the other hand, strongly opposed the arguments of the appellant. He submits that since Air India Charters Ltd. has paid for the services rendered, they are the service recipients and, therefore, they are liable to discharge Service Tax liability under Reverse Charge Mechanism under the Section 66A of the Finance Act, 1994.
5. We have carefully considered the rival submissions.
5.1 As far as the demand on Management, Maintenance or Repairs services is concerned, the appellant's arguments have merit. If the appellant has to undertake the maintenance and repairs services in India by the DGCA approved authority on their own, it cannot be said that the services are rendered abroad and they are liable to pay Service Tax merely because they have kept a security deposit towards repair and maintenance of the aircraft with the lessor. As regards the demand of Service Tax on Finance Leasing, even though the aircrafts have been delivered abroad, Air India is in travel business and aircrafts are used for flying from Indian destinations to foreign destinations and vice-versa. This in any way does not affect the taxability of the Service. Inasmuch as they have paid the service charges to the foreign lessor, they are liable to pay Service Tax as a service recipient under Section 66A of the Act, and this liability squarely lies on them. Therefore, prima facie we are not satisfied that the appellant has made out a case for 100% waiver of the dues adjudged.
5.2 The learned Counsel for the appellant made an offer to make a deposit of Rs. 3 crores including the payment of Rs. 1.6 crores already made, at this stage for hearing of the appeal and also pleads financial hardship.
5.3 Considering the offer made by the learned Counsel satisfactory and taking into account the financial condition of the appellant, we direct the appellant to make the balance amount of Rs. 1.5 crores within a period of eight weeks and report compliance on 9.4.2013. On such compliance, pre-deposit of the balance amount of dues adjudged against the appellant namely, balance of Service Tax, interest and penalties shall stand waived and recovery thereof stayed during pendency of the appeal.
VINEET

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Regards,

Pawan Singla
BA (Hon's), LLB
Audit Officer

ST-Constructions of Government or school buildings and dams aren't commercial or industrial construction services

ST : Construction services by way of widening of roads, construction of Government building, school building, dams canals, etc. are not within purview of commercial or industrial construction services
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[2013] 33 taxmann.com 247 (Mumbai - CESTAT)
CESTAT, MUMBAI BENCH
Vinod N. Maniyar
v.
Commissioner of Central Excise, Nagpur*
P.R. CHANDRASEKHARAN, TECHNICAL MEMBER
AND Anil Choudhary, JUDICIAL MEMBER
ORDER NOS. S/135/2013/CSTB/C-I & A/67/2013/CSTB/C-I
APPLICATION NO. ST/STAY/1395 OF 2012
APPEAL NO. ST/424 OF 2012
DECEMBER  20, 2012 
Section 65(25b) of the Finance Act, 1994 - Commercial or Industrial Construction Services - Period from 1-4-2005 to 31-3-2010 - Assessee was engaged in works such as construction of dams, water reservoir, canals, residential and office building, school building, removal of tree roots/plants, widening of roads, raising height of bus stand, excavation and site preparation, etc. - Department sought levy of service tax under Commercial or Industrial Construction Services - HELD : From work orders submitted by assessee, it was clear that assessee had undertaken various construction services such as widening of roads, construction of Government building, school building, dams, canals and so on - Such activities did not come within purview of commercial or industrial construction services - However, matter was remanded back to adjudicating authority to verify bills raised by assessee and all other documentary evidences in support of assessee's claims [Para 5.1] [In favour of assessee]
C.L. Deshpande for the Appellant. K.S. Mishra for the Respondent.
ORDER
 
P.R. Chandrasekharan, Technical Member - The appeal and stay application are directed against the Order- in-Original No: 17/ST/2012/C dated 30/03/2012 passed by the Customs & Commissioner of Central Excise, Nagpur.
2. The appellant is a contractor undertaking various construction services. A show-cause notice dated 14/10/2012 was issued to them demanding service tax of Rs. 1,00,45,036/- on the ground that gross amount of Rs. 8,26,32,553/- has been received from their client for providing services under the category of Construction Services during the period 01/04/2005 to 31/03/2010. The appellant contended that the work which they have undertaken are not commercial or industrial construction but comprises works such as construction of dams, Water reservoir, canals, residential and office building, school building, removal of tree roots/plants, widening of roads, raising height of bus stand, GTA services, excavation and site preparation, etc. and they have produced the work orders relating to these activities. Further, the adjudicating authority noted that the appellant had not submitted proper documentary evidences such as copy of the bills raised for payment against the work rendered by them. Accordingly, he confirmed the service tax demanded along with interest thereon and also imposed penalty from the appellant under Sections 76, 77 and 78 of the Finance Act, 1994. Hence, the appellant is before us.
3. The learned counsel for the appellant submits that from the work orders submitted by them, it can be seen that they hive undertaken construction services but they are not in the nature of "commercial or industrial construction". Therefore, the demand is not sustainable. Further, he has produced certificates from the agencies who have given the work to the appellant. However, these were not produced before the adjudicating authority when the case was heard. He submitted that he is willing to produce all the documentary evidences in support of his claim that the work undertaken by the appellant does not come under the category of "commercial or industrial construction" service as defined under Section 65(25b) of the Finance Act, 1994. Accordingly, he prays for remanding the case back to the adjudicating authority.
4. The learned Additional Commissioner (AR) appearing for the Revenue submits that in view of the non-submission of documentary evidences the adjudicating authority has confirmed the impugned demands and, therefore, the order cannot be faulted.
5. We have carefully considered submissions made by both the sides. As the issue lies in a narrow compass, we are of the view that the appeal itself can be disposed of at this stage. Therefore, after waiving the requirement pre-deposit of the dues adjudged against the appellant, we take up the appeal for consideration and disposal.
5.1 From the work orders, it is clear that the appellant has undertaken various construction services such as widening of roads, construction of government building, school building, dams, canals and so on. Obviously these activities do not come within the purview of commercial or industrial construction services as defined under Section 65(25b) of the Finance Act, 1994. The only question to be decided is whether the payments received by the appellant pertain to the above activities undertaken by the appellant. For this, the bills raised by the appellants for the services rendered have to be verified. Inasmuch as the appellant has undertaken to submit all the documentary evidences in respect of the claims made by them that the payments received by them towards the activities which do not come under the purview of commercial or industrial construction service, in the interest of equity and justice, we remand the case back to the adjudicating authority for reconsideration of the matter afresh. The appellant is directed to produce all the documentary evidences in support of their claims before the adjudicating authority. Thereafter, the adjudicating authority shall readjudicate the matter afresh alter giving a reasonable opportunity to the appellant to make their submissions. The appellant is directed to appear before he adjudicating authority within one month from the date of receipt of this order along with documentary evidences in support of their claim.
6. The appeal is allowed by way of remand. The stay application is also disposed of
Vineet
*In favour of assessee.