G Janardhanan vs Calicut

Court
Customs, Excise and Service Tax Appellate Tribunal

ST/21090, 21091/2016



CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 1

Service Tax Appeal No. 21090 of 2016

(Arising out of Order-in-Appeal No. CAL-EXCUS-000-APP 40 & 41-16-
17 dated 28.04.2016 passed by the Commissioner of Central Excise,
Customs & Service Tax (Appeals-II), Cochin.)


Shri. G. Janardhanan,
PWD Contractor,
Puthenthara, Melarcode,
Pulakkad – 678 703.
Appellant(s)

VERSUS
The Commissioner of Central
Excise, Customs and Service
Tax,
Pallakkad II Division, Calicut.
Respondent(s)

With

Service Tax Appeal No. 21091 of 2016

(Arising out of Order-in-Appeal No. CAL-EXCUS-000-APP 40 & 41-16-
17 dated 28.04.2016 passed by the Commissioner of Central Excise,
Customs & Service Tax (Appeals-II), Cochin.)

Shri. G. Janardhanan,
PWD Contractor,
Puthenthara, Melarcode,
Pulakkad – 678 703.
Appellant(s)
VERSUS

The Commissioner of Central
Excise, Customs and Service
Tax,
Pallakkad II Division, Calicut.
Respondent(s)

APPEARANCE:


Mr. Rajesh Kumar T.R, Chartered Accountant for the Appellant
Mr. Vinod Kumar Garhwal, Superintendent (AR) for the Respondent

CORAM:
HON'BLE MR P.A. AUGUSTIAN, MEMBER (JUDICIAL)
HON'BLE MRS R. BHAGYA DEVI, MEMBER (TECHNICAL)
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Final Order No. 20993-20994 /2026

DATE OF HEARING: 08.05.2026
DATE OF DECISION: 03.09.2026

PER : P.A. AUGUSTIAN


The issue in the present appeals is regarding sustainability
of demand of service tax under the category of Management,
Maintenance or Repair service (MMRC) and under the category
of manpower recruitment and supply agency service during the
period from 16.06.2005 to 31.12.2010.

2. Appellant is a License Contractor of PWD and other
Departments of Kerala Government. Alleging that Appellant
failed to pay service tax for the above period and also failed to
take registration under the relevant category of service tax,
proceedings were initiated and in appeal no. ST/21090/2016,
show cause notice was issued on 31.05.2010 for the period from
16.06.2005 to 31.03.2009 demanding service tax of Rs.
2,93,140/- under MMRS and Adjudication Authority as per order
dated 18.11.2011 confirmed the demand and imposed penalties.
Similarly, in the appeal no. ST/21091/2016, another show cause
notice was issued on 14.06.2011 for the period from 01.04.2010
to 31.12.2010 and Adjudication Authority as per the order dated
05.10.2012 confirmed the demand of Rs.46,919/-under MMRS
and Rs.15,175/- under Man Power Supply. Aggrieved by said
orders, appeals were filed before the Commissioner (Appeals).
The Commissioner (Appeals) as per the impugned common
Order-in-Original dated 28.04.2016 dropped the penalties
imposed by the Adjudication authority and confirmed the
demand. Aggrieved by said order, present appeals are filed.

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3. When the appeals came up for hearing, Learned Chartered
Accountant (CA) for the Appellant submits that the appellant
had carried out re-construction/repair of damaged portion of
irrigation canals including improvement, and maintenance of
canal. Since the said works involved supply of property in
goods, appellant paid VAT as applicable under ‘works contract'.
Learned CA further submits that even as per para 11 of the
impugned order, it is stated "The service provider may be
paying sales tax/VAT for the materials he purchased for the
execution of the contract". However, on the very same order,
another finding was given that "It seems that no such transfer
of property has been involved in the repairs or maintenance
works done for an existing dilapidated concrete structure / a
civil structure in dispute". In this regard, learned CA submits
that such finding is contradictory and once it is admitted that
the activities carried out by the appellant involved supply of
goods and if the appellant paid applicable VAT, demand
confirmed by the impugned order under the category of
Management, Maintenance or Repair Service is unsustainable.
Learned CA further draws our attention to the finding where the
classification of services under works contract was denied on the
grounds that -
a. Under the definition given, the
repair/renovation/restoration works mention in clause
(d) must be provided in relation either to clause (b) and
(c);
b. The canal is not for commerce or industry;
c. Hence it is not covered under works contract.
d. Since it is not works contract, it is taxable under
MMRS
4. Learned CA also drew our attention to the certificate issued
under Kerala Value Added Tax Rule, 2005 evidencing payment
of VAT paid by the Appellant and submits that the issue is no
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more res integra as covered by the judgment of Hon'ble
Supreme Court in the case of Commissioner v. Larsen &
Toubro 2015 (39) S.T.R. 913 (S.C.) where it is held that
"This is clear from the very language of Section 65(105) which
defines "taxable service" as "any service provided". All the
services referred to in the said sub-clauses are service contracts
simpliciter without any other element in them,". That being a
case, there cannot be levy of Service Tax on the works involving
transfer of property as a composite works other than under
Works Contract Service. Works contract services was introduced
specifically to tax a works involving transfer of property in
goods. Hence the same cannot be taxed under any other
category. If any category of service specifically excludes certain
type of services, the same cannot be taxed under any other
category. In this regard, Learned CA also placed reliance on the
decision in the matter of Dr. Lal Path Lab Pvt. Ltd. vs
Commissioner of C. Ex., Ludhiana 2006 (004) STR 0527
Tri.-Del which is affirmed by Hon’ble Supreme Court in 2007
(8) STR 337 (P&H.). Learned CA further submits that in the
matter of Lanco Infratech Ltd Vs CC, CE & ST Hyderabad
2015 (38) STR 709 (Tri-LB) also it was held that construction
of canal falls under works contract and hence event the repair /
improvement / AMC contracts wherein both material and labour
involved should also fall under works contract service only.
Further reliance is placed on the following decisions wherein it
was held that maintenance or repair works involving materials
and in composite nature cannot be taxed under MMRS.
a. Agarwal Engineering Works vs C.C., C. Ex. & S.T.,
2019 (24) G.S.T.L. 264 (Tri. - Hyd.)
b. Kailash Chawla vs CCE 25 Centax 337 (Tri.-Del)

5. Learned CA further submits that demand confirmed by
invoking extended period of limitation is also unsustainable. The
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impugned order itself finds that there was no suppression and
intention to evade payment of tax and only on that ground,
appellate authority has set aside the penalty under section 78 of
the Finance Act, 1994. When there was no suppression or
intention to evade payment of tax, demand confirmed by
invoking extended period of limitation is unsustainable. As per
the relevant date (due date for filing ST-3 return) the SCN
should have been issued within 25.04.2010 wherein in the
present case, for demanding service tax under MMR Service, for
the period from 16.06.2005 to 31.03.2009, the SCN is issued on
31.05.2010. Therefore, the entire demand under MMR Service is
barred by limitation.

6. As regarding demand under Manpower Recruitment and
Supply Agency Service for the period from 01.04.2010 to
31.12.2012, learned CA submits that the Appellant had provided
manpower in emergency situation as one time activity. The
value of amount received from the said activity is Rs. 1,7,334/-,
and even if it is held that said activity is taxable, it is well within
the exemption limit since all other values are exempted.

7. Learned Authorized Representative (AR) for the Revenue
reiterated the finding in the impugned order and submits that
even if the appellant were paying VAT as applicable, appellant is
liable to pay service tax on the service provided by them. He
prays that the appeal may be dismissed and the impugned order
may be upheld.

8. Heard both sides and perused the records.

9. We find that as per section 65(105)(zzzza), Works
Contract means,-
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transfer of property in goods involved in the execution of
such contract is leviable to tax as sale of goods, and 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
construction of a new building or a civil structure or a part
thereof, pipeline or conduit, primarily for the purposes of
11 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

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

11. Further We find that similar to appellant’s case, in the
matter of M/s Agarwal Engineering Works, the contracts
clearly indicated that they would have to render services as well
as provide materials related to those services. As far as
materials are concerned, the Indian Railways have deducted an
amount of 4% from their bill towards VAT and credited the same
to the Government of Andhra Pradesh. Considering the issue,
the appeal was allowed insofar as the demand on "Management,
Maintenance & Repair Services".

12. As regarding the demand confirmed by invoking the
extended period of limitation, we find that once the First
Appellate authority has admitted that there is no deliberate
suppression of fact and also considering the certificate issued
under Kerala Value Added Tax Rule, 2005 evidencing payment
of VAT as paid by the Appellant, there is no justification for
invoking extended period of limitation. Thus the demand
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confirmed by adjudication / appellate authority by invoking
extended period of limitation is also unsustainable. Further, as
regarding the demand under the category of Manpower
Recruitment and Supply Agency Service, though it is taxable
activity, since it is below the taxable limit and the demand
against the said category is also unsustainable.

13. Accordingly, impugned orders are set aside and appeals
are allowed with consequential relief, if any, as per law.


(Order pronounced in Open Court on 03.09.2026)



(P. A. AUGUSTIAN)
MEMBER (JUDICIAL)




(R. BHAGYA DEVI)
MEMBER (TECHNICAL)
Raja….
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