Tribunal Finds Activities Exempt from Service Tax Under CBEC Circular; Overrules Extended Limitation Period
In a significant judgment, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Eastern Zonal Bench in Kolkata quashed a service tax demand of Rs.93.69 lakh against M/s Precision Trenchless Laying Private Limited. The tribunal found that the company's activities of laying cables under or alongside roads were exempt from service tax as per CBEC Circular No. 123/5/2010-TRU dated May 24, 2010.
The case dates back to a demand issued by the Commissioner of Service Tax-II, Kolkata, for the period from 2008-09 to 2012-13. The Commissioner had confirmed service tax demands based on alleged undervaluation, point of taxation rules, disallowance of abatement, right of way reimbursements, and reverse charge liability. M/s Precision Trenchless, a specialized contractor engaged in laying underground telecom and optical fiber cables, challenged these demands, arguing their activities were not taxable.
The tribunal, comprising Member (Judicial) Shri Ashok Jindal and Member (Technical) Shri K. Anpazhakan, highlighted the CBEC circular which clarifies that laying cables under or alongside roads is not liable to service tax. This exemption applies to the entire period in question. The tribunal also found that the Department's reliance on the extended period of limitation was unsustainable as there was no suppression of information by the appellant.
The tribunal noted that the appellant had been regularly filing returns and paying service tax collected from clients, where applicable. However, since the activity itself was exempt, the collected tax, once deposited, could not be refunded to the appellant.
In its detailed order, the tribunal set aside the demands, interest, and penalties imposed by the Commissioner. It emphasized that procedural lapses could not override substantive exemptions. The judgment brings clarity to service providers engaged in similar activities, reinforcing the non-taxable status of cable laying under specified conditions.
Bottom Line:
Service Tax - Activity of laying cables under or alongside roads is not taxable as clarified by CBEC Circular No. 123/5/2010-TRU, dated 24.05.2010 - Demand of Service Tax on such activity is unsustainable.
Statutory provision(s):
- CBEC Circular No. 123/5/2010-TRU, dated 24.05.2010
- Section 78 of the Finance Act, 1994
- Section 67 of the Finance Act, 1994
- Point of Taxation Rules, 2011
- Notification No. 01/2006-ST
- Section 65B(44) of the Finance Act, 1994
