CESTAT- New Delhi : Where assessee entered into an agreement with DMC for covering certain area for providing parking facility for Commonwealth Games-2010, said activity would not fall under category of ‘works contract service’

CESTAT, New Delhi Bench

Punj Lloyd Ltd. Vs. Commissioner of Service Tax, Delhi

Satish Chandra, President And B. Ravichandran, Technical Member

Final Order No. 50946/2018

Appeal No. St/53362/2014

March  14, 2018


B. Ravichandran, Technical Member – The present appeal is against Order-in-Original dated 03.03.2014 of Commissioner of Central Excise, Rohtak. This appeal along with stay application was transferred back from Regional Bench, Chandigarh, in pursuance of the order dated 13.06.2017 of the said Bench. When the matter was taken-up today, both the sides submitted that the stay application filed by the appellant praying for waiver of pre-deposit of adjudicated dues is still pending disposal. The appeal can be taken up only on disposal of such application for waiver. Since the matter is almost 4 years old and upon prima facie examination of the merits of the case, we have decided to waive the pre-deposit and take up the appeal itself for final hearing.

2. The brief facts of the case are that the appellant entered into an agreement with Municipal Corporation of Delhi (MCD) for “Covering of Sunehari Nallah from Lala Lajpat Rai Marg (Behind Lodhi Road Hotel) to Dayal Singh College along Lodhi Road & covering of Kushak Nallah from Jawaharlal Nehru Stadium (South Gate) to IVTH Avenue Road, Lodhi Road, Lodhi Colony, for providing parking facility for Commonwealth Games-2010.”

3. The Revenue entertained a view that the said construction activity will be covered for service tax liability under ‘works contract service’ for the period 2007- 08 to 2011-12. Another issue regarding service tax liability of the appellant is with reference to tax liability on manpower services provided to group company of the appellant. On both these issues, proceedings were initiated against the appellant by issue of SCN dated 18.10.2012. The appellants contested the demand on merit and on limitation. The case was adjudicated and the original authority confirmed a total service tax liability of ₹ 11,46,16,011/- along with penalty of equivalent amount under Section 78 with further penalty under Section 77 of the Finance Act, 1994.

4. The ld Counsel for the appellant submitted that the present dispute arose consequent of an audit of record of the appellant in December, 2010 and January, 2011. The appellants carried-out the above-mentioned construction activity which is a part of infrastructural requirement for the Commonwealth Games, 2010 hosted in New Delhi between 03.10.2010 to 14.10.2010. The main sports events along with opening/closing ceremony took place in JLN Stadium. This called for substantial parking facility to cater to the vehicles used for transporting sports persons and other connected personnel. To develop the adequate parking facilities with approach/link roads, MCD allotted the work to the appellant. The original authority confirmed the service tax liability on this work under ‘Works Contract Service’ mainly based on his assumptions and presumptions without considering the actual facts. The appellants all along maintained that the said facility was created only with reference to Commonwealth Games and there is no commercial usage of the said infrastructure. Even otherwise, when the initial project was clearly earmarked for intended purpose of sports events, the tax liability under WCS cannot be sustained. The WCS covers only civil structures primarily used for the purpose of commerce or industry. In the present case, the facility created by the appellant is not for the purposes of commerce or industry.

5. For the second issue regarding their service tax liability under ‘Manpower Recruitment and Supply Agency Services’, the ld Counsel submitted that they are not a manpower supply service industry. They are engaged in infrastructural construction activities. They have shared some of their employees with a wholly owned subsidiary company. The expenditure for such deputation of employees was reimbursed by the subsidiary company. Relying on the decision of the Tribunal in M/s. Paramount Communication Ltd.-2013-TIOL-37- CESTAT-DELHI and Volkswagen India Pvt. Ltd.-2013-TIOL-1640-CESTAT-MUM, the ld Counsel submitted that such arrangement of sending staff to group company and getting reimbursement of expenditure cannot be taxed as manpower supply services.

6. The ld AR submitted that the parking facilities created by the appellant were apparently used for commercial purpose by the MCD after the Commonwealth Games. Hence, the tax liability will arise. Similarly, for deputing employees to subsidiary company, it appears that there is no employer-employee relationship between the deputed employees and the appellants. As such, the ld AR prayed for dismissal of the appeal.

7. We have heard both the sides and perused appeal record.

8. On the first issue, we note that the appellants have created infrastructure which involve covering of canals, creating link road for providing parking facilities for Commonwealth Games, 2010. We have gone through the scope of the agreement. The civil structure created by the appellant is admittedly used for the said parking facility only. Regarding usage of the said facility, during and after the Commonwealth Games, we note that SDMC vide their letter dated 23.06.2014 clarified that no parking charges were levied during the Commonwealth Games. Thereafter, the said parking facility is being used as road connection between Barapullah Elevated Corridor and the other part of the facility being used for the parking of City Bus Service under the control of GNCTD. We note that in the face of such factual submission, the impugned order erred in making un-supported presumption regarding possible commercial usage, to uphold service tax liability under ‘Works Contract Service’. As already noted, WCS covers only civil structures which are for commerce or industry. Admittedly, the creation of present facility by the MCD using the services of the appellant is for Commonwealth Games. It is clear that the said games were organized and conducted by the Govt. involving participation of large number of countries. Such sport event and the structure created for such sport event cannot be considered as commercial or industrial venture. Though the subsequent use of the facility created should not have any implication on the question of tax liability which should be with reference to status of the facility at the time of provision of service, we note that, even here, the clarification issued by SDMC supports the case of appellant. Accordingly, we find the impugned order is not legally sustainable in upholding the tax liability under WCS.

9. On the Second issue, we note that the appellants have deputed some of their employees to their subsidiary group company. For such deputed employees, they have got consideration on actual basis reimbursed by the said subsidiary unit. The appellants have recovered cost for such deputation on actual basis without any mark up. We note that the appellant is not engaged in manpower recruitment or supply and are not to be considered as manpower supply agency. Even otherwise, we note that the decision cited and relied upon by the appellant on this issue herein above as well as the decision of the Tribunal in Airbus Group India (P.) Ltd. v. CST [Final Order No. 52564 of 2016, dated 26-7-2016], settles the issue in favour of appellant. We find deputing employees to group company cannot be considered as supply of manpower. The appellants categorically asserted that they continued to control the deputed employees and have only got reimbursement of actual cost for such deputation. We find following the ratio of decided cases mentioned above, the service tax liability on appellant on this issue cannot be sustained.

10. In view of the above discussion and analysis, we find that the impugned order is not sustainable. Accordingly, the same is set-aside and appeal allowed.

[Citation : 2018-Taxcaselaw-33-CESTAT-Delhi-GST]

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