M/s A I Equipments Private Limited vs Commissioner, Service Tax, Delhi-III

The appellant â€" M/s A1 Equipments Private Limited are engaged in erection of girders used in the construction of roads and bridges with the help

of labour and equipment. They have entered into various contracts with construction companies like M/s Vijay Nirman Company Private Limited, L &

T Construction Limited also IsoLux Corsan etc. The Department opined that the appellants are rendering the service of “supply of tangible goods

services†used in the year 2011-2012 and 2012-2013. A show cause notice dated 20 May, 2015 was issued and the proceedings culminated into

issuance of adjudication order dated 27.05.2016 which is under challenge vide this appeal.

Learned Counsel for the appellant submits that leasing out the tangible goods has been introduced with effect from 01.06.2008 and as per the

provisions, the levy is on supply of tangible goods and in such type of contracts, the thrust is on supply of tangible goods and the consideration largely

depends upon the number of machines and duration of such supply, if any. He also submits that in the instant case, the work executed by the appellant

is essentially erection of girders in the construction of roads which itself is an exempted service. Even the show cause notice acknowledges the fact

that the appellants have undertaken services in respect of construction of the road. He places reliance on Board’s Circular No. 80/10/2004-ST

dated 17.9.2004 and Circular No. B-I/6/2005-TRU dated 27.7.2005 to submit that the definition of construction service specifically excludes

construction of roads, airports, railways, transport terminals, bridges, tunnels etc. He further submits that the work entrusted to the appellant and the

remuneration received by them was clearly fall the erection of girders and not for supply of equipment like cranes etc. He relies upon the following

judgments:

(i) Commissioner of Central Excise Vs. Ballarpur Industries Ltd. â€" 2007 (215) ELT 489 (SC);

(ii) Commissioner, Central Excise Vs. Brindavan Beverages (P) Ltd. â€" 2007 (213) ELT 487 (SC);

(iii) Ruchi Infotech Ltd. Vs. CCE â€" 2015 (37) STR 131 (Tri.-Delhi).

Learned Authorized Representative appearing for the Revenue, on the other hand, submits that the services rendered by the appellant fulfills the

essential criteria of “supply of tangible goodsâ€; the effective control and possession of the cranes always remained with the operator and was not

transferred to their clients. He also reiterates the findings of the adjudicating authority. He relies on the following judgments/Circulars/Notifications

which are as follows:

(i) Circular No. 138/07/2011-ST dated 6.5.2011;

(ii) Education Guide para 7.11.11;

(iii) M/s EIH Ltd. Vs. Commissioner of Central Excise, Delhi-I â€" 2019 (24) GSTL 592 (Tri.-Del.);

(iv) CBEC vide D.O.F. No. 334/1/2008-TRU dated 29.2.2008;

(v) M/s Shoppers Stop Ltd. Vs. CST, Mumbai-II â€" 2013 (32) STR 710 (Tri.-Mumbai).

Heard both sides and perused the records of the case.

On going through the work orders issued by the clients of the appellant, it is seen that the work order issued by M/s Vijay Nirman Company Private

Limited gives the discussion of work as “erection†of 408 Nos. of PSC girder of 39 M. length at 153 KM interchange of Yamuna Expressway

Project, Agra (UP) by providing cranes, manpower, tools and tackles including transportation of the same from casting yard of PCEPL to erection

location at site. The work order issued by M/s L & T Company describes the work as erection services and the payment in both the cases was linked

to the number of girders erected. On going through the work contracts, we find that the work performed by the appellants is essentially erection of

girders. For this purpose, they may have used/mobilized equipment/labour. It is not coming forth from the work orders that the work orders were for

supplies of any cranes or equipments. The payment terms are also in respect of a number of girders erected and not the number of equipment used

and number of hours of their use etc. We are of the considered opinion that in the work order states that the appellants are required to erect the

girders by providing cranes, manpower, tools and tackles, transportation etc., it cannot be said that they have supplied any tangible goods. The tenor of

the contract is certainly for erection of girders. The payment terms also, are not for the lease out or supply of equipment so as to be categorized the

service in the supply of tangible goods. The words “by providing†appearing in the contract should be harmoniously read with the other terms of

the contract. Even on a plain reading of the description of item, it is clear that the contract is for erection of girders only and it is also mentioned that

the requisite equipment, labour, transportation etc. will be managed by the appellant themselves. For this reason, the work undertaken cannot be

considered to be supply of tangible service. It is clear that the Revenue had gone by the word ‘providing cranes’ appearing in the work order

while conveniently leaving out the other items like manpower, transportation etc. We also find that the circulars and the case law relied upon by the

learned Authorized Representative are of no avail to the Revenue as the facts of the case are different. Hence, the ratio cannot be made applicable.

We also find Education Guide of Service Tax Department clarifies that however, a sub-contractor providing services by way of works contract to the

main contractor, providing works contract services, has been exempted from service tax under the mega exemption if the main contractor is engaged

in providing exempt services of work contracts. It is not the case of the Revenue that the clients of appellants have not rendered services in the

construction of roads and bridges. On this count also, the Revenue’s contention that the appellants provided supply of tangible goods services is

not tenable. Department’s reliance on EIH Ltd. Vs. Commissioner of Central Excise, Delhi-I (supra) is also mis-placed as the issue discussed

therein was classification of service under transportation of passenger by air service or supply of tangible goods services. In the instant case, there is

no such dispute of classification of the service. In view of our discussion above, we are of the considered opinion that the impugned order does not

survive on merits and is liable to be set aside.

The appeal is allowed by setting aside the impugned order.

(Pronounced in Court on 07.12.2021)