Fitting of electrical appliances is not covered under works contract

The CESTAT in Ahmedabad has ruled that the general fitting and wiring of electrical appliances does not constitute a 'works contract service'. The tribunal set aside a service tax demand against an appellant who provided electrification services, finding that the revenue department failed to prove the appellant was engaged in the erection, commissioning, or installation of electrical devices. Therefore, the service tax levied under works contract was not sustainable.

The CESTAT, Ahmedabad in Paresh H Thakkar v. Commissioner of Central Excise & ST [Service Tax Appeal No. 11865 of 2015-DB dated September 12, 2023] set aside the order passed the Adjudicating Authority on the ground that assessee provides works contract services by holding that, the services of general wiring, fitting thereof, are not covered under works contract services.

Facts

Paresh H Thakkar ("the Appellant") provided services of electrification to Jail and Residences of police officers.

The Revenue Department ("the Respondent") conducted investigation and from the copies of works orders, financial accounts and other documents submitted by the Appellant and details of work done as narrated by Appellant, it was alleged that Appellant was engaged in providing works contract services.

Accordingly, the show cause notice was issued demanding service tax under works contract services along with interest and penalty.

Thereafter, the Adjudicating Authority vide and order dated July 20, 2015 ("the Impugned Order") confirmed the service tax demand.

Aggrieved by the Impugned Order the Appellant filed an appeal before the CESTAT, Ahmedabad.

The Appellant contended that they are engaged in laying of wires and therefore the services are not taxable as per the Circular 123/5/2010 dated May 24, 2010 and Circular No. 62/11/2003 dated August 21, 2003.

The Appellant also contended that the SCN was issued on October 22, 2012 and covers period 2007-08 to 2011-12 but the present issue was interpretation in nature, therefore the extended period is wrongly invoked in the present matter.

Issue

Whether fitting electronic device and laying of wires would qualify as works contract service?

Held

The CESTAT, Ahmedabad in Service Tax Appeal No. 11865 of 2015-DB held as under:

• Found that, the case of Respondent is that the electrical installation works undertaken by the Appellant during the Impugned period is to be classified under the Works Contract Service. For that, analysis of classification of services is important.
• Analysed the works contract services, only erection, commissioning or installation of electrical and electronic devices are covered under the definition of works contract.
• Noted that, in order to be classified as works contract service there must be installation of electrical devices or electronics devices whereas the nature of business of Appellant is of electrification and supplying electrical material since the electrification contract are of general wiring and fitting thereof which cannot be classified as work contract service.
• Observed that, in the present matter the Respondent nowhere provided any invoices or any documents by which it can be conclude that the Appellant are engaged in erection, commissioning or installation of electrical and electronic devices.
• Held that, the service tax demand in the present matter not sustainable under works contract services on Appellant’s activity.
• Set aside the Impugned Order.