Does construction of railway track amount to manufacture?
SERVICE Tax right from its birth had a special treatment. Though administered by the Central Excise officers, certain provisions were special for service tax under Finance Act, 1994 which ultimately had to give way to match with Central Excise Act, 1944. For example, initially for invoking extended period, under Section 73, mere omission or failure to make a return was enough. It was later amended on par with Central Excise by incorporating the ingredients of fraud, collusion etc.
In respect of issuing clarifications also, it appears service tax has a special treatment even now. Whenever any doubt is expressed or an issue is referred to Board for clarification, the views of the Board or the clarification is communicated only to the party seeking clarification, and may be to the field formations. The other tax payers absolutely have no clue on the said clarification.
Recently we came across a clarification issued in 2008 on applicability of service tax on welding of rails. It was replied only to the Commissioner who asked the query that:
Construction of railway track is a construction of civil structure. The activity performed for welding of railway track under construction, is a service as defined in the ‘commercial or industrial construction service'. The said activity does not amount to manufacture as defined under the Central Excise Act, 1944. Therefore, this activity is in the nature of ‘commercial and industrial construction'; However, as railways is specifically excluded from the scope of such service, the activity would not be taxable under the said taxable service.
But, there may be many other Commissionerates where this activity is also undertaken which will have no idea of the clarification issued. Even there may be show cause notices issued demanding service tax. It is time that a uniform approach is maintained in respect of these clarifications and may be a copy of all those secret / sacred letters can be marked to the Industry / Trade associations.
CBEC F.No. 137/185/2007-Cx.4 Dated: February 06, 2008