2023 (9) TMI 1377 - AT - Service Tax

Tribunal exempts Railways services, sets aside demands, grants abatement benefits, and waives penalties.

Shri Mahendra Kumar Anchalia, Managing Director of M/s MRT Signals Ltd. Versus Commissioner of CGST & CX, Kolkata And Shri MRT Signals Ltd. Versus Commissioner of CGST & CX, Kolkata

Shri Mahendra Kumar Anchalia, Managing Director of M/s MRT Signals Ltd. Versus Commissioner of CGST & CX, Kolkata And Shri MRT Signals Ltd. Versus ... Issues Involved:1. Exemption under Notification No. 25/2012 for Works Contract Services related to Railways.2. Taxability of Repair and Maintenance Services provided to Railways.3. Tax liability under Reverse Charge Mechanism (RCM).4. Imposition of penalties under sections 77 and 78 of the Finance Act, 1994.Summary of Judgment:1. Exemption under Notification No. 25/2012 for Works Contract Services related to Railways:The Appellant contended that their services related to Railways are exempted by Notification No. 25/2012. The department's interpretation restricting the exemption to 'Railways meant for public carriage of passengers or goods' was challenged. The Tribunal observed that the notification does not impose such restrictions and should cover all Railway infrastructures, including private tracks. The Tribunal supported this view with decisions from similar cases, concluding that the exemption is available to all Railway infrastructures. Consequently, the demand of Rs. 3,43,31,013 for Works Contract Service and Rs. 68,80,060 for Erection, Installation, and Commissioning Service were set aside.2. Taxability of Repair and Maintenance Services provided to Railways:The Appellant had paid Rs. 45,51,838 out of the confirmed demand of Rs. 60,21,394 for repair and maintenance services. They argued that the abatement benefits under Rule 2A of Service Tax (Determination of Value) Rules, 2006 were not properly considered. The Tribunal agreed, noting that the service tax should be payable on 60% of the total amount for works contract services related to immovable property. The balance demand of Rs. 14,69,556 was set aside.3. Tax liability under Reverse Charge Mechanism (RCM):The Tribunal found discrepancies in the department's calculations regarding the effective rate of RCM, abatement for Goods Transport Agency Service, and the rate of service tax. The Appellant had already paid Rs. 18,22,472 out of Rs. 18,98,620 confirmed under RCM. The balance tax of Rs. 76,148 was set aside due to incorrect calculations.4. Imposition of penalties under sections 77 and 78 of the Finance Act, 1994:The Tribunal observed no evidence of suppression of facts with the intent to evade tax. Since the Appellant had paid the service tax along with interest, the penalties under sections 77(1)(a) and 78 on the Appellant Company, as well as the penalty on the Director under section 78A, were set aside.Order:(i) The demand of service tax of Rs. 3,43,31,013 for Works Contract Service is set aside.(ii) The demand of service tax of Rs. 68,80,060 for Erection, Installation, and Commissioning Service is set aside.(iii) Out of the demand of Rs. 60,21,394 for Repair and Maintenance Service, Rs. 45,51,838 along with interest is confirmed. The balance demand of Rs. 14,69,556 is set aside.(iv) Out of the demand of Rs. 18,98,620 under RCM, Rs. 76,148 is set aside, and the balance amount is upheld.(v) Penalties imposed under sections 77(1)(a), 78 on the Appellant Company, and the penalty on the Director under section 78A are set aside.The appeals are disposed of on the above terms.