Works contract services to local authority exempted from service tax under Notification 25/2012 section 65B(31)

CESTAT NEW DELHI allowed the appeal regarding non-payment of service tax on works contract services for April-September 2013. The tribunal held that services provided by appellant to local authority involving construction, erection, and commissioning of pipeline/water supply were exempted under Notification 25/2012 dated 20.06.2012, considering the definition of local authority under section 65B(31) of Finance Act. The Commissioner's order dated 31.3.2015 was set aside as unsustainable.

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Issues:
The issue involves the demand of service tax with interest and penalty confirmed by the Commissioner, Central Excise, Jaipur for services provided by the appellant to Municipal Corporations/ Municipal Councils during the period from April 2013 to September 2013.

Summary:

Issue 1: Service Tax Demand
A show cause notice was issued to the appellant alleging non-payment of service tax for providing taxable works contract service from April 2013 to September 2013. The Commissioner confirmed the demand, citing that the work undertaken by the appellant fell within the definition of "works contract services" under the Finance Act.

Issue 2: Exemption under Notification dated 20.06.2012
The appellant claimed exemption under Notification No. 25/2012 dated 20.06.2012, which exempts services provided to the Government, local authority, or governmental authority for construction, erection, commissioning, installation, etc. of pipelines for water supply, water treatment, or sewerage treatment. The appellant argued that as a local authority includes a Municipality or Municipal Committee, they were entitled to the exemption.

Decision:
The Tribunal found that the services provided by the appellant to the local authority were exempted under the Notification dated 20.06.2012, based on the definition of a local authority under the Finance Act. Despite the appellant not filing a reply to the show cause notice, the Tribunal considered the facts and concluded that the demand of service tax was not valid. Therefore, the impugned order confirming the demand was set aside, and the appeal was allowed.

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