2024 (2) TMI 1308 - AT - Service Tax

Works Contract Services to state corporations exempt under Notification 25/2012-ST, service tax demands set aside

Prasad Babu Kalyanam Versus Commissioner of Central Tax Visakhapatnam - GST

CESTAT Hyderabad allowed the appeal, setting aside service tax demands totaling Rs. 27,98,962 on Works Contract Services. The tribunal held that services ... Eligibility for exemption under Notification No.25/2012-ST - Works Contract Services (WCS) provided to Andhra Pradesh Education Welfare Infrastructure Development Corporation Ltd (APEWIDC), Andhra Pradesh Medical Services Infrastructure Development Corporation Ltd (APMSIDC), Andhra Pradesh State Police Housing Corporation Ltd (APSPHCL) - exemption for construction of IT tower building by way of Works Contract provided to SEZ Authority - HELD THAT:- The three entities/institutions viz., (i) APEWIDC, (ii) APMSIDC & (iii) APSPHCL have been set up by the State Government and are fully controlled by the State Government for furthering the statutory functions of the State Government like providing health, medical and education and housing facilities. It is further the function of the State Government to provide housing for its staff including the Police staff. It is found from the copy of the Andhra Pradesh Reorganisation Act, 2014 published in the Gazette of India Extraordinary Part II dated 01.03.2014, wherein Sec 68(1) of the said Act provides that – the companies and corporations specified in the Ninth Schedule constituted for the existing State of Andhra Pradesh shall, on and from the appointed day, continue to function in those areas in respect of which they were functioning immediately before that day, subject to the provisions of this section - the aforementioned three entities are carrying out the activities as mentioned in Article 243W read with Twelfth Schedule of the Constitution of India and thus, the Appellant is entitled to exemption under Notification No.25/2012-ST with respect to services provided to these three entities, being WCS. Services provided through the main contractor by the Appellant to APEWIDC - HELD THAT:- It is found from the documents produced in the course of Hearing corroborate that the Appellant has rendered WCS being construction of school buildings, which is exempt under Notification No.25/2012-ST, S.No.12(a) & (c) and thus, the Appellant is also entitled to exemption as subcontractor under S.No.29(h) of the said notification. The demand of Rs.16,91,682/- and Rs.3,80,518/- being services provided to governmental authorities set aside - the demand of Rs.6,26,762/- on WCS provided to APIIC, Kakinada (SEZ), it is held that the same is exempt under the provisions of the SEZ Act (Sec 7 read with Sec 51), which has got overriding effect on the provisions of Service Tax Act, and accordingly, this demand is also set aside. The demands as well as penalties imposed are set aside - this appeal is allowed. Issues Involved:1. Entitlement to exemption under Notification No.25/2012-ST for Works Contract Services (WCS) provided to APEWIDC, APMSIDC, and APSPHCL.2. Entitlement to exemption for construction of IT tower building by way of Works Contract provided to SEZ Authority.3. Non-contested demands for construction services provided to APIIC, Visakhapatnam, and Visakhapatnam Urban Development Authority (VUDA).4. Demand for service tax under the head 'Renting of Immovable Property.'5. Demand for service tax on alleged supply of labor work and supply of manpower.6. Imposition of penalties under various sections of the Finance Act.Summary of Judgment:1. Exemption under Notification No.25/2012-ST for WCS to APEWIDC, APMSIDC, and APSPHCL:The Tribunal found that APEWIDC, APMSIDC, and APSPHCL are governmental authorities as they are set up by the State Government, fully controlled by it, and perform functions entrusted to municipalities under Article 243W of the Constitution. The Tribunal held that the Appellant is entitled to exemption under Notification No.25/2012-ST for services provided to these entities.2. Exemption for Construction of IT Tower Building in SEZ:The Tribunal held that the services provided to SEZ Authority are exempt under the SEZ Act, which has an overriding effect on the Service Tax Act. The demand of Rs.6,26,762/- for WCS provided to APIIC, Kakinada (SEZ) was set aside.3. Non-contested Demands:The Tribunal noted that the Appellant had not contested the demands for construction services provided to APIIC, Visakhapatnam, and VUDA, as well as the demand under 'Renting of Immovable Property.' These demands were confirmed and not part of the appeal.4. Demand for Service Tax on Alleged Supply of Labor Work and Supply of Manpower:The Tribunal set aside the demand of Rs.16,91,682/- and Rs.3,80,518/- for services provided to governmental authorities, finding that the Appellant had rendered WCS, which is exempt under Notification No.25/2012-ST.5. Imposition of Penalties:The Tribunal set aside the penalties imposed under Sections 78, 77(2), and other relevant sections, allowing the appeal with consequential benefits.Conclusion:The Tribunal allowed the appeal, setting aside the demands and penalties imposed, and granted consequential benefits in accordance with the law.