Railway siding construction services exempt from service tax regardless of public or private operation under Finance Act 1994

CESTAT Kolkata ruled on multiple service tax demands against an appellant. The tribunal allowed exemption for railway siding construction services, holding no distinction exists between public and private railways under Finance Act 1994. Service tax demand on limestone extraction royalty was rejected as agreements predated April 2016 when such services became taxable. The appellant was held liable for service tax on works contract services at 50% reverse charge rate totaling Rs 1,46,250 but without penalty. Demands for Swachh Bharat Cess and Krishi Kalyan Cess were rejected due to extended limitation period misuse. Input service credit on STTG certificates was upheld as valid documentation.

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Issues Involved:

1. Demand of Service Tax on construction of Railway Siding.
2. Demand of Service Tax on royalty paid for limestone extraction.
3. Demand of Service Tax on works contract service.
4. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC).
5. Denial of Input Service Credit on ineligible documents.

Summary:

1. Demand of Service Tax on construction of Railway Siding:
The appellant contended that services related to the construction of railway siding are exempt u/s Notification No. 25/2012-ST dated 20 June 2012. The Tribunal observed that the term "railways" is not defined under the Finance Act, 1994, and no distinction between public and private railways is made. The Tribunal relied on previous judgments, including Konkan Railway Corporation Limited Vs. Commissioner of CGST & Central Excise and Shri Mahendra Kumar Anchalia Vs. Commissioner of CGST & CX, Kolkata, to conclude that the demand of Rs. 1,24,61,772/- is not sustainable.

2. Demand of Service Tax on royalty paid for limestone extraction:
The appellant argued that the royalty payments were for agreements executed prior to 01 April 2016, and thus not taxable. The Tribunal agreed, citing that services by way of grant of natural resources by the Government became taxable only from 01 April 2016. The Tribunal referenced decisions like Ms. The Madhya Pradesh State Mining Corporation Limited Vs. Pr. Commissioner, CGST & Central Excise and Principal Commissioner of CGST and Central Excise Vs. SK Traders to hold that the demand of Rs. 13,45,733/- is not sustainable.

3. Demand of Service Tax on works contract service:
The appellant, acting as a sub-contractor, argued that the main contractor paid the service tax on the full value. The Tribunal noted that as per the Board's Circular dated 23.08.2007, a sub-contractor is liable to pay service tax even if the main contractor has paid it. The Tribunal held that the appellant is liable to pay Rs. 1,46,250/- along with interest but no penalty is imposable.

4. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC):
The Tribunal observed that the demand pertains to periods well within the knowledge of the department due to an audit. Thus, invoking the extended period of limitation was not justified. The demand of Rs. 53,803/- was set aside on the ground of limitation.

5. Denial of Input Service Credit on ineligible documents:
The appellant had availed Cenvat Credit based on railway receipts and later submitted STTG certificates as required. The Tribunal found that the STTG certificates were in the prescribed format and contained all necessary particulars. Thus, the denial of credit amounting to Rs. 9,00,380/- was set aside.

Order:
1. The demand of Rs. 1,24,61,772/- for construction of Railway Siding is set aside.
2. The demand of Rs. 13,45,733/- on royalty for limestone extraction is set aside.
3. The appellant is liable to pay Rs. 1,46,250/- along with interest for works contract service, but no penalty is imposed.
4. The demand of Rs. 53,803/- for SBC and KKC is set aside on the ground of limitation.
5. The denial of input tax credit of Rs. 9,00,380/- is set aside.

The appeal filed by the appellant is disposed of on these terms.

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