Construction services for electricity transmission infrastructure qualify for service tax exemption under Notification 45/2010 ST

CESTAT Ahmedabad allowed the appeal regarding service tax levy on works contract services. The appellant provided construction services including building, foundation, cable trench, and compound wall to Gujarat Energy Transmission Corporation Ltd for electricity transmission activities. The tribunal held that such services were exempted under Notification No. 45/2010 ST and Notification No. 11/2010-ST as they related to transmission of electricity. The exemption covered not only actual transmission services but all infrastructure supporting electricity transmission objectives. Following precedent from Kedar Construction case, the tribunal ruled the service tax demand unsustainable and set aside the impugned order.

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Issues Involved:
1. Whether works contract services provided to Gujarat Energy Transmission Corporation Ltd (GETCO) in relation to transmission of power are liable to service tax.
2. Whether the Show Cause Notice (SCN) dated 22.04.2013 for the period 2010-11 to 2011-12 is barred by limitation.

Issue-wise Detailed Analysis:

1. Liability of Works Contract Services to Service Tax:
The primary issue is whether the works contract services provided by the appellant to GETCO, specifically for the construction of C R Building, foundation, cable trench, compound wall, etc., are liable to service tax. The appellant argued that these services are directly related to the transmission of electricity and are thus exempt under Notification No. 45/2010-ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010.

The Tribunal found that the services provided by the appellant to GETCO are exclusively for activities related to the transmission of electricity. It was noted that the term "relating to transmission" is broad and includes all infrastructure necessary for the ultimate objective of transmitting electricity. Therefore, the works contract services in question are covered under the exemption provided by the aforementioned notifications.

The Tribunal referred to several judgments to support this interpretation:
- Kedar Constructions: The Tribunal held that all taxable services rendered "in relation to" the transmission and distribution of electricity are exempt from service tax. The expression "relating to" was deemed to have a wide scope.
- J S Kataria, Bhumi Construction: The Tribunal reiterated that services related to the construction of infrastructure for transmission towers fall under the exemption.
- Noida Power Company Ltd.: It was concluded that activities essential for the distribution and transmission of electricity, such as installation of sub-stations and transmission towers, are exempt from service tax.
- U.P. Rajkiya Nirmaan Nigam Ltd.: The Tribunal held that services relating to the transmission and distribution of electricity are exempt from service tax under Notification No. 45/2010-ST.
- MD. Aub Khan: The Tribunal affirmed that services provided to entities engaged in the transmission of electricity are exempt from service tax.

Based on these judgments, the Tribunal concluded that the appellant's services are exempt from service tax under Notification No. 45/2010-ST and Notification No. 11/2010-ST.

2. Barred by Limitation:
The second issue concerns whether the demand for service tax raised in the SCN dated 22.04.2013 for the period 2010-11 to 2011-12 is barred by limitation. The appellant argued that the demand is time-barred as there was no suppression of facts or mala fide intention to evade tax.

The Tribunal noted that the appellant acted as a sub-contractor and there were contradictory clarifications from the government regarding the liability of sub-contractors to pay service tax. Initially, it was clarified that sub-contractors were not liable if the main contractor discharged the tax, but this stance was later reversed. Given the contradictory circulars and the referral of the matter to a larger bench in CST V/s. MELANGE DEVELOPERS, the Tribunal concluded that the extended period of limitation could not apply.

It was further held that due to the lack of suppression of facts or mala fide intention, the demand beyond one year was not sustainable on the grounds of limitation. Consequently, the penalties imposed were also set aside.

Conclusion:
The Tribunal set aside the impugned order, ruling that the works contract services provided by the appellant to GETCO are exempt from service tax under Notification No. 45/2010-ST and Notification No. 11/2010-ST. The issue of the demand being time-barred was also resolved in favor of the appellant, leading to the setting aside of the penalties. The appeal was allowed in these terms.

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