2009 (12) TMI 437 - AT - Service Tax

Appellate tribunal grants waiver and stays recovery in service tax case for government infrastructure projects.

The appellate tribunal ruled in favor of the appellant, granting a waiver of pre-deposit amounts and staying the recovery until the appeal's final ... Stay – work contract service - The issue involved in this case is regarding the service tax liability on the appellant as regards the services rendered by them to the Govt. of Andhra Pradesh in form of turn key projects executed by them for the construction of dam, canals, distributory system to feed various ayacut, land etc. the Revenue proceeded against the appellant on the ground that such an activity would fall under the category of works contract and will be covered under the definition of 'works contract' more specifically under sub-clause (e) 'turnkey projects including engineering, procurement and construction of commissioning (EPC) projects'. Held that – work executed not for commerce or industry. C.B.E&C. Circular dated 15.09.2009 excluding such welfare activity. Held that- prima facie case made out. Thus, waive the pre deposit. Issues Involved:Service tax liability on services rendered for turnkey projects executed for the construction of dam, canals, distributory system for the Govt. of Andhra Pradesh.Analysis:Issue 1: Service Tax Liability on Turnkey ProjectsThe issue revolved around the service tax liability on the services provided by the appellant for turnkey projects executed for the Govt. of Andhra Pradesh. The Revenue contended that the activities fell under the works contract category, specifically under turnkey projects. The appellant argued that their services should be classified under 'Commercial or Industrial Construction services' and exempted from tax liability as the activities were not commercial. The appellant relied on circulars to support their claim that services provided for non-commercial purposes, such as construction of reservoirs and canals for irrigation, should not be subject to service tax. The Revenue, however, maintained that the appellant's activities directly fell under turnkey projects and should be taxed accordingly. The appellate tribunal analyzed the definitions of works contract services and noted that the appellant's services for the irrigation system were not for commercial or industrial purposes. They referenced a circular that exempted infrastructure activities like dams and buildings from service tax, further supporting the appellant's position. Ultimately, the tribunal found in favor of the appellant, granting a waiver of the pre-deposit amounts and staying the recovery of the same until the appeal's final disposal.This judgment highlights the importance of correctly classifying services for tax purposes, particularly in the context of works contract services and infrastructure projects. The tribunal's detailed analysis of the definitions and relevant circulars demonstrates a thorough consideration of the appellant's arguments and the applicable legal framework.