2025 (11) TMI 1340 - AT - Service Tax

Dam power house construction exempt from service tax; refund governed by Section 11B(5)(ec) limitation period

M/s. SNC Power Corporation (P) Limited Versus Commissioner of Service Tax, Bangalore

Appeal was allowed on merits, with CESTAT holding that construction of the power house and appurtenant structures formed part of dam construction and was ... Exemption from service tax - construction activity related to Dam - Refund of the amount already deposited - amount paid as service tax as per the instruction of the Audit party can be considered as a deposit or not - applcability of limitation under Section 11B of the Central Excise Act, 1944 - HELD THAT:- There is no dispute that the appellant had entered into an agreement with Karnataka Power Corporation Ltd. for the work of construction of Almatti Dam Power House and Appurtenant Structures. However, the Commissioner denied the benefit of the exclusion clause on the ground that the power house is not part of the dam - It is found that, the Tribunal in the case of CONTINENTAL CONSTRUCTIONS LTD. Versus COMMR. OF S.T. (ADJ.), NEW DELHI [2018 (2) TMI 1256 - CESTAT NEW DELHI] held that 'From the description of work executed by the assessee in the Maneri Bhali Hydro-Electric Project, we note that it is in connection with construction of barage, intake sedimentation chamber, etc. There is no doubt that such work has been carried out as part of the hydroelectric project and construction of dam therefor. So, we find no infirmity in the view taken by the adjudicating authority that these activities are in connection with the construction of the dam and hence excluded from the purview of Commercial or Industrial Construction.' - thus, there are no reason to sustain the impugned order on merit, hence set aside. Time limitation - HELD THAT:- Reliance placed by the appellant in the case of M/s KVR Construction Vs. Commr. of C.E. (Appeals), Bangalore [2012 (7) TMI 22 - KARNATAKA HIGH COURT] is not relevant to the present set of facts in view of the observations by the Supreme Court in the case of Mafatlal Industries Ltd. Vs, Union of India [1996 (12) TMI 50 - SUPREME COURT]. Moreover, in the present case the service tax has been paid under the respective heads accepting the observations of the audit. Having paid the tax the only remedy for refund would be Section 11B of Central Excise Act, as applicable to service tax. Thus, the Tribunal being bound by the statute cannot allow the refund claim by any other means other than those specified in the Finance Act, 1994, hence any refund of tax has to be necessarily filed under Section 11B of the Central Excise Act, as made applicable to the service tax provisions. Accordingly, we hold that any refund application has to be filed within the time limit provided under the Finance Act, 1994. Appeal is allowed on merit and the original authority is directed to process the refund claim as per Section 11B(5)(ec) of the Central Excise Act, 1944. ISSUES PRESENTED AND CONSIDERED 1. Whether construction activities relating to dams, including powerhouses and appurtenant hydro-mechanical works executed as part of multipurpose dam projects, are excluded from the taxable ambit of 'Commercial or Industrial Construction Services' / 'Works Contract Service'. 2. Whether amounts paid pursuant to an audit instruction and later claimed as refund constitute a mere deposit during investigation (entitling summary refund) or constitute tax requiring refund proceedings under the statutory refund mechanism. 3. Whether limitation and the statutory refund regime (Section 11B of the Central Excise Act as applied to service tax) govern the appellant's refund claim, thereby barring/conditioning relief outside that mechanism. ISSUE-WISE DETAILED ANALYSIS - 1. Scope of exclusion for dams and related works Legal framework: The definition of 'Commercial or Industrial Construction Services' / 'Works Contract Service' contains an express exclusion for services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. The question is whether that exclusion covers civil and hydro-mechanical works forming part of an integrated hydroelectric or multipurpose dam project (including powerhouses and appurtenant structures). Precedent treatment: Multiple Tribunal decisions and a Larger Bench have interpreted the exclusion broadly to include works that are part of dams/tunnels even when executed as components of larger hydroelectric projects; earlier narrower interpretations treating ancillary structures (e.g., powerhouses) as outside the exclusion have been disapproved by subsequent larger benches/tribunal precedents. Administrative circulars attempting a restrictive reading have been considered but not held decisive against textual and purposive interpretation. Interpretation and reasoning: The Court reasons that a dam or tunnel, by common sense and engineering reality, does not exist in isolation and often requires allied civil and hydro-mechanical works (spillways, intake works, coatings, grouting, appurtenant channels, powerhouses integral to the dam's functioning). The exclusionary clause must be given a true and fair construction: if the civil/hydro-mechanical works pertain to or are incorporated into the dam/tunnel system, they partake the character of the dam/tunnel and fall within the statutory exclusion. A restrictive construction that excludes only standalone dams would produce absurd results (tax on integrated HEP contracts but not on identical works executed under separate dam contracts) and is therefore rejected. Ratio vs. Obiter: Ratio - The exclusion for 'dams' in the definition covers civil and hydro-mechanical works that are part and parcel of dam/tunnel construction, even when those works are executed as components of a larger hydroelectric or multipurpose project. Obiter - Observations on hypothetical distinctions between different types of ancillary structures not present on the facts are non-decisive. Conclusion: Works of construction of dam-related structures, including powerhouses and appurtenant hydro-mechanical works that are integral to the dam/tunnel system, are excluded from the taxable service entries and thus not exigible to service tax under those heads for the period in question. ISSUE-WISE DETAILED ANALYSIS - 2. Characterisation of amounts paid pursuant to audit instruction Legal framework: Refund and recovery of service tax are governed by the statutory provisions made applicable by the Finance Act; amounts collected/paid as tax are subject to the statutory refund mechanism. Distinct authorities have recognized situations where amounts paid under protest or pursuant to illegal/ultra vires demands may be treated as deposit and refundable outside tax statute in exceptional circumstances. Precedent treatment: Several appellate and High Court decisions have held that sums collected without lawful authority must be refundable; however, the Supreme Court's exposition in a leading authority requires that refund claims for tax paid must generally proceed under the specific statutory refund provisions (e.g., Section 11B), and that claims based on 'mistake of law' or by reference to decisions in other parties' cases cannot bypass the statutory remedy and limitation. Interpretation and reasoning: The Court distinguishes payments that are held to have been made without authority of law from payments voluntarily made under the tax code while accepting the tax heads/assessments. In the present facts the amounts were paid as service tax under the relevant heads following audit direction; they were not shown to have been collected pursuant to an order declared void or outside statutory authority. Therefore, the amounts constitute tax paid, not mere deposits, and must be treated within the statutory refund regime. Ratio vs. Obiter: Ratio - Amounts paid pursuant to audit direction, accepted as payment of service tax under the relevant provisions and not shown to be collected without authority of law, are to be characterised as tax (not mere deposit) and are refundable only under the statutory refund provisions. Obiter - References to exceptional jurisprudence allowing restitution where collections were without lawful authority, as not applicable on these facts. Conclusion: The amounts paid on audit instruction are tax payments and not mere deposits for investigation; the refund claim must be processed under the statutory refund procedure. ISSUE-WISE DETAILED ANALYSIS - 3. Applicability of limitation and Section 11B refund mechanism Legal framework: Section 11B of the Central Excise Act (as applied to service tax) and allied procedural rules prescribe the exclusive mechanism, conditions and time-limits for refund of duties/service tax. Supreme Court jurisprudence establishes that refunds of tax collected under the Act must be claimed and adjudicated under that statutory framework; claims based on discovery of a mistake of law via decisions in other persons' cases are generally not maintainable outside Section 11B. Precedent treatment: The Court follows precedent that affirms the primacy and exclusivity of the statutory refund mechanism and limits the application of alternate remedies (suit/writ) where the statute provides an exhaustive remedy, particularly in cases not involving a declaration of unconstitutionality or collection without authority of law. Interpretation and reasoning: Given that the tax was paid under the applicable service tax provisions and not shown to be ultra vires or collected without statutory authority, the tribunal is bound to require refund applications to be filed and adjudicated under Section 11B within the prescribed time limits. Reliance on decisions permitting restitution in other factual matrices is not determinative here. The tribunal directs the adjudicating authority to process the refund claim in accordance with Section 11B(5) of the Central Excise Act. Ratio vs. Obiter: Ratio - Refund claims for tax paid under the service tax/central excise scheme must be pursued under Section 11B; limitation prescribed by that regime applies and bars alternative non-statutory claims in the absence of an established lack of statutory authority for collection. Obiter - Remarks on policy and finality of assessments consistent with Supreme Court reasoning. Conclusion: The refund claim is not maintainable outside the statutory refund regime; the adjudicating authority is directed to process the refund under Section 11B within the statutory framework and applicable time limits. FINAL CONCLUSIONS The appeal is allowed on merits: (a) dam-related construction works including integral powerhouses/appurtenant hydro-mechanical works fall within the statutory exclusion and are not exigible to service tax under the challenged heads; and (b) payments made pursuant to audit are to be treated as tax payments subject to refund only under Section 11B, and the adjudicating authority is directed to process the refund claim in accordance with that provision and applicable limitation rules.