2025 (12) TMI 1669 - AT - Service Tax

Works contract for water-supply pipelines under public scheme-tax exemption under Sl.12 Notification 25/2012-ST denied; demand upheld.

The dominant issue was whether works contract services provided to a statutory authority for laying pipelines and allied water-supply infrastructure under ... Levy of service tax - services provided to Noida for laying of pipelines under the Ganga Jal Water Scheme construction of underground reservoirs, ranney wells etc. - period of demand is prior and post to 01.07.2012 - exempt services or not - demand confirmed holding that these services are not exempted as per the N/N. 24/2009-ST dated 21.07.2009, 54/2010-ST dated 21.12.2010 and 31/2010-ST dated 22.06.2010 - Services provided for construction of electric substations and laying of cables - Time limitation - Levy of penalties u/s 77 (1)(b), 77 (1) (c) & 77 (2) for the Finance Act, 1994 - Demand for interest under section 75 of Finance Act, 1994. Levy of service tax - services provided to Noida for laying of pipelines under the Ganga Jal Water Scheme construction of underground reservoirs, ranney wells etc. - period of demand is prior and post to 01.07.2012 - exempt services or not - demand confirmed holding that these services are not exempted as per the N/N. 24/2009-ST dated 21.07.2009, 54/2010-ST dated 21.12.2010 and 31/2010-ST dated 22.06.2010 - HELD THAT:- Impugned order records that Work Contract Services provided to government authorities are exempt from payment of service tax but the said exemption is not applicable on certain specific work contract services. The services provided by the appellant to the Noida are not within the said category. Appellant has also relied upon the decision in the case of M/s Jyoti Buildtech (P) Ltd. Vs CCE & ST, Noida [2017 (3) TMI 1100 - CESTAT ALLAHABAD] to argue that these services are exempted from payment of service tax - there are no merits in the said submission for the reason that the said order has been passed following the decision of M/s Lanco Indian Hume Pipes Company Ltd. [2015 (9) TMI 479 - MADRAS HIGH COURT] for the period prior to 01.06.2007 and the demand has been set aside mainly on the ground of extended period of limitation. The services provided to the statutory authorities or government will not be exempt from payment of service tax, till it can be shown that the services provide are strictly falling within the purview of exemption notification. Appellant has in the present case in respect of the “work contract services” provided by them claimed exemption under various S No. of the exemption Notification No 25/2012-ST. These clause have been dealt by the impugned order and after examination of the specific activities and the clauses of the said exemption Notification have concluded that the exemption under that Sl No. 12 is not admissible. Services provided for construction of electric substations and laying of cables - HELD THAT:- On perusal of the notification, it is evident that the services provided in relation to construction, erection, commissioning and installation of water treatment, sewerage treatment all are exempt from the above notification and the impugned order itself has dropped the demand of Rs 2,09,73,235/- in respect of the services provided by the appellant to NOIDA and HUDA in respect of underground reservoir and rennywell. Time limitation - HELD THAT:- It is fact on record that in respect of certain services provided to GDA appellant had declared their tax liability under VCES and claimed the benefit under that scheme. However even while making declaration under the scheme they did not made a true and complete disclosure of their tax liability. If service tax was payable in respect of services provided to GDA then how can they entertain a bonafide belief that service tax is not payable on the similar services provided to NOIDA. It is settled principle in law that bonafide belief needs to be established and the reason for claiming such belief should be established by evidence - there are no merits in the submissions made in the appeal with regards to invocation of extended period of limitation. Extended period as per Section 73 (1) of the Finance Act, 1994 has rightly been invoked for making this demand. Levy of penalties u/s 77 (1)(b), 77 (1) (c) & 77 (2) for the Finance Act, 1994 - HELD THAT:- The appellant has in fact contravened the various provisions by not maintaining the records in prescribed manner, determining the and depositing the service tax by the due date and by not filing the appropriate returns declaring their correct service tax liability penalty under these provisions are justified and upheld. Penalties under Section 77 are not for the contumacious conduct but for the contravention of the provisions of statute and hence cannot be faulted. Demand for interest under section 75 of Finance Act, 1994 - HELD THAT:- Since appellants have not paid the service tax leviable by the due date the demand for interest under section 75 of Finance Act, 1994 is justified. There are no merits in this appeal - appeal dismissed. Issues: (i) Whether service tax is leviable on works contract/construction services rendered by the appellant to NOIDA/GDA/HUDA/UPPCL (including laying of pipelines, underground reservoirs, running/renney wells, construction of electric sub-station, laying of cables and construction of store) and whether exemption notifications relied upon by the appellant apply; (ii) Whether extended period of limitation under proviso to Section 73(1) is rightly invoked; (iii) Whether amounts/taxes paid by the appellant have been appropriately appropriated against confirmed demand; (iv) Whether interest and penalties under Sections 75, 78 and Sections 77(1)(b), 77(1)(c) and 77(2) are sustainable; (v) Whether a sub-contractor can be held liable when the main contractor has paid tax.Issue (i): Taxability of construction/works contract services provided to NOIDA/GDA/HUDA/UPPCL and applicability of exemption notifications.Analysis: The services comprised works contract/construction activities (pipelines, underground reservoirs, renney wells, sub-station construction, cable laying, store construction) falling within the scope of works contract/Commercial and Industrial Construction Service categories as defined in Section 65(105)(zzzza) and related provisions. Relevant exemption notifications (including Notification No.24/2009, 31/2010, 54/2010 and Sl. No.12 of Notification No.25/2012) were examined against the specific nature and purpose of each project and the identity and commercial nature of recipients (e.g., UPPCL). Precedents distinguishing mandatory/statutory functions from commercial activities and requiring strict construction of exemption notifications were applied. Services not falling strictly within the exempted categories or not shown to be for a non-commercial statutory purpose were held taxable.Conclusion: In favour of Revenue the impugned demands for service tax on the specified construction/works contract services are sustainable; exemption notifications relied upon by the appellant do not apply to the contested items except where the impugned order itself dropped specified amounts.Issue (ii): Invocation of extended limitation period under proviso to Section 73(1) (fraud, suppression, willful mis-statement, collusion or intent to evade).Analysis: Evidence that the appellant operated from premises other than the registered address, failed to disclose material facts, and declared some liabilities under VCES while not fully disclosing others was considered. Authorities establishing that bona fide belief must be supported by clear factual/legal basis were applied. The factual matrix supported invocation of the extended period.Conclusion: In favour of Revenue extended period under proviso to Section 73(1) is rightly invoked and the demand is not time-barred.Issue (iii): Appropriation/credit of taxes deposited by appellant against confirmed demand.Analysis: Record of deposits and the impugned order's appropriation of amounts already deposited were reviewed; minor discrepancies in amounts claimed by appellant require production of challans/evidence to modify demand quantitatively, but appropriation of proven deposits was accepted.Conclusion: Partly in favour of Assessee on quantification only amounts actually deposited and evidenced will be appropriated; subject to verification, confirmed demand reduced accordingly where proved.Issue (iv): Liability for interest under Section 75 and penalties under Sections 78 and 77(1)(b), 77(1)(c) and 77(2).Analysis: Statutory framework mandates interest for short/non-payment of tax; jurisprudence confirms compulsory interest. Penalties for suppression, non-maintenance of records and failure to furnish information are civil/ remedial and sustainably imposed where contraventions and suppression are established; bona fide belief defence requires demonstrable legal basis which was absent.Conclusion: In favour of Revenue interest and penalties as imposed in the impugned order are sustainable.Issue (v): Liability of sub-contractor where main contractor has paid tax and risk of double taxation.Analysis: The statutory scheme and Cenvat/Cenvat Credit mechanism permit tax liability at each provider stage; earlier decisions absolving sub-contractors were re-examined and superseded by authorities holding sub-contractors liable while credit mechanisms prevent true double taxation if conditions for credit are met.Conclusion: In favour of Revenue a sub-contractor is liable to pay service tax even if the main contractor has discharged tax liability; alleged double taxation is addressed by the credit regime and does not nullify sub-contractor liability.Final Conclusion: The cumulative effect is that the appeal succeeds on no substantial ground; demands, interest and penalties confirmed by the adjudicating authority remain largely sustainable subject to minor quantification adjustments where deposits are proved, and accordingly the appeal is dismissed.Ratio Decidendi: Exemption notifications are to be strictly construed; services to government/statutory bodies are taxable unless shown to fall squarely within the precise scope and conditions of an exemption, and sub-contractors remain liable to service tax with the Cenvat/Credit mechanism addressing concerns of double taxation.