Reverse charge on construction-related payments requires proof of taxable services, while exemptions and limitation restrict service tax liability.
Service tax exemptions cover qualifying dam and irrigation works supplied to government, public road works, and repair or renovation of civil structures supplied to governmental authorities. A medical college subcontract is taxable where the applicable exemption has been withdrawn; tax paid by the main contractor does not itself exempt the subcontractor. Reverse charge applies to qualifying goods transport agency and advocate services, not merely to supplier invoices, loading expenses or payments to other professionals. Revenue must establish that labour and subcontract payments are for taxable services; accounting descriptions or assumptions alone do not suffice. Royalty deductions alone do not establish a taxable government service or a grant of natural-resource rights. The extended limitation period is unavailable where disputes involve statutory interpretation, returns are regularly filed, information is drawn from books and no fraud or suppression is established.
Issues: (i) Exemption for dam protection and flood security works; (ii) exemption and subcontractor liability for medical college construction; (iii) exemption for construction and improvement of public roads; (iv) exemption for interior decoration of a governmental authority's office; (v) reverse-charge liability for goods transport and related payments; (vi) reverse-charge liability for legal and other professional payments; (vii) reverse-charge liability for labour and subcontract expenses; (viii) reverse-charge liability on royalty deductions; and (ix) invocation of the extended period of limitation.
Issue (i): Exemption for dam protection and flood security works.
Analysis: Entry 12(d) of Notification No. 25/2012-ST covers specified construction and repair services relating to canals, dams and other irrigation works supplied to government. The records connected the ghat construction with prevention of dam erosion and the flood protection work with the extended irrigation department contract.
Conclusion: Both works qualify for exemption, in favour of the assessee.
Issue (ii): Exemption and subcontractor liability for medical college construction.
Analysis: The relevant exemption under Entry 12(a) had been withdrawn before the contract. A larger bench ruling established that payment of service tax by the main contractor does not itself exempt a subcontractor; earlier conflicting decisions were relevant to limitation.
Conclusion: The subcontract was not exempt and was taxable in principle, against the assessee, subject to the limitation finding.
Issue (iii): Exemption for construction and improvement of public roads.
Analysis: Entry 13(a) of Notification No. 25/2012-ST covers construction or repair of roads for use by the general public. The evidence addressed the public character of the riverfront pathway, neighbourhood and approach roads, and connected the other payments with road construction or improvement.
Conclusion: The road-related works qualify for exemption, in favour of the assessee.
Issue (iv): Exemption for interior decoration of a governmental authority's office.
Analysis: Entry 12A(a) covers specified work, including repair and renovation, on qualifying civil structures supplied to a governmental authority. The recipient was a governmental authority and the interior decoration was treated as repair of a civil structure.
Conclusion: The interior decoration qualifies for exemption, in favour of the assessee.
Issue (v): Reverse-charge liability for goods transport and related payments.
Analysis: Reverse charge applies to qualifying goods transport agency services. Supplier invoice amounts and loading and unloading expenses were distinguished from payments for those services; a payment to a freight carrier was identified as taxable.
Conclusion: The non-transport payments are not liable on that basis; the identified freight-carrier payment is taxable in principle, subject to limitation.
Issue (vi): Reverse-charge liability for legal and other professional payments.
Analysis: Notification No. 30/2012-ST provides for reverse charge on services supplied by an advocate to a business entity. Payments to other professionals and for incidental expenses were distinguished from the identified advocate payment.
Conclusion: The other professional and incidental payments are not liable as advocate services; the advocate payment is taxable in principle, subject to limitation.
Issue (vii): Reverse-charge liability for labour and subcontract expenses.
Analysis: The burden of proof rested on the revenue to establish that the payments were for manpower supply or works contract services. No corresponding contracts were identified, and the demands rested on assumptions drawn from accounting descriptions.
Conclusion: The demands on labour and subcontract expenses cannot be sustained, in favour of the assessee.
Issue (viii): Reverse-charge liability on royalty deductions.
Analysis: Government services were taxable under the applicable negative-list framework and reverse-charge notification. No transaction granting a right to use natural resources was identified, and one deducting authority was neither government nor a local authority.
Conclusion: The demand on royalty deductions cannot be sustained, in favour of the assessee.
Issue (ix): Invocation of the extended period of limitation.
Analysis: The disputes involved interpretation of service tax provisions. Returns had been regularly filed, the information came from the assessee's books, and no fraud or suppression was established.
Conclusion: The extended period is unavailable and the entire demand is time-barred, in favour of the assessee.
Final Conclusion: No service tax demand or related penalty survives for the period, although the medical college subcontract and identified transport and advocate payments were taxable in principle.
Ratio Decidendi: A reverse-charge service tax demand cannot be sustained solely on accounting descriptions or assumptions without proof of the taxable service.