AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (2) TMI 665
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....t of the second show cause notice. 2. The three issues which arise for consideration in this appeal are as follows: (a) Whether the Commissioner is correct in holding that the services provided by the respondent in relation to Hydro Electric Projects are nontaxable for the reason that these services were provided to dams, which are exempted? (b) Whether the Commissioner is correct in holding that the respondent has appropriately discharged service tax liability without taking cognizance of the allegations made in the show cause notice with respect to non-inclusion of the material received free of cost in the assessable value and simultaneous availment of abatement? (c) Whether the Commissioner is correct in holding that the respondent is not liable to discharge the service tax liability as a sub-contractor where the service tax has already been paid by the main contractor? 3. We have heard Shri Harshvardhan, learned authorised representative appearing for the Department and Shri Prakash Sinha, learned counsel for the Respondent assisted by Shri Kartik Garg. 4. These three issues shall be taken up separately. A. Services in relation to Hydro Electric Projects. 5. The fin....
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....o in the nature of dam/ tunnel and fall outside the scope of 'works contract service' as well under 'commercial or industrial construction service' by way of the specific exclusion provided for dams under the Act. The SCN has tried to differentiate between a HEP and dam and tunnel. The discussions above would clearly show that Dam and Tunnel are integral part of HEP, and HEP cannot be visualised in isolation from Dam and Tunnels. The logic of SCN would lead to an absurd situation where construction services of dam and tunnel under separate contracts would not attract service tax, while the same activity in the form of an integrated contract of HEP would attract service tax. 54. Therefore, the demand of Service Tax to the extent it relates to hydroelectric projects cannot sustain in respect of all works executed before 1.06.07 under the taxable head of CICS and in respect of work executed after 1.06.07 under the taxable head of work contract services, in as much as the same are outside the purview of service tax in view of discussion above and accordingly merits to be dropped." (emphasis supplied) 6. The Commissioner held that the work undertaken by the appellant wo....
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....ditionality's of the Finance Act are fulfilled. Therefore, interpretation of the Adjudicating Authority that 'Hydroelectric Projects' are covered under the entry 'tunnels or dams' is grossly mistaken. The Adjudicating authority stressed on the issue that DAM constitutes a necessary and very important element of a Hydro Electric Project and the former is prerequisite for latter and that "Hydro Electric power plant was a public utility project thus "Hydro Electric power plant was not liable to tax. The adjudicating authority has failed to appreciate the intent of the law that exemption was available to Dams only, not to "Hydro Electric power plants which are constructed for an underlying commercial interest only. Hydro Electric plant can be compared with thermal power plant. Law has already taxed thermal power plant then there remains no ambiguity that Hydro Electric power plant are taxable or not. Therefore, the Adjudicating authority has grossly erred in holding the construction services rendered to Hydro Electric power plant non taxable on the pretext that the services have been rendered to DAM not to Hydro Electric power plant. The adjudicating authority has fai....
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....c projects as underground passage for conveyance of water. Thus, there is no doubt that the activity of fabrication penstock/ steel liners are essential for the completion of tunnels. 5.15. From these discussions, we find that the impugned activity of the assessee was nothing but "works contract service" in respect of tunnels/ dams. We further find that since the works contract was in respect of tunnels for dams/ power projects, the same would then be excluded from taxability thereunder in view of the exclusion in section 65 (105)(zzzza) of the Finance Act, 1994." (emphasis supplied) 15. The Civil Appeal filed by the Department before the Supreme Court against the aforesaid order of the Tribunal was dismissed on 23.07.2018, both on the ground of delay and on merit and the decision is reported in 2018 (16) GSTL J77(SC). 16. In MCM Services Pvt. Ltd. vs. Commissioner of Service Tax, Delhi [2017 (52) STR 388 (Tri.-Del)], a Division Bench of the Tribunal examined whether the nature of work executed by the appellant therein relating to construction of dam, which would be a part of the hydro electric project, would fall within the exclusion clause of the taxable service of 'works ....
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....the noticee as under: LARJI HYDRO-ELECTRIC PROJECT (126 MW), DISTRICT MANDI (H.P.) Whereas the Himachal Pradesh State Electricity Board invited tenders for "Construction of 2075m long, 10.5m dia modified horse show shaped Highway (NH- 21) Tunnel as extension of existing Highway Tunnel from RD 646.30m including 125m long, 7.25m x 6.5m D-shaped construction Adit of Larji HEP". 2. In the show cause notice issued by the Revenue, it was proposed to charge service tax in respect of the activities carried out in the above two projects under the category of "Commercial and Industrial Construction Services". It was represented by the assessee that in such projects the activities carried out by the appellant are towards construction of dam in the case of Maneri Bhali Hydro-Electric Project and construction of Highway Tunnel in the case of the project for Himachal Pradesh Electricity Board. Accordingly, the adjudicating authority dropped the demand for service tax by taking the view that it is covered under the exclusion clause providing under the "Commercial and Industrial Construction Service". Revenue has filed the appeal against this. 5. First we consider the issues raised in the ....
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.... cost material and the noticee was liable to pay service tax on the materials so received. This fact was alleged in the SCN that the noticee did not provide the detail of free of cost material. During the adjudication proceedings also the adjudication authority has not taken up the issue, it has not been discussed whether the noticee had paid service tax on the free of cost material received from various clients eg. M/s Larsen & Toubro Ltd., M/s P & R Infra Projects Ltd., M/s Simplex Concrete Piles India Ltd., neither it has been mentioned whether the noticee was paying tax at full rate or taking abatement which was not available to him when free of cost material has not been added as alleged in the SCN." 20. The issue as to whether service tax can be levied on the cost of materials supplied free of cost has now been settled by the Supreme Court in Commissioner of Service Tax vs. Bhayana Builders Pvt. Ltd. [2018 (10) GSTL 118 (SC)] It has been held that service tax cannot be levied on the amount of material supplied free of cost. The relevant observations are as follows: " 13. A plain meaning of the expression 'the gross amount charged by the service provider for such servic....