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2025 (6) TMI 1591 - AT - Service TaxExemption from service tax - contracts awarded under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) for rural electrification involving supply of materials and erection testing commissioning and civil construction services - applicability of N/N. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A) - HELD THAT - In this case it is an undisputed fact that the assessees had been awarded the works under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) by the Energy and Power Department of the Government of Sikkim. These contracts have been awarded to the assessees/appellants for rural electrification in the State of Sikkim under the scheme of the Central Government. The activity of rural electrification is not liable to be taxed in terms of N/N. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A) wherein services provided to government/local authority/governmental authority by way of construction erection or commissioning installation completion fitting out repair maintenance renovation or alteration of civil structures or any other original works meant predominantly for use other than in commerce industry or any other business or profession are exempted. Admittedly the services provided by the said assessees/contractors were meant for use other than in commerce industry or any other business or profession to the State Government under the Central Government scheme of Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The issue is no longer res integra as an identical issue has already been examined by this Tribunal in the case of Shankar Agarwal v. Commissioner of C.Ex. Cus. S.T. Siliguri 2025 (4) TMI 1654 - CESTAT KOLKATA wherein the same view has been expressed by this Tribunal holding that such services provided by an assessee under the RGGVY scheme for rural electrification are exempt from levy of Service Tax in terms of Notification No. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A). Thus no Service Tax is payable by the assessees for the said services. Conclusion - No Service Tax is payable on contracts solely for supply of materials and equipment. Contracts involving erection testing commissioning and civil construction services under the RGGVY scheme are exempt from Service Tax. There are no merit in the appeals filed by the Revenue and hence the same are dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Liability of Service Tax on supply contracts involving only delivery of materials and equipment Relevant legal framework and precedents: It is well established that supply of goods alone does not attract Service Tax. Freight and insurance charges paid to contractors may include Service Tax if applicable, but the pure supply of goods is not taxable under Service Tax law. Court's interpretation and reasoning: The Tribunal noted that the first two contracts for each assessee were solely for supply and delivery of materials and equipment at site for rural electrification works. These contracts required procurement from approved suppliers and manufacturers, and no service component was involved beyond supply. Key evidence and findings: The contracts explicitly described the nature of activities as supply-only, with no erection or commissioning services. The adjudicating authority had rightly dropped the Service Tax demand on these supply contracts. Application of law to facts: Since supply of goods is outside the scope of Service Tax, no tax liability arises on these contracts. Treatment of competing arguments: The Revenue contended that all contracts were related and hence the entire amount should be taxable under erection and commissioning services. However, the Tribunal rejected this aggregation approach for supply contracts. Conclusions: No Service Tax is payable on contracts involving only supply of goods. Issue 2: Applicability of Service Tax on contracts involving erection, testing, commissioning and civil construction services Relevant legal framework and precedents: Notification No. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A) exempts services provided to government/local authority/governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of civil structures or any other original works meant predominantly for use other than in commerce, industry or any other business or profession. Court's interpretation and reasoning: The Tribunal examined that the erection, testing, commissioning and civil construction services were provided under the RGGVY scheme for rural electrification, which is a government scheme aimed at providing electricity to rural areas. The services were rendered to the State Government and were meant predominantly for use other than commerce, industry, or any other business or profession. Key evidence and findings: The contracts explicitly stated the nature of activities involving erection, testing, commissioning and civil construction of control room buildings. The rates of Service Tax applicable were specified in the work orders. The Tribunal relied on a precedent where identical issues were considered, and exemption was held applicable. Application of law to facts: The services fall squarely within the exemption under Notification No. 25/2012-S.T. since they were provided to government authorities for rural electrification, which is not a commercial or industrial activity. Treatment of competing arguments: The Revenue argued for levy of Service Tax on the entire amount received under the contracts, invoking the extended period of limitation. The Tribunal rejected this, emphasizing that the exemption notification applies and that the extended limitation period was not justified. Conclusions: The erection, testing, commissioning and civil construction services provided under RGGVY are exempt from Service Tax. Issue 3: Aggregation of contracts and invocation of extended period of limitation Relevant legal framework and precedents: The Service Tax law requires separate consideration of taxable and non-taxable components. Extended period of limitation can be invoked only under specific circumstances such as suppression of facts or fraud. Court's interpretation and reasoning: The Tribunal found that the contracts for supply and erection were distinct in nature and could not be aggregated for the purpose of tax liability. The invocation of extended limitation period was not justified as there was no evidence of suppression or fraud. Key evidence and findings: The adjudicating authority had dropped demands on supply contracts but confirmed on erection contracts. The Tribunal agreed with this approach and found no merit in the Revenue's contention for aggregation or extended limitation period. Application of law to facts: The law mandates separate treatment of supply contracts and service contracts. Extended limitation requires strong justification which was absent. Treatment of competing arguments: The Revenue's attempt to tax the entire amount and extend limitation was rejected. Conclusions: Aggregation of contracts for taxation and invocation of extended limitation period are not sustainable. 3. SIGNIFICANT HOLDINGS "The activity of rural electrification is not liable to be taxed in terms of Notification No. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A), wherein services provided to government/local authority/governmental authority by way of construction, erection or commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of civil structures or any other original works meant predominantly for use other than in commerce, industry or any other business or profession are exempted." "Admittedly, the services provided by the said assessees/contractors were meant for use other than in 'commerce, industry or any other business or profession', to the State Government, under the Central Government scheme of Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)." "In these circumstances, we find that the services provided by the assessees are not taxable services." "An identical issue has already been examined by this Tribunal ... wherein the same view has been expressed by this Tribunal, holding that such services provided by an assessee under the RGGVY scheme for rural electrification are exempt from levy of Service Tax in terms of Notification No. 25/2012-S.T. dated 20.06.2012 (Entry No. 12A)." Core principles established include:
Final determinations:
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