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Construction Services provided to IIT exempt even though Government does not hold 90 or more equity/control in it

Service Tax - By: - Bimal jain - Dated:- 26-3-2016 - Dear Professional Colleague, We are sharing with you an important judgement of the Hon ble High Court of Patna in the case of Shapoorji Paloonji& Company (P) Ltd. Vs. Commissioner, Customs & Central Excise & Service Tax [ 2016 (3) TMI 832 - PATNA HIGH COURT ] on the following issue: Issue: Whether an authority established under an Act of Parliament/ State Legislature is a Governmental authority, for claiming exemption under the Meg .....

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ces but stop paying Service tax after some time and also claimed refund with respect to earlier payments. Petitioner s contention: Construction/ Works contract of 'educational institution' is exempt under Entry No. 12(c) of the Mega Exemption Notification No. 25/2012-ST dated June 20, 2012 ( the Mega Exemption Notification ), as the Services were provided to IIT, being a 'Governmental authority', which is set up under an Act of Parliament. Revenue s contention: IIT is not a Gover .....

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tablished with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution; W.e.f. January 30, 2014: (s) governmental authority means an authority or a board or any other body; (i) set up by an Act of Parliament or a State Legislature; or (ii) established by Government, with 90% or more participation by way of equity or control, to car .....

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0% or more participation by way of equity or control to carry out any function entrusted to a municipality under article 243W of the Constitution is related to sub-clause (ii) of Clause 2(s) alone, as the sub-clause (i) is followed by ';' and the word 'or'. Therefore, each of the sub-clauses is independent provision; Thus, it means that when an authority is established by Government, then, it should have 90% or more participation by way of equity or control to carry out any funct .....

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n terms of the Mega Exemption Notification as amended. It was further held that since the levy as collection of Service tax paid by the Petitioner or IIT has not been found to be justified, therefore, the Department shall refund the amount of the Service tax deposited either to the Petitioner or IIT, as the case may be, expeditiously. Our Comments: It would not be out of place here to mention that Entry No. 12 of the Mega Exemption Notification was amended vide Notification No. 6/2015-ST dated M .....

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