TMI Blog2018 (8) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... r the supervision of the Railways. Therefore, they are required to make payment of mandatory departmental chares, cost of OHE work and D&G charges. It is not disputed that all these charges have been paid by the appellant for various approvals and supervisions by the Railways for construction of siding by the appellant. The said execution of such work cannot be done without mandatory approvals and supervisions by the railways. In that circumstances, in terms of CBEC Education guide 2012, TRU Circular dated 20.06.2012, the services in question cannot be termed as Support Services under Section 65B of the Finance Act, 1994. The activity undertaken by the Railways for granting various approvals and supervision for siding constructed by the appellant are of statutory in nature and is sovereign function of the Railways. Therefore, on that account, the appellant is not liable to pay service tax. Also, the granting of approvals and supervision are in relation to the Railways which is exempted from payment of service tax under N/N. 25/2012- ST dated 20.06.2012 at Serial No. 14A - appellant are not liable to pay service tax. Appeal allowed - decided in favor of appellant. - Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices received from the Railways for construction of siding from Sarai Banjara railway station to Thermal Power Plant. Hence, the appellant was liable to pay service tax under the category of Support services under reverse charge mechanism. In these set of facts, the show cause notice was issued to the appellant and on mandatory amount paid by the appellant to Railways for various approvals and supervisions, the demand of service tax was confirmed as mentioned hereinabove in Para-1, along with interest and various penalties under the Finance Act, 1994 were also imposed. Against the said order, the appellant is before us. 3. The ld. Counsel for the appellant submits that the construction of siding was done mandatorily by the railways and for that appellant was required to make certain payments for approvals and supervision. The said activity do not qualify as Business Support Service. It is his contention that the payment made by the appellant for the activity performed by railways do not qualify as consideration towards any support service provided by Railways in as much as the same in relation to mandatory statutory payment and are not substitutable. He also relied on the CBEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enterprise. 5. Heard the parties and considered the submissions. 6. On careful consideration of the submissions made by both sides, it would be relevant to discuss that for what the charges have been paid to the Railways by the appellant and what service has been provided by Railways. 7. To know the details thereof, we have to see various provisions of the Railways Act and the same are reproduced below:- 2. Definition. In this Act, unless the context otherwise requires, - (1) to (30) .... ..... ..... (31) railways means a railway, or any portion of a railway, for the public carriage of passengers or goods, and includes (a) ......... (b) all lines of rails, sidings, or yards, or branches used for the purposes of, or in connection with, a railway; CHAPTER V OPENING OF RAILWAYS 21. Sanction of the Central Government to the opening of railway - No railway shall be opened for the public carriage of passengers until the Central Government has, by order, sanctioned the opening thereof for that purpose. 22. Formalities to be complies with before giving sanction to the opening of a railway, - (1) The Central Government shall, before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Railways. As per Section 21 of the Railways Act, certain sanctions are required for construction of that siding and Section 22 and 23 provide various formalities to be complied with. Therefore, the Railway is required to construct the siding and have to supervise the same and the said properties of railways cannot be interfered by anybody else. In this regard, the Railway issued a policy Circular dated 30.01.2012 and issued Freight Marketing Circular No. 1/2012. The said Circular is incorporated hereunder:- 1. Nodal Agency : In order to provide a Single Window Service to the customers, Board have decided that for all siding matters during pre-construction stage and for signing of the agreement, Chief Traffic, Planning Manager (CTPM) at the Zonal Railway shall be the Nodal Officer. However, throughout the construction stage including activities for approval of plants and sanctioning of Estimates, Chief General Engineer (CGE) shall be the Nodal Officer. Further, as soon as the siding is notified for commissioning, CCM (FM) shall take over as the Nodal Officer. In Railway Board s office, EDCE(G) shall be the Nodal Officer during construction stage. Executive Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay siding, mandatory deposits have to be made by the appellant as per the chart extracted in Para 3 of the above policy Circular. 8. In the case in hand, the appellant themselves have constructed the siding under the supervision of the Railways. Therefore, they are required to make payment of mandatory departmental chares, cost of OHE work and D G charges. It is not disputed that all these charges have been paid by the appellant for various approvals and supervisions by the Railways for construction of siding by the appellant. The said execution of such work cannot be done without mandatory approvals and supervisions by the railways. In that circumstances, in terms of CBEC Education guide 2012, TRU Circular dated 20.06.2012, the services in question cannot be termed as Support Services under Section 65B of the Finance Act, 1994, which provides as under :- thus the services which are provided by the Government in terms of sovereign right to business entity and which are not substituted in any manner by any private entity, are not support services, e.g. grant of mining or licensing rights or audit of government entities established by a special law, which are required to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne by the Railways cannot be done by any other party or the appellant. We further take note of the fact that in the case of Commissioner of Cus. CE, Bhopal vs. State of Madhya Pradesh, the Hon'ble High Court has observed as under :- 7. From the aforesaid, it is clear that service tax is a value added tax and the service provided for which the duty is payable is nothing but an activity undertaken by a person based on his performance and skill and is certain service provided by the service provider to his client. According to the aforesaid principle laid down by the Supreme Court, service tax is imposed every time when service is rendered to a customer or a client by the assessee. If the act of the State Government in appointing a person for supervision and for discharging the statutory function under Section 28A of the MP Excise Act, 1950 is taken note of, it would be seen that the supervisory staff appointed by the State Government or the Excise Department does not provide any service on behalf of the Government to the Liquor Contractor or the person who is storing the liquor in the warehouse or the storage. On the contrary, the supervisor only keeps a watch, on the ..... 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