TMI Blog2020 (11) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... Member to give opinion on the point(s) of difference. - Service Tax Appeal No. 30309 of 2019 - INTERIM ORDER NO.25/2020 - Dated:- 23-10-2020 - HON BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) AND HON BLE MR. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL) Shri V. R. Pavan Kumar, Supdt.,(AR) for the appellant Shri M. V.S. Sridhar, Advocate for the respondent ORDER ANIL CHOUDHARY: The issue in this appeal is whether the respondent have rightly claimed exemption under Sl. No. 12(a)/12A of Notification No. 25/2012-ST dated 20.06.2012 in their ST-3 returns for the period 01.04.2012 to 30.06.2017, in respect of Works Contract Service being erection, commissioning and installation of transmission lines for various Government companies / corporations and also if rightly not paid service tax on the reimbursement of amount towards crop compensation, right of way, from the service recipient, being incidental to the works contract executed. 2. Brief facts are that M/s K. Ramachandra Rao Transmission Projects Pvt. Ltd., (KRRTPL in short) are engaged in providing taxable services under clause (51) read with Clause (44) of Section 65B of the Act, viz. Works contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent have also been receiving certain consideration towards tree / crop compensation, right of way, from their service recipients. The assessee claimed these to be reimbursement of amounts paid to the farmers towards damage caused to the property or crops, during the construction/ erection activities of transmission lines, and not paid any service tax on such consideration. The said tree/ crop compensation / right of way amount, appeared to revenue, to be towards completion of works contract service and in view of the same, such amount is includible in the taxable value for the purpose of service tax levy. 7. Consequently show cause notice O. R. No. 49/2017-18-ST dated 05.01.2018 (F. No.INV/DGCEI/HZU/ST/16/2017-18) (SCN No. 108/2017-18 (ST)] was issued by the Principal Additional Director General, DGGI, Hyderabad Zonal Unit answerable to the Principal Commissioner of Central Tax, Hyderabad GST Commissionerate, Hyderabad proposing- (i) demand of service tax amounting to ₹ 9,77,17,404/- (inclusive of Cesses) on the taxable services rendered during the period from 01.10.2014 to 30.06.2017 under the category of Works Contract Service in terms of proviso to Section 73(1) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair maintenance, renovation, or alteration of (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; ii) The above clause (a) of entry Sl. No. 12 was omitted vide notification No. 6/2015-ST dated 01.03.2015 and vide Notification No. 9/2016-ST dated 01.03.2016, entry vide Sl. No. 12A, which reads as under, was re-inserted in the Notification No. 25/2012-ST (supra w.e.f. 01.03.2016). 12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair maintenance, renovation, or alteration of (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; iii) Further, the taxable services provided to Government, a local authority or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations level the high-voltage power is converted to domestic tolerable power i.e. 11KVA and the same is supplied to consumers by power distribution companies. Transferring high-voltage power to sub-stations through their transmission lines by transmission companies/ corporations is not a function entrusted to the municipalities. Public amenities including street lighting is one of the various functions entrusted to the municipalities under Article 243W of the Constitution. Public amenities are resources, conveniences, facilities or benefits continuously offered to the general public for their use and/ or enjoyment, with or without charge (e.g. restrooms, information displays, public telephones, rain shelters, drinking fountains, etc.). Transmission corporations, which are distinct from Electricity boards, are engaged in transmission of high voltage electricity, which cannot be termed as a public amenity. High voltage transmission facilities on the contrary cannot be offered to general public. Therefore, the analogy drawn by Adjudicating authority that transmission companies/ corporations are electricity boards, and since electricity is a public amenity, they satisfy the test of fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n extending the benefit of exemption Notification No. 25/2012-ST dated 20.06.2012, as amended, to the assessee, apparently by misinterpreting the provision of the exemption of notification. xi) Further, wherever the service consideration is exclusive of service tax in the agreement and M/s KRRTPL have received service tax additionally from their client, they have paid service tax. In the cases where the consideration is inclusive of service tax in the agreements, the assessee did not pay the service tax though they have, apparently collected (as the total value being inclusive of service tax). Shri K. Ramachandra Rao, Managing Director of M/s KRRTPL has confirmed this aspect in the annexure to their letter No. KRRTPPL/ SERVICE TAX/291/2017-18 dated 13.9.2017. For example, they have shown service tax of ₹ 1,56,137/- towards Invoice No. 001 dated 07.04.2014 for work Order No. 2907 in Service Tax Ledger Account in respect of service rendered to M/s Bihar Transmission Company. xii) Further, in all work orders there is a mention regarding payment of service tax. To cite an example, in Work Order No. 2907/BSPTCL dated 05.12.2013 issued by M/s Bihar State Power Transmission Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of crop compensation is entrusted to the executing agency/ appellant either as reimbursement or a lump sum rate to be provided in the contract towards this. (b) Shri K. Ramachandra Rao, Managing Director of M/s KRRTPL, vide his statement, deposed that they have received reimbursement of crop compensation paid by them to the claimants; that the amount received from the clients was either in the form of reimbursement or a lump sum rate. From the above deposition, it is evident that M/s KRRTPL did not act as pure agent inasmuch as the exact amounts paid by them to the farmers have not been reimbursed and they are getting more than such payments. Hence Rule 5(2) of the Service Tax (Determination of Value) Rules, 2006 is not applicable in the instant case. Further, the assessee have received service tax on the reimbursement amounts in certain contracts but they did not pay to the Government exchequer treating that there is no service at all. The stand taken by M/s KRRTPL is irregular as it is not a pure agent activity and moreover they have also collected certain service tax amount from the clients. 8. Further, the commissioner s observation that the issue in dispute has already b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a and are managed and controlled by the respective Ministry of the State. These service receiving companies are Governmental Authorities as defined in clause (s) of para 2 of Notifications No. 25/2012-ST. The other conditions that the Governmental Authority should be established 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 as envisaged in Notification No. 25/2012-ST dated 20.06.2012 (effective from 01.07.2012) is not required to be fulfilled as held by the Hon ble High Court of Patna in the case of Shapoorji Palonji and Company Pvt. Ltd. vs. CC,C.Ex ST, Patna-2016 (42) STR 681. 13. It is submitted that the corporations are owned controlled (majority holding) and their functions and responsibilities being also regulated by the respective governments. 14. It is further urged, under the directions of respective Governments, power is provided free of charge to agricultural sector. Power is provided at concessional tariff rates to economically poor families. Several other concessions are also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01.03.2015 (effective from 01.04.2015 and as per entry no. 12A(a) of notification No. 9/2016-ST dated 01.03.2016 (effective from 01.03.2016), read with section 102 of the Finance Act, 1994, civil structures or any other original works meant predominantly for use other than for commerce, industry or any other business or profession is exempted from the liability of service tax, if the contracts had been entered into prior to 01.03.2015 and on which appropriate stamp duty, where applicable had been paid. This exemption is effective upto 31.03.2020. In the case of respondents the impugned transactions are in respect of the contracts entered into prior to 1.03.2015 on stamp papers on which prescribed stamp duty has been paid as verified and confirmed and accepted by the learned Commissioner. 17. Further urges, as the disputed transactions are covered by the above provisions, exemption availed does not suffer from any infirmity. Impugned orders passed by the learned Commissioner of Customs, Central Tax Hyderabad Audit-II Commissionerate are therefore valid and legally maintainable. 18. It is also submitted that in own case of the respondents, similar exemption under the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the fact of availing exemptions, through specific correspondence and through periodical returns, as confirmed by the ld. Commissioner, in the impugned order. No valid reasons had been stated by the Revenue in their appeal countering the cogent and logical conclusions of the ld. Commissioner, except reiteration of the allegations in the show cause notice. The appeal filed by the Revenue is thus liable to be rejected. 24. Having considered the rival contentions, we find that the service receiving companies are all government companies as defined in Section 2(45) of the Companies Act, 2013. We further find that similar issue had arisen before the Hon ble Patna High court in the case of Shapoorji Paloonji Company Pvt. Ltd. vs. CC, CE ST, Patna -2016 (42) STR 681 (Pat.) Shapoorji Paloonji was engaged by Indian Institute of Technology , a body incorporated by the Institutes of Technology Act, 1961. IIT appointed National Building Construction Corporation Limited as a consultant for construction of its academic building project. Shapoorji Paloonji was appointed as contractor for construction by NBCC. The terms of the contract provided - the work awarded is on works contract ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a board or any other body; 27. Further, vide Notification No. 6/2015-ST amending exemption Notification No. 25/2012, whereby item Nos. (a), (c) and (f) of entry 12 stood omitted. 28. The Hon ble High Court took notice that under Notification No. 25/2012 w.e.f. 01.07.2012, services provided to government or local authority or government authority by way of construction, erection etc. was exempt from payment of service tax. Further, local authority is defined under Section 66B(31) of the Finance Act. Further, IIT for which academic block was being constructed by Shapoorji Paloonji was set up by an Act of Parliament as an institute of national importance. Further, definition of Government Authority as amended by the amending Notification No. 2/2014 means - authority or Board or any other body set up by an Act of Parliament or State Legislature is a Government Authority. Therefore, Notification No. 25/2012 grants exemption to activity of construction undertaken by Shapoorji Paloonji for I.I.T., from payment of service tax. 29. Taking notice of the argument of Revenue that only a authority with 90% or more participation by way of equity or control to carry out any function ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 243W. Powers, authority and responsibilities of Municipalities, etc. Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow- (a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to- (i) the preparation of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in Schedule XII; (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in Schedule XII. 31. Further Schedule XII of the Constitution reads as follows:- 1. Urban planning including town planning. 2. Regulation of land-use and construction of buildings. 3. Planning for economic and social development. 4. Roads and bridges. 5. Wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice provided by the respondent assessee to the service receiving companies, rather there is an element of pure agent as respondent has discharged the onus of service receiver to the land owners, and thus the said activity is not taxable, even if respondent has received some surplus in the said activity. Moreover, in the facts of the case no consideration is defined for this activity and the said activity, by no stretch of imagination can be classified as service as defined in the provision of the Finance Act, 1994. 36. Thus, there is no merit in the appeal of Revenue and same is dismissed. The respondent-assessee is entitled to consequential benefit, in accordance with law. (Pronounced on 2020) (Anil Choudhary) Member (Judicial) (P. Venkata Subba Rao) Member (Technical) P. Venkata Subba Rao 37. I concur with my brother Ld. Member (Judicial) Shri Anil Choudhary as far as the facts of the case are concerned. I also agree with him that Notification no. 25/2012-ST entry S.No. 12A is relevant for the purpose which has been reproduced in pages 6 7 of this Order. The conditions to be fulfilled for an assessee to be eligible for this exemption notification as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for normal functioning of the court, it cannot be said that Delhi Jal Board has the mandate of dispensing justice and disposing of Writ Petitions. Therefore, supplying water or electricity or anything else required for an organisation is quite different and distinct from performing the functions of that organisation. 40. The only way to also include supply of electricity or anything else required to perform the functions listed in the Twelfth Schedule of the Constitution is to amend this Schedule. Any change to the provisions of Article 243W and Schedule XII to the Constitution falls only within the domain of the Parliament and is clearly outside the scope of the competence of this Tribunal. This Tribunal cannot read into Article 243W and Twelfth Schedule words which do not exist in it nor enlarge the scope of the schedule by including in it transmission and distribution of electricity to perform the other functions listed in it. 41. Therefore, to the extent the Respondent s services were rendered to entities established by Acts of legislature, the exemption notification is available. To the extent, the services were rendered to entities created by the Governments, the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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