2013 (5) TMI 926 - AT - Service Tax

Summary

Issues: Assessment of liability to Service Tax on works contract services u/s 65(105)(zzza) - Interpretation of legislative provisions and Board Circular dated 24-5-2010.

The judgment pertains to appeals filed by the assessee against adjudication orders assessing liability to Service Tax on works contract services. The petitioner had entered into an agreement with the State Govt. for embankment works along Nagavali river to prevent inundation. The adjudicating authority classified the service as a taxable works contract, leading to tax assessment, interest, and penalties. The petitioner contended that the services provided do not fall under the definition of works contract as per Section 65(105)(zzza), citing the Board's clarification dated 24-5-2010.

The definition of works contract includes contracts where property transfer in goods is taxable as sale of goods for executing turnkey projects, excluding EPC projects. The petitioner argued that their services should not be considered works contracts based on this definition and the Board Circular. They contended that turnkey projects should be interpreted as projects other than those excluded from other taxable services like commercial or industrial construction services, as per the Board Circular dated 24-5-2010.

The Board Circular was issued to address disputes on the applicability of Service Tax on various activities, clarifying the scope of taxable services. The Court noted that the Circular's purpose was to resolve disputes related to specific activities like shifting cables underground during road renovation, indicating that the Circular's context must be considered. It emphasized that Circulars should not be equated to statutes.

The petitioner further argued that services related to core governmental activities like agriculture, irrigation, and public works should be excluded from the works contract definition. They claimed that even though their activities did not fall under specific services, the legislative intent suggests that services related to such governmental works should be excluded from the works contract definition.

The Court acknowledged the need to consider whether exclusions from the works contract definition can be inferred from other taxable services definitions and whether the term "turnkey projects" should be narrowly interpreted. It granted a waiver of pre-deposit and stay of further proceedings, subject to the petitioner remitting 50% of the assessed Service Tax within a specified time frame. Failure to comply would result in the waiver being dissolved and the appeal rejected.