2011 (2) TMI 98 - AT - Service Tax

Waiver of pre-deposit and stay of recovery - Works contract under section 65(105)(zzzza) - The work undertaken by the assessee is squarely fell under clause (c) of CBEC Circular No. 116/10/2009-ST dated 15-9-2009 - They had rendered service in relation to infrastructure provided by different State Governments - As per the Circular cited such activities did not attract Service Tax liability - The contention is that the activities involved were carried out for building infrastructure and constitute civic amenities provided by the State Governments - These were excluded from taxable services classified under construction services and works contract services as per sub-clause (ii)( b) of the Explanation to the Works Contract service in the Act. Held that clarification given by the Board that infrastructure activities which are concerned with welfare activity for the citizens of this country has been excluded from the liability of Service tax. - Hence waiver of pre-deposit and stay of recovery of the dues adjudged against the appellants in the impugned order - Thus pending decision in the appeal.

Issues:
1. Whether the EPC Turnkey Contracts executed by the appellant can be termed as construction of Canals meant for irrigation of agricultural land and drinking water purposes and can they be treated as non-taxable?
2. Whether the activities undertaken by the appellant fall under the definition of taxable service of 'works contract' as per the Act?
3. Whether the activities carried out by the appellant for building infrastructure provided by State Governments attract Service Tax liability?
4. Whether the Circulars and Clarifications provided by the Board support the appellant's contention for exemption from Service Tax liability?

Issue 1:
The appellant sought waiver of pre-deposit of Service Tax, interest, and penalties imposed under the Finance Act, 1994. The dispute revolved around whether the EPC Turnkey Contracts executed by the appellant for construction projects like canals for irrigation should be considered non-taxable. The appellant argued that the construction activities were non-commercial in nature and should be exempt from Service Tax. The impugned notice alleged that the appellant provided services under taxable Works Contract Service and did not disclose material facts or pay appropriate service tax. The appellant contended that constructions for the Government should be considered based on their purpose, and irrigation projects should not be classified as Works Contract Services unless for commercial purposes.

Issue 2:
The main argument against the confirmed demand was that the activities undertaken by the appellant were covered under CBEC Circular No. 116/10/2009-ST, exempting certain infrastructure-related services from Service Tax liability. The appellant relied on the Explanation to Section 80(IA)(4) in the Income-tax Act to support their claim that the activities constituted civic amenities provided by State Governments and were excluded from taxable services classified under construction services and works contract services. The appellant also argued for limitation based on prior activities and ST-3 Returns filed before the inclusion of 'works contract' under Service Tax net.

Issue 3:
The Tribunal analyzed the case records and submissions to determine if the disputed activity fell under the definition of 'works contract' as per the Act. The appellant claimed that their activities should be classified under a specific clause of the Explanation in section 65(105)(zzzza) of the Act, while the Revenue contended that the activity fell under a different sub-clause of the same Explanation. Previous Tribunal decisions in similar cases were referenced to support the appellant's argument regarding the nature of the services provided for the Government of Andhra Pradesh.

Issue 4:
The Tribunal referred to previous decisions involving similar demands and activities related to turnkey projects executed for the Government of Andhra Pradesh. The Tribunal highlighted findings from earlier cases where services rendered for infrastructure projects, including construction of dams and canals, were considered exempt from Service Tax liability based on specific Circulars and Clarifications provided by the Board. The Tribunal, consistent with previous decisions, ordered a complete waiver of pre-deposit and stay of recovery of the dues pending the appeal decision.

This detailed analysis of the judgment provides insights into the legal arguments, interpretations of statutory provisions, and the application of Circulars and Clarifications in determining the Service Tax liability for the appellant's construction activities.

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