2013 (10) TMI 435 - AT - Service Tax

Evasion of service tax on works contract service - Execution of works contract in respect of Lift Irrigation Schemes for lifting the water from source to the canal and for further transmission of water. - Held that - meaning of the words in respect of , prima facie concludes that the expression covers the work undertaken which is in relation to canals. Undisputedly, the pump house and other facilities were erected by the appellant to lift the water from lower level to higher level of canals. In these circumstances, the appellant has made out prima facie case for complete waiver in view of the fact that the period involved is subsequent to October 2009 and during the relevant period, exemption notification was available. Stay application - Held that - where the projects executed for Government which are not for commerce and industry are not liable to tax, the appellant cannot be found fault with if they entertained a belief that service tax may not be payable, benefit of doubt has to be extended. In such a situation, the demand for the period beyond one year may not be sustainable - Stay granted.

Summary

Issues:
1. Whether the appellant evaded service tax on works contract services provided under the category of execution of works contract?
2. Whether the appellant is eligible for the benefit of Notification No. 41/2009-S.T. dated 23.10.2009, exempting service tax in relation to execution of works contract in respect of canals not primarily used for commerce or industry?
3. Whether the works undertaken by the appellant can be considered as 'works contract service' in respect of canals?

Analysis:
1. The appellant, a Joint Venture registered under 'works contract service,' faced a show-cause notice alleging evasion of service tax amounting to Rs. 5,08,90,503/- for projects executed between October 2009 to September 2010. The projects involved lift irrigation schemes for providing water for irrigation purposes. The appellant argued that the services provided were related to lifting water from the source to the canal and further transmission, essential for irrigation. They also relied on Notification No. 41/2009-S.T., claiming exemption from service tax for works contract in respect of canals not primarily used for commerce or industry.

2. The key issue revolved around the interpretation of 'in respect of canals' as per the exemption notification. The Revenue argued for a strict interpretation, limiting it to direct canal-related activities like digging or embankment strengthening. However, legal references suggested a broader interpretation, encompassing activities related to canals such as infrastructure provision and water lifting. The Tribunal concluded that the appellant's work, involving erecting pump houses and lifting water for canal transmission, fell within the scope of 'in respect of canals,' making them eligible for the exemption.

3. Considering the wider connotation of 'in respect of,' the Tribunal found that the appellant's activities were indeed related to canals and qualified as 'works contract service' under the exemption notification. As the projects were executed for the government and not for commerce or industry, the Tribunal granted a complete waiver of pre-deposit and stay against recovery during the appeal process for the period beyond one year. The judgment highlighted the importance of understanding the scope of exemption notifications and interpreting legal terms to determine the applicability of tax liabilities accurately.