2014 (2) TMI 808 - AT - Service Tax

Waiver of pre deposit - Demand of service tax - Denial of the benefit of Notification No. 17/2005-ST dated 7/6/2005 - Held that - demand is on activities viz. site formation and clearance, excavation and earth moving and demolition and such other similar activities referred to in Section 65(105)(zzza) - activities were performed by the appellant preparatory to laying of railways leading to the premises of Karnataka Power Corporation Ltd., and JSW Steels Ltd. The learned Commissioner, who was adjudicating upon a show-cause notice issued on 18/5/2010 invoking the extended period of limitation, took the view that the aforesaid activities preparatory to construction of railways as defined under the Railways Act could not claim exemption from service tax being charged. Prima facie case found for the appellant against the above view taken by the adjudicating authority. The term railways , which has not been defined under the Finance Act 1994 and in respect of which the said Act does not refer to the Railways Act, has ordinarily to be understood in accordance with common parlance. Construction of railways by private agencies in connection with their business activities is not unknown to trade and commerce. It is also undeniable that railway lines so constructed are operated by the railways. The above Notification should be interpreted having regard to all these aspects - Stay granted.

Issues:
1. Applicability of Notification No. 17/2005-ST dated 7/6/2005 for exemption from service tax.
2. Interpretation of the term 'railways' under Section 65(105)(zzza) of the Finance Act 1994.
3. Granting waiver and stay of recovery for the demanded amount.

Analysis:

1. Applicability of Notification No. 17/2005-ST:
The appellant sought waiver and stay of recovery for over Rs. 7.44 crores demanded towards service tax and education cesses under Section 65(105)(zzza) of the Finance Act 1994. The demand stemmed from the denial of the benefit of Notification No. 17/2005-ST dated 7/6/2005, which exempts certain activities related to construction from service tax. The Tribunal noted that the demand was on activities falling under Section 65(105)(zzza) and performed by the appellant in preparation for laying railways leading to specific premises. The Commissioner had opined that activities preparatory to construction of 'railways' as defined under the Railways Act were not eligible for the exemption. However, the Tribunal found a prima facie case for the appellant against this view, emphasizing the need to interpret the term 'railways' in common parlance and considering private agencies' construction of railways for business purposes. Consequently, the Tribunal inclined to grant waiver and stay of recovery for the adjudged dues based on this interpretation.

2. Interpretation of the term 'railways':
The key point of contention revolved around the interpretation of the term 'railways' under Section 65(105)(zzza) of the Finance Act 1994. The Tribunal highlighted that 'railways' had not been defined in the Finance Act and that the Act did not reference the Railways Act for clarification. In the absence of a specific definition, the Tribunal reasoned that 'railways' should be understood in its ordinary sense, considering common usage and industry practices. Noting that private agencies do engage in constructing railways for operational purposes, and these lines are eventually operated by the railways, the Tribunal underscored the need to interpret the Notification in light of these practical aspects. This interpretation played a crucial role in the Tribunal's decision to grant waiver and stay of recovery for the appellant.

3. Granting waiver and stay of recovery:
After thorough consideration of the arguments presented and the interpretation of relevant provisions, the Tribunal concluded that there was a prima facie case in favor of the appellant regarding the denial of exemption under Notification No. 17/2005-ST. Acknowledging the ambiguity surrounding the term 'railways' and the absence of a specific definition in the Finance Act, the Tribunal leaned towards a broader interpretation that considered industry practices and operational realities. Consequently, the Tribunal exercised its discretion to grant waiver of predeposit and stay of recovery for the demanded amount, providing relief to the appellant pending further proceedings. This decision was based on the Tribunal's assessment of the facts, legal provisions, and the interpretation of relevant terms in the context of the case.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the Tribunal's reasoning, and the ultimate decision reached in the case.

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