2016 (11) TMI 699 - AT - Service Tax

Levy of service tax - canal project viz., Flood Flow Canal Project - N/N. 41/2009-ST dated 23.10.2009 - Held that - Following the judgment laid in Lanco Infra Tech Ltd. 2015 (5) TMI 37 - CESTAT BANGALORE (LB) case, where it was held that Where under an agreement, whether termed as works contract, turnkey or EPC, the principal contractor, in terms of the agreement with the employer/ contractee, assigns the works to a sub-contractor and the transfer of property in goods involved in the execution of such works passes on accretion to or incorporation into the works on the property belonging to the employer/ contractee, the principal contractor cannot be considered to have provided the taxable (works contract) service enumerated and defined in Section 65(105)(zzzza) of the Act. - this Bench has remanded the matter to adjudicating authority. Therefore, in the light of the decision laid in Lanco Infra Tech as well as the decision of Tribunal in the above stated final order we remand this matter to the adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
1. Applicability of service tax on canal works for irrigation projects.
2. Validity of demand for service tax, interest, and penalty.
3. Interpretation of relevant circulars and notifications.
4. Effect of Tribunal's decision in Lanco Infra Tech Ltd., case on the present case.

Analysis:
1. The Appellant, a Joint Venture for executing canal works, contended that no service tax was leviable on the project as it related to government projects, citing a clarificatory circular by the Central Board of Excise and Customs. The nature of works included earthwork, embankment, and construction of canal systems. The Appellant did not pay service tax initially, but a show cause notice was issued demanding service tax, interest, and penalty. The adjudicating authority and Commissioner (Appeals) upheld the demand, leading to the current appeal.

2. During the hearing, the Appellant's counsel referred to a decision by the Tribunal Larger Bench in the Lanco Infra Tech Ltd., case, which had relevance to the issue at hand. Following the judgment in the Lanco case, the Bench remanded a similar matter to the adjudicating authority. Consequently, the present case was remanded based on the decisions in the Lanco case and a previous final order involving M/s Ayyappa Infra Projects Pvt Ltd. The impugned order was set aside, and the appeal was allowed by way of remand.

3. The Tribunal's decision in the Lanco Infra Tech Ltd., case played a crucial role in the resolution of the present appeal, emphasizing the need for a reexamination by the adjudicating authority. The impact of the circulars and notifications, along with the interpretation of government project-related works in relation to service tax liability, formed the core of the dispute. The Appellant's reliance on the clarificatory circular and subsequent notification highlighted the complexity of the legal framework governing service tax applicability in such scenarios.

4. The judgment delivered by the Tribunal in the present case underscored the significance of precedent, specifically referencing the Lanco Infra Tech Ltd., case to guide the decision-making process. By remanding the matter to the adjudicating authority, the Tribunal ensured a thorough reconsideration in light of the legal principles established in previous cases. The operative part of the order was announced at the conclusion of the hearing, marking a pivotal moment in the resolution of the service tax dispute concerning canal works for irrigation projects.