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2018 (8) TMI 1228 - AT - Service TaxBusiness Support services - Reverse charge mechanism - Revenue was of the view that appellant was required to pay service tax on the services received from the Railways for construction of siding from Sarai Banjara railway station to Thermal Power Plant under the category of Support services under reverse charge mechanism. Held that - Railways includes siding also for transportation of public carriage of passengers or goods - Admittedly, in the case in hand, the siding has been required to be constructed for transportation of coal upto the plant of the appellant. Therefore, the siding in question is covered under the definition of Railways. As per Section 21 of the Railways Act, certain sanctions are required for construction of that siding and Section 22 and 23 provide various formalities to be complied with. Therefore, the Railway is required to construct the siding and have to supervise the same and the said properties of railways cannot be interfered by anybody else. In the case in hand, the appellant themselves have constructed the siding under the supervision of the Railways. Therefore, they are required to make payment of mandatory departmental chares, cost of OHE work and D&G charges. It is not disputed that all these charges have been paid by the appellant for various approvals and supervisions by the Railways for construction of siding by the appellant. The said execution of such work cannot be done without mandatory approvals and supervisions by the railways. In that circumstances, in terms of CBEC Education guide 2012, TRU Circular dated 20.06.2012, the services in question cannot be termed as Support Services under Section 65B of the Finance Act, 1994. The activity undertaken by the Railways for granting various approvals and supervision for siding constructed by the appellant are of statutory in nature and is sovereign function of the Railways. Therefore, on that account, the appellant is not liable to pay service tax. Also, the granting of approvals and supervision are in relation to the Railways which is exempted from payment of service tax under N/N. 25/2012- ST dated 20.06.2012 at Serial No. 14A - appellant are not liable to pay service tax. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the payments made by the appellant to the Railways for supervision and approvals qualify as "Business Support Service" under the Finance Act, 1994. 2. Whether the services provided by the Railways are exempt from service tax under Notification No. 25/2012-ST dated 20.06.2012. 3. Whether the fees collected by the Railways qualify as statutory fees and are deposited in the consolidated fund of India. Issue-wise Detailed Analysis: 1. Qualification as "Business Support Service": The appellant contends that the payments made to the Railways for the supervision and approvals required for constructing a railway siding do not qualify as "Business Support Service." The appellant argues that these services are mandatory and statutory in nature, performed under the sovereign rights of the Railways, and cannot be substituted by any private entity. The appellant relies on the CBEC Education guidelines 2012 and TRU Circular dated 20.06.2012, which state that services provided by the government in terms of their sovereign rights to business entities are not considered support services. The appellant further submits that the supervision provided by the Railways is a statutory function, and the payments are deposited in the consolidated fund of India. The respondent (Revenue) argues that the construction and supervision of private railway sidings are not statutory functions of the Indian Railways. The charges collected are based on the Engineering Code and are not statutory. The Revenue relies on a decision by the Hon'ble High Court of Delhi, which classified similar activities as "Business Support Service." Upon careful consideration, the Tribunal finds that the supervision and approvals provided by the Railways are mandatory and statutory functions. The Railways Act and related policies require the Railways to supervise and approve such constructions, and these activities cannot be performed by the appellant or any other private entity. Therefore, the Tribunal concludes that the services provided by the Railways do not qualify as "Business Support Service" under Section 65B of the Finance Act, 1994. 2. Exemption under Notification No. 25/2012-ST: The appellant argues that the services received from the Railways for the construction of the railway siding are exempt from service tax under entry No. 14A of Notification No. 25/2012-ST dated 20.06.2012. The term "railway" includes sidings, and the construction of railway sidings falls under the exemption provided for original works pertaining to railways. The Tribunal agrees with the appellant's contention and finds that the services related to the construction, erection, commissioning, or installation of original works pertaining to railways, including sidings, are exempt from service tax under the mentioned notification. Therefore, the appellant is not liable to pay service tax on these services. 3. Statutory Fees and Consolidated Fund of India: The adjudicating authority had held that the fees collected by the Railways do not qualify as statutory fees unless they are directly deposited in the consolidated fund of India. During the adjudication, the appellant could not produce evidence that the payments were deposited in the consolidated fund. However, during the appeal, the appellant produced a letter dated 27.09.2016, confirming that the amounts were credited to the consolidated fund of India. The Tribunal takes note of this letter and concludes that the fees collected by the Railways for supervision and approvals are statutory in nature and are deposited in the consolidated fund of India. Therefore, these activities are considered sovereign functions of the Railways and are not subject to service tax. Conclusion: The Tribunal sets aside the impugned order and allows the appeal, concluding that the appellant is not liable to pay service tax on the services received from the Railways for the construction of the railway siding. The Tribunal also grants consequential relief to the appellant. (Order pronounced in the court on 16.08.2018)
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