2019 (2) TMI 592 - AT - Service Tax

Works Contract Service - Execution of Clear Water Transmission Main from RICO Industrial Area to SEZ Boundary Jaipur - execution of contract during the period December 2007 to July 2008 - benefit of N/N. 4/2004 ST dt. 31.0-3.2004 - Held that - The tender documents and work order specifically talks about the project for transmission of potable drinking water to be transferred upto the SEZ boundary. The said project specifically states that appellant has to comply with this work of transmission of clear transfer of water to the boundaries of SEZ. The issue seems to be clearly covered by the Larger Bench decision of the Tribunal in the case of Lanco Infratech Limited 2015 (5) TMI 37 - CESTAT BANGALORE (LB) 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. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the appellant is liable to pay service tax under Works Contract Service for a project awarded by the Government of Rajasthan.
- Whether the benefit of a specific notification can be extended to the appellant.
- Whether the project executed by the appellant is of a commercial nature.

Analysis:
1. The appellant was awarded a contract by the Government of Rajasthan for the "Execution of Clear Water Transmission Main." Revenue authorities demanded service tax under Works Contract Service. The appellant argued that the project benefits the SEZ and should be covered by a specific notification. The Adjudicating authority confirmed the demands.

2. The appellant cited a judgment by the Larger Bench of the Tribunal in a similar case. The project involved transmitting water to the SEZ boundary. The appellant contended that the project was not commercial in nature. The Department argued that the water was for commercial purposes and the project did not extend into the SEZ area.

3. The Tribunal examined the tender documents and work orders, finding that the project was indeed for transmitting potable water to the SEZ boundary. Referring to the Larger Bench judgment, the Tribunal noted that projects like these, even if part of a dam project, are excluded from Works Contract Service. The Tribunal held that the project in question fell under this exclusion.

4. Despite the appellant not raising this legal point earlier, the Tribunal applied the Larger Bench decision to the case. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant. The appeal was allowed, and the impugned order was deemed unsustainable.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision based on legal precedents and interpretations.