2020 (3) TMI 319 - AT - Service Tax

Recovery of service tax - construction of a railway siding track works - scope of the term railways - non-consideration of their claim of exclusion from taxability as provider of works contract service and commercial and industrial construction service - period from 2009-10 to 2012-13 - HELD THAT - We cannot concur with the Learned Authorised Representative as the conclusion of the adjudicating authority lacks legal soundness. We are unable to comprehend the resort to Railways Act, 1989 for a broader understanding of expression railways in the absence of permissible referral in section 65(105)(zzzza) or (zzp), or, for that matter, anywhere in section 65, of Finance Act, 1994. In the absence of such authority, it is the common parlance understanding that should have been adopted. Even if a conscientious disposal of the allegations did prompt such recourse, it should have been appreciated by the adjudicating authority that statutes are framed with distinct objectives and that the definitions contained therein cannot have application de hors the operative provisions of such statutes. The constructions excluded from taxability under both the entries in section 65(105) of Finance Act, 1994 are, plainly, unqualified. The legislative intent, therefore, cannot be circumscribed by encroachment, or restrictive interpretation, ventured upon by tax authority. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Non-consideration of exclusion from taxability as provider of 'works contract service' and 'commercial and industrial construction service' for the period from 2009-10 to 2012-13.
Exclusion from tax under either one of the entries claimed as available to railway construction.

Analysis:
1. The appellant contested the recovery of service tax, interest, and penalty confirmed by the Commissioner of Service Tax, Mumbai-II. The projects undertaken by the appellant were deemed taxable under different sections of the Finance Act, 1994. The Tribunal found the segregation of activities questionable and highlighted the need for a thorough examination of the contracts. Reference was made to settled judicial precedent to challenge the dichotomous application of taxing entries for similar projects, emphasizing the need for a fresh examination of the contracts.

2. The Tribunal noted the distinction made by the Hon'ble Supreme Court regarding the components of 'works contract' and emphasized the need for a comprehensive evaluation of the projects to determine taxability. The adjudicating authority's failure to consider the extent to which the projects are taxable under the law was criticized. The Tribunal highlighted the importance of ascertaining the service component subject to levy under the Finance Act, 1994 and criticized the disregard of the law by the adjudicating authority.

3. The dispute was limited to the exclusion from tax claimed for railway construction. The adjudicating authority's interpretation, based on the Railway Act, 1989, was challenged by the appellant. Reference was made to judicial decisions to support the argument that the exclusions under the taxing entries should be broadly interpreted to include all types of railway constructions. The Tribunal rejected the adjudicating authority's conclusion, emphasizing that the legislative intent behind the exclusions should not be circumscribed by restrictive interpretations.

4. The Tribunal disagreed with the adjudicating authority's reliance on the Railway Act, 1989 to interpret the term 'railways' in the absence of statutory authority. The common parlance understanding should have been adopted, and any distinction beyond what is enacted in the statute was deemed impermissible. The unqualified exclusions from taxability under the relevant entries in the Finance Act, 1994 should not be circumscribed by encroachments or restrictive interpretations by tax authorities. The Tribunal set aside the impugned order and allowed the appeal, emphasizing the need for a consistent interpretation of taxing statutes based on clear expressions within the law.