2023 (9) TMI 75 - AT - Service Tax

Exemption of service tax - Government Authority as defined under clause 2(s) of the Notification No. 25/2012-ST dated 20.06.2012 or not - works carried out by the Appellant for SBPDCL are specified as a function entrusted to a Municipality under Article 243W of the Constitution of India - period 2014-15 to 2016-17 - Extended period of limitation - HELD THAT - The Company is subsidiary of Bihar State Power (Holding) Company Limited which holds 100% of shares in the company. Bihar State Power (Holding) Company Limited is charged with the responsibility of promoting a coordinated development of generation, supply and distribution of electricity in the State of Bihar on an efficient and economic basis of management. The administrative set up of Bihar State Power (Holding) Company Limited indicates that it is wholly owned by Government of Bihar - SBPDCL falls within the ambit of the definition of 'Government Authority' as provided under Clause 2(s) of the Notification No. 2/2014-S.T. w.e.f. 30-1-2014 - SBPDCL is a 'Government Authority'. Whether the works carried out by the Appellant for SBPDCL are specified as functions entrusted to a Municipality under Article 243W of the Constitution of India? - HELD THAT - All the services rendered to the 'Government Authority' are not exempted from payment of service tax. Only those services which are entrusted to a Municipality, if carried out by a service provider then such services alone are exempted from service tax - the services undertaken by the Appellant are related to supply of materials and equipments, erection, testing and commissioning of 11KV line, 11/0 433 KV 63KVA D/S/S LT Line and providing 30 service connection including energy meter on TURNKEY basis to the state tube wells under NABARD Phase VIII and works of similar nature in the State of Bihar. The works carried out by the Appellant would qualify under 'Planning for economic and social development' as defended under 12th Schedule to Article 243W of the Constitution of India. The scope of this Entry is wide enough to cover the tube well energization work undertaken by the Appellant - the activities undertaken by the Appellant are covered within the ambit of the works assigned under Article 243W of the Constitution to be carried out by the Municipalities. Accordingly, the appellant are eligible for the exemption provided under Notification 25/2012-ST dated 20.06.2012. Extended period of limitation - HELD THAT - It is observed that every nonpayment/ non-levy of duty does not attract extended period. There must be a deliberate default on the part of the Appellant to invoke extended period, which is not there in this case. The conclusion that mere non-payment of duties is not equivalent to collusion or wilful mis-statement or suppression of facts is untenable - the department has not brought in any evidence to substantiate the allegation of suppression of fact with an intention to evade payment of duty. The Appellant has undertaken works to a 'Government Authority', which are function entrusted to a Municipality under Article 243W of the Constitution of India. Accordingly, the Appellants are eligible for the exemption provided in Notification 25/2012-ST dated 20.06.2012 and hence the demand confirmed in the impugned order is not sustainable. Since the duty itself is not sustainable, the question of demanding interest and imposing penalty does not arise - the impugned order on merits as well as on the ground of limitation. Appeal allowed.

Summary

Issues Involved:
1. Whether SBPDCL qualifies as a 'Government Authority' under Notification No. 25/2012-ST.
2. Whether the works carried out by the Appellant for SBPDCL are functions entrusted to a Municipality under Article 243W of the Constitution of India.
3. Applicability of the extended period of limitation.

Summary:

Issue 1: Whether SBPDCL qualifies as a 'Government Authority' under Notification No. 25/2012-ST.

The Tribunal examined the definition of 'Government Authority' as per Clause 2(s) of Notification No. 25/2012-ST dated 20.06.2012, which was later substituted by Notification No. 2/2014-S.T. w.e.f. 30-1-2014. The definition includes any authority or body set up by an Act of Parliament or State Legislature or established by Government with 90% or more participation by way of equity or control. The Tribunal found that SBPDCL, being a subsidiary of Bihar State Power (Holding) Company Limited which is wholly owned by the Government of Bihar, falls within this definition. Judicial pronouncements such as *KRISHI CONSTRUCTIONS PVT. LTD. Versus COMMISSIONER OF C.T., HYDERABAD* and *RAJASTHAN STATE ROAD DEVELOPMENT CONSTRUCTION CORPORATION LTD. Versus COMMISSIONER OF CGST & C. EX., JODHPUR* supported this interpretation. Thus, SBPDCL is held to be a 'Government Authority'.

Issue 2: Whether the works carried out by the Appellant for SBPDCL are functions entrusted to a Municipality under Article 243W of the Constitution of India.

The Tribunal referred to Notification 25/2012-ST which exempts services provided to a Government authority if they are functions entrusted to a Municipality under Article 243W. The works carried out by the Appellant included supply of materials, erection, testing, and commissioning of electric lines under a special state plan. The Tribunal examined Article 243W and the Twelfth Schedule, which includes "Planning for economic and social development." The Tribunal concluded that the works undertaken by the Appellant fall under this category and are thus functions entrusted to a Municipality. Consequently, the Appellant is eligible for the exemption under Notification 25/2012-ST.

Issue 3: Applicability of the extended period of limitation.

The Tribunal observed that the extended period of limitation under proviso to section 78 of the Act can only be invoked in cases of fraud, collusion, or wilful misstatement or suppression of facts with intent to evade payment of tax. The Tribunal found no evidence of deliberate default or suppression by the Appellant. Therefore, the extended period of limitation was not applicable, and the demand confirmed in the impugned order was not sustainable on this ground as well.

Conclusion:

The Tribunal held that the Appellant provided services to a 'Government Authority' and carried out functions entrusted to a Municipality under Article 243W, making them eligible for exemption under Notification 25/2012-ST. The demand confirmed in the impugned order was set aside on merits and on the ground of limitation. The appeal filed by the Appellant was allowed.