2023 (11) TMI 156 - AT - Service Tax

Liabillity of pay service on reverse charge basis (RCM) - Business Entity or not - Works Contract Service - construction of BSc Nursing College Hostel Building at Singupuram - denial of benefit on the grounds that the work order was given on 06.02.2016 and the exemption notification as amended was applicable only to contracts entered prior to 01.03.2015 - HELD THAT - Department has not been able to adduce to support that APMSIDC is a business entity. It is also an admitted position that they are Governmental authority , though in terms of Notification No.25/2012-ST as well as in terms of relevant documents perused by the Adjudicating Authority. A holistic view would indicate that even though they might be considered as body corporate, they cannot be considered as business entity, which intrinsically involves profit motive. The collection of processing charges or a cost markup on the medicines purchased on behalf of the Government and supplied as per their direction would not make them a business entity, per se. There is no other evidence on record to suggest that they are a business entity - they are not required to pay any service tax on reverse charge basis on the WCS provided to them by M/s Satya Sai Constructions and therefore, Notification No.30/2012-ST would not be applicable to them. Therefore, neither Original Order nor Impugned Order has been able to establish that they will be within the ambit of Notification No.30/2012-ST and therefore, liable to pay 50% of the service tax payable on the WCS provided by M/s Satya Sai Constructions to APMSIDC. Therefore, Appellant is entitled to get the relief. Appeal allowed.

Summary

Issues involved: Appeal against confirmation of demand of service tax and imposition of penalties under various sections of the Finance Act, 1994.

Summary:
1. The appeal was filed against the confirmation of demand of service tax and penalties imposed by the Commissioner (Appeals) on the Managing Director of APMSIDC for the period 2016-17.
2. The Original Authority confirmed the demand of service tax in respect of Works Contract Service received by APMSIDC from M/s Satya Sai Constructions, except for one work order not covered under the exemption notification.
3. The main submission of the Appellant was that APMSIDC, being a corporation registered under the Andhra Pradesh Public Societies Act, is not a business entity and therefore not liable to pay service tax under reverse charge mechanism.
4. The Adjudicating Authority extended the benefit of exemption to APMSIDC under Notification No.25/2012-ST for services provided to governmental authorities.
5. The Adjudicating Authority concluded that APMSIDC is covered under the definition of governmental authority and entitled to the exemption based on the nature of work performed and certain judgments.
6. The Appellant did not challenge the nature of service or their corporate status but contended that they are not a business entity and therefore not liable to pay service tax under reverse charge mechanism.
7. The Adjudicating Authority and the Commissioner (Appeals) did not establish that APMSIDC falls within the ambit of Notification No.30/2012-ST, making them liable to pay service tax on the Works Contract Service provided to them.
8. The Tribunal allowed the appeal, stating that APMSIDC, being a governmental authority and not a business entity, is not required to pay service tax on the Works Contract Service provided to them by M/s Satya Sai Constructions.

Separate Judgement: None.