2024 (6) TMI 192 - AT - Service Tax

Demand of Service Tax on reverse charge basis on services received from the Indian Railways for the construction of Railway Sidings by denying the benefit of exemption - Demand of Service Tax on reverse charge basis on the royalty amount paid to the State Government on natural resource (limestone) extraction - Demand of Service Tax on reverse charge basis on works contract service received by the Appellant - Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) - Input Service Credit availed on the basis of ineligible documents. Demand of Service Tax on reverse charge basis on services received from the Indian Railways for the construction of Railway Sidings by denying the benefit of exemption - HELD THAT - The impugned order has relied upon the definition of railways as given in the Railway Act 1989 to hold that the benefit of the aforesaid exemption notification shall not be available to the Appellant because the sidings constructed by the Railways for the Appellant was for private use and the same was not used for public carriage of passenger or goods - it is observed that the term railways has not been defined under the Finance Act 1994. Accordingly no distinction has been made out between public and private railways in the said Act. The Department cannot fall back on the definition of railways in another statute for the purpose of creating an artificial distinction between the two. The issue with respect to availability of the benefit of exemption on services of construction of railway siding is no more res-integra in view of the judgements rendered by the Tribunals in M/S. TRIVENI ENGICONS PRIVATE LIMITED VERSUS COMMISSIONER OF C.G.S.T. AND CENTRAL EXCISE JAMSHEDPUR 2024 (3) TMI 917 - CESTAT KOLKATA where it was held that The issue has already been settled by this Tribunal and it has been categorically held that there is no distinction between public railways and private railways. In these circumstances following the decision of this Tribunal in the case of M/S HARI CONSTRUCTION ASSOCIATES PRIVATE LIMITED VERSUS COMMISSIONER OF CGST EXCISE PATNA II 2023 (9) TMI 454 - CESTAT KOLKATA it is held that the appellant is entitled to the benefit of exemption vide Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012 as claimed. The demand confirmed in the impugned order is not sustainable. Demand of Service Tax on reverse charge basis on the royalty amount paid to the State Government on natural resource (limestone) extraction - HELD THAT - The services by way of grant of natural resources by the Government became taxable only with effect from 01 April 2016. In the present case the agreements were executed prior to 01 April 2016 and therefore the provisions of service tax as applicable prior to the said date would be applicable to determine the leviability of service tax on the royalty payments. It has been settled by a number of decisions of the Tribunals that when the assignment of right to use natural resources was made before 01 April 2016 service tax liability cannot be fastened upon the Appellant even if the consideration for the same is paid after the introduction of the levy with effect from the said date. Accordingly we hold that the demand of service tax confirmed in the impugned order is not sustainable. Demand of Service Tax on reverse charge basis on works contract service received by the Appellant - HELD THAT - This issue has been clarified by Board vide Circular dated 23.08.2007 wherein it has been clarified that the sub-contractor is liable to pay service tax even if the main contractor pays service tax on the full value. In the present case for the works contract service rendered the appellant was required to pay service tax on reverse charge basis at the rate of 50 percent. Accordingly we hold that the appellant is liable to pay service tax of 1, 46, 250/- along with interest as demanded in the impugned order. However no penalty imposable on this service tax confirmed as the intention to evade payment of service tax does not exist in this case. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) - HELD THAT - The demand pertains to the period November 2015 to December 2015 and June 2016 to August 2016 respectively and the impugned notice was issued only on 02 June 2020 by invoking extended period of limitation. It is observed that the fact of nonpayment of the cesses by the appellant was well within the knowledge of the department in view of the Audit conducted. Accordingly the intention to evade payment of service tax does not exist in this case. Thus the demand confirmed on this count is not sustainable. Input Service Credit availed on the basis of ineligible documents - HELD THAT - The appellant has obtained the STTG certificates as required under the said notification and submitted the same before the Ld. Adjudicating Authority during the course of personal hearing - the STTG Certificates were in the prescribed format as contained in the aforesaid Notification. Also the said certificates contain all the particulars available in the Railway receipts as required to avail the credit. Accordingly the STTG certificates are valid documents to avail the credit and hence the credit availed cannot be denied. Appeal disposed off.

Summary

Issues Involved:

1. Demand of Service Tax on construction of Railway Siding.
2. Demand of Service Tax on royalty paid for limestone extraction.
3. Demand of Service Tax on works contract service.
4. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC).
5. Denial of Input Service Credit on ineligible documents.

Summary:

1. Demand of Service Tax on construction of Railway Siding:
The appellant contended that services related to the construction of railway siding are exempt u/s Notification No. 25/2012-ST dated 20 June 2012. The Tribunal observed that the term "railways" is not defined under the Finance Act, 1994, and no distinction between public and private railways is made. The Tribunal relied on previous judgments, including Konkan Railway Corporation Limited Vs. Commissioner of CGST & Central Excise and Shri Mahendra Kumar Anchalia Vs. Commissioner of CGST & CX, Kolkata, to conclude that the demand of Rs. 1,24,61,772/- is not sustainable.

2. Demand of Service Tax on royalty paid for limestone extraction:
The appellant argued that the royalty payments were for agreements executed prior to 01 April 2016, and thus not taxable. The Tribunal agreed, citing that services by way of grant of natural resources by the Government became taxable only from 01 April 2016. The Tribunal referenced decisions like Ms. The Madhya Pradesh State Mining Corporation Limited Vs. Pr. Commissioner, CGST & Central Excise and Principal Commissioner of CGST and Central Excise Vs. SK Traders to hold that the demand of Rs. 13,45,733/- is not sustainable.

3. Demand of Service Tax on works contract service:
The appellant, acting as a sub-contractor, argued that the main contractor paid the service tax on the full value. The Tribunal noted that as per the Board's Circular dated 23.08.2007, a sub-contractor is liable to pay service tax even if the main contractor has paid it. The Tribunal held that the appellant is liable to pay Rs. 1,46,250/- along with interest but no penalty is imposable.

4. Short Payment of Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC):
The Tribunal observed that the demand pertains to periods well within the knowledge of the department due to an audit. Thus, invoking the extended period of limitation was not justified. The demand of Rs. 53,803/- was set aside on the ground of limitation.

5. Denial of Input Service Credit on ineligible documents:
The appellant had availed Cenvat Credit based on railway receipts and later submitted STTG certificates as required. The Tribunal found that the STTG certificates were in the prescribed format and contained all necessary particulars. Thus, the denial of credit amounting to Rs. 9,00,380/- was set aside.

Order:
1. The demand of Rs. 1,24,61,772/- for construction of Railway Siding is set aside.
2. The demand of Rs. 13,45,733/- on royalty for limestone extraction is set aside.
3. The appellant is liable to pay Rs. 1,46,250/- along with interest for works contract service, but no penalty is imposed.
4. The demand of Rs. 53,803/- for SBC and KKC is set aside on the ground of limitation.
5. The denial of input tax credit of Rs. 9,00,380/- is set aside.

The appeal filed by the appellant is disposed of on these terms.