2024 (8) TMI 96 - AT - Service Tax

Construction of a dam or not - services of site formation and clearance, excavation and earthmoving and demolition - exemption under N/N.17/2005-ST dated 07.06.2005 - whether the services rendered by the respondents are in relation to the construction of a dam and thus, the respondents are eligible for the exemption contained in Notification No.17/2005 dated 07.06.2005? - time limitation. HELD THAT - The respondents rely upon the case of C.P. Systems 2023 (2) TMI 665 - CESTAT NEW DELHI wherein the Principal Bench has upheld the order of the Adjudicating Authority in holding that standalone dam or water channel system would be quite useless unless it is combined with other structures like Hydro Electric Plant. It is found that the case involves identical facts and the Tribunal has gone into the very same question as to whether services rendered in relation to a Hydro Electric Project would amount to work rendered towards the construction of dams to be eligible for the exemption contained in Notification No.17/2005 dated 07.06.2005. In view of the decision of the Tribunal in the case of Continental Constructions Ltd. 2018 (2) TMI 1256 - CESTAT NEW DELHI , it is found that the issue is no longer res-integra and is decided in favour of the respondents. We find that the Hydro Electric projects have no separate existence from the dams. The construction of a Hydro Electric project, pre-supposes the existence or construction thereof of a dam. The Hydro Electric projects are always associated with the dam and therefore, such dams are often referred to as multi-purpose hydel projects. Thus, there is no merit in the grounds of appeal of the Department. Time Limitation - HELD THAT - It is found that other than making casual allegation that the appellants intended to avoid proper discharge of service tax and suppressed the facts and did not file ST-3 Returns, Revenue has not highlighted any specific commission or omission on the part of the respondents so as to necessitate the invocation of extended period. Therefore, relying on the cases cited by the respondent and the other cases, it is opined that the respondent had bona fide reasons to believe that the services rendered by them to M/s Patel Gammon J V Engineering Ltd. are not exigible to service tax. Therefore, no case has been made by the Revenue to invoke the extended period. There are no merit in the appeal and there are no reasons as to why the impugned order should be interfered with - the respondents have a case in their favour on merits as well as limitation - the appeal filed by the Revenue is dismissed.

Summary

Issues Involved:
1. Applicability of service tax exemption under Notification No. 17/2005-ST dated 07.06.2005 for services related to the construction of a power house.
2. Determination of whether services rendered were in relation to the construction of a dam.
3. Interpretation of the term "dam" and its relation to Hydro Electric Projects.
4. Invocation of the extended period for demand of service tax.

Issue-wise Detailed Analysis:

1. Applicability of Service Tax Exemption under Notification No. 17/2005-ST:
The Revenue contended that the services rendered by the respondents were not eligible for exemption under Notification No. 17/2005-ST as the services were related to the construction of a power house, not a dam. The Adjudicating Authority, however, concluded that the services provided by the respondents were in relation to the construction of dams, tunnels, roads, power houses, etc., and were thus exempt from service tax. The Tribunal upheld this view, stating that the services rendered were integrally connected to the construction of a dam, making them eligible for the exemption.

2. Determination of Whether Services Rendered Were in Relation to the Construction of a Dam:
The respondents argued that the services provided were part of a Hydro Electric Project, which includes the construction of dams and tunnels. The Tribunal agreed, noting that the services of site formation and clearance, excavation, and earth moving and demolition were provided for the construction of dams, which are specifically exempted under Notification No. 17/2005-ST. The Tribunal referenced the case of C.P. Systems Pvt. Ltd., which supported the view that services related to Hydro Electric Projects are inherently linked to the construction of dams.

3. Interpretation of the Term "Dam" and Its Relation to Hydro Electric Projects:
The Tribunal found that dams and Hydro Electric Projects are inseparable, as the construction of a Hydro Electric Project presupposes the existence or construction of a dam. The Tribunal cited the definition of a dam from Wikipedia, which mentions that Hydro Power is often used in conjunction with dams to generate electricity. Thus, the Tribunal concluded that services rendered in relation to Hydro Electric Projects should be seen as services rendered towards the construction of dams, making them eligible for the exemption.

4. Invocation of the Extended Period for Demand of Service Tax:
The respondents argued that the demand was time-barred and that there was no evidence of suppression or mis-declaration with intent to evade payment of duty. The Tribunal agreed, noting that the Revenue had not highlighted any specific commission or omission by the respondents to justify the invocation of the extended period. The Tribunal referenced several cases, including Pushpam Pharmaceuticals Company and Anand Nishikawa Co. Ltd., to support the view that the respondents had bona fide reasons to believe that their services were not subject to service tax.

Conclusion:
The Tribunal dismissed the appeal filed by the Revenue, holding that the respondents were eligible for the exemption under Notification No. 17/2005-ST for services rendered in relation to the construction of a dam. The Tribunal also found that the demand was time-barred and that there was no justification for invoking the extended period. The Tribunal's decision was based on the interpretation that Hydro Electric Projects are inherently linked to the construction of dams, making the services provided by the respondents eligible for the exemption.