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2024 (11) TMI 724 - AT - Service TaxAdmissibility of exemption from service tax on the services of maintenance provided to Railway site under FCI - FAA held that since the activities of the Appellant are provided for use of FCI and hence are not Railways for public carriage of passenger or goods. Therefore, the exemption under Notification No.24/2009-ST dated 27.07.2009 as amended is not available HELD THAT - We find that the issue is no more res integra and has been decided by the Tribunal in the case of KVR Rail Infra Projects Pvt. Ltd. 2019 (5) TMI 376 - CESTAT HYDERABAD wherein the demand of service tax under Commercial or Industrial Construction Service or Works Contract Service for the period from October 2004 to June 2007 and August 2007 to October 2009 respectively for construction of railway sidings/tracks cannot sustain and require to be set aside. Thus demand of service tax is set aside and penalty imposed under Section 78 is also set aside. The appeal filed by the Appellant is partly allowed in the above terms.
Issues Involved:
1. Admissibility of exemption from service tax on maintenance services provided to private railway sidings under Food Corporation of India (FCI). 2. Applicability of penalties under various sections of the Finance Act, 1994 and Service Tax Rules, 1994. Issue-wise Detailed Analysis: 1. Admissibility of Exemption from Service Tax: - The central issue in the appeal was whether the maintenance services provided to the railway sidings of FCI qualified for exemption from service tax under Notification No. 24/2009-ST dated 27.07.2009, which exempts services related to management, maintenance, or repair of railways. - The Appellate Authority previously determined that the exemption did not apply because the railway sidings maintained by the Appellant were private and not used for public carriage of passengers or goods, as defined under Section 2(31) of the Railways Act, 1989. - The Tribunal, however, referred to precedents such as KVR Rail Infra Projects Pvt. Ltd. and Afcons Infrastructure Ltd., which clarified that the term "railways" in the context of service tax exemptions should be interpreted broadly and does not distinguish between government and non-government railways. - The Tribunal concluded that the maintenance of private railway sidings, which are connected to the main railway network and under the supervision of Indian Railways, falls within the exemption's purview. Thus, the demand for service tax was set aside. 2. Applicability of Penalties: - The original order imposed penalties under Sections 77 and 78 of the Finance Act, 1994, for contravention of various provisions, including failure to pay service tax and suppressing the value of taxable services. - The Appellate Authority reduced the penalty under Section 78 to 50% of the tax amount, acknowledging that the service tax demand was based on transactions recorded in specified records (Form 26AS), suggesting no intent to evade tax. - The Tribunal, aligning with its decision to set aside the service tax demand, also set aside the penalty imposed under Section 78, as the basis for the penalty (i.e., the service tax liability) was no longer valid. In conclusion, the Tribunal allowed the appeal partly by setting aside the demand for service tax and the penalty under Section 78, reinforcing the interpretation that private railway sidings connected to the main railway network are included within the service tax exemption for railways.
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