2024 (12) TMI 278 - AT - Service Tax

Exemption from service tax - site formation and clearance, excavation and earth moving work for road construction and water supply - quantification of mandatory penalty. Demand of Rs. 58, 249/- on renting of JCB machines and excavator under the head of supply of tangible goods for use service - HELD THAT - It is found that as per the facts of the present case and the submission made by the Learned Counsel, this service tax is in relation to the transportation of construction material related to the construction of road. In such case the appellant being a proprietary firm the service tax liability is on the recipient of service in terms of Notification No. 13/2012-ST dated 01.07.2012 by which reverse charge was applicable on the recipient of the service. Therefore, the demand of Rs. 58,249/- against the appellant is clearly not sustainable. Demand of Rs. 27,226/- for road construction work and Rs. 10,64,431/- related to water supply project - HELD THAT - It is found that these services are related to construction of road provided to M/s L T and in turn L T has got the work done from the appellant for execution of contract for the governmental authority i.e. GIDC (Gujarat Industrial Development Corporation) - From the above reading of exemption under Notification No. 25/2012-ST dated 20.06.2012 (w.e.f. 01.07.2012) under Sr. No. 12 13(a), it is found that if a service is provided to the government or governmental authority by way of construction of pipe line or plant for water supply, the same is exempted. Similarly, under Sr. No. 13., the services provided by way of construction of road transportation used by general public is also exempted. In the present case the appellant s activity involved is to construct the water supply system and also related to the construction of road. Therefore, the appellant s activities are clearly covered under both the entries i.e. Sr. No. 12 13 of Notification No. 25/2012-ST. The Learned AR Shri Rajesh Nathan argued that the appellants have provided the service to M/s L T is not a government or governmental authority, therefore, the appellant s activities are not covered under exemption - in this regard it is held that since the entire project of the main contractor i.e. M/s L T is meant for government and appellant being a sub-contractor also providing the service for the government - it is an usual practice that a main contractor who is allotted the project by the government major part of the work is done by sub-contractor only and if on this ground the exemption is denied then the whole purpose of the modification will be defeated - even though the service is provided by the sub-contractor but since the same undisputedly meant for the government i.e. GIDC, the activities are covered under Sr. No. 12 and 13 of the notification No. 25/2012-ST. The demand of service tax amounting to Rs. 58,249/-, Rs. 27,226/-, Rs. 10,64,431/- set aside. However, the demand of Rs. 32,514/- for which the appellant is not contesting is upheld - appeal allowed in part.

Summary

Issues:
Quantum of service tax demand on various services, classification of services under works contract, applicability of exemptions under relevant notifications, imposition of penalties, interpretation of reverse charge mechanism, and applicability of judgments in similar cases.

Analysis:

Quantum of Service Tax Demand:
The appellant challenged the service tax demand on various services, including supply of tangible goods on hiring and site formation services. The Commissioner (Appeals) reduced the demand but upheld a portion of it. The appellant contested the demand based on their activities and the nature of services provided.

Classification of Services under Works Contract:
The appellant argued that they were sub-contractors for road construction projects and should be classified under works contract services. They relied on circulars and judgments to support their claim for exemption under relevant notifications.

Applicability of Exemptions:
The Tribunal analyzed the services provided by the appellant in relation to road construction and water supply projects. They interpreted the exemptions under Notification No. 25/2012-ST and concluded that the activities of the appellant fell under the exempted categories for services provided to government or governmental authorities.

Imposition of Penalties:
The Commissioner (Appeals) imposed penalties on the appellant based on specified records and provisions of the Finance Act, 1994. The Tribunal reviewed the penalty amounts and upheld the imposition based on the available evidence.

Interpretation of Reverse Charge Mechanism:
The appellant argued that as a proprietary firm providing transportation services, the service tax liability should be on the recipient of the service. They referred to relevant notifications and judgments to support their position on the reverse charge mechanism.

Applicability of Judgments:
The appellant cited various judgments to strengthen their arguments regarding the classification of services, applicability of exemptions, and liability under the reverse charge mechanism. The Tribunal considered these judgments in their analysis of the case.

Conclusion:
After considering the submissions from both parties and reviewing the records, the Tribunal set aside certain demands for service tax while upholding others. They interpreted the exemptions under relevant notifications and clarified the applicability of penalties and the reverse charge mechanism. The appeal was allowed in part, modifying the impugned order accordingly.