2025 (3) TMI 903 - AT - Service Tax

Admissibility of refund claim - entitlement for exemption under S.No. 12(a) of Notification No. 25/2012-ST for services provided to Raipur Development Authority (RDA) and Naya Raipur Development Authority (NRDA) - S.No. 12(e) covers the excluded category which has been left out by the Commissioner or otherwise while extending the benefit under S.No. 12(e) to RDA - benefit under S.No. 39 covers a situation where the service provider is not a Governmental Authority - invocation of extended period of limitation - penalty. Whether S.No. 12(a) would be admissible to appellants or otherwise? - HELD THAT - It is found from the submissions made by the learned Special Counsel as also from the grounds taken by the Adjudicating Authority that these two authorities are clearly engaged in commercial activities. It is also found that the other arguments taken by the learned Advocate is that their work is not for commercial use per se and therefore they would be covered within the ambit of S.No. 12(a). This argument is also not correct inasmuch as the exemption notification has to be construed strictly in terms of the wordings of the notification and a plain reading would obviously indicate that if the service was for use for commercial purpose then it would not get covered. In this case it is obvious that all these activities are for value addition of the plot and township which are being sold at commercial rates and terms by these two authorities therefore these services are obviously provided to the authorities who are otherwise engaged in commerce. In view of the same there are no infirmity in the impugned order in denying them the benefit under S.No. 12(a) of the notification 25/2012-ST. Whether S.No. 12(e) covers the excluded category which has been left out by the Commissioner or otherwise while extending the benefit under S.No. 12(e) to RDA? - HELD THAT - While the learned Advocate has contested that all these activities are civic in nature and therefore they should be covered under the notification and that the wordings under S.No. 12(e) of the Notification clearly covers even the activities of work relating to reservoirs sumps and pumping stations we find that the notification only covers three activities viz. pipeline conduit or plant for (a) water supply (b) water treatment (c) sewerage treatment or disposal. Therefore a plain reading of the entry would indicate that reservoirs and sumps would not be covered on the plain reading. However we feel that since the expression used is plant this would include pumping stations. Further a plant for either water supply or water treatment or sewerage treatment or disposal would invariably also have certain reservoirs or sumps or pumping stations attached thereto - the facts have not been correctly appreciated insofar as denial of benefit under S.No. 12(e) of the notification in respect of reservoirs sumps and pumping stations is concerned and accordingly this needs to be remanded back to the Original Adjudicating Authority. It is however made clear that the expression plant used in the entry would cover pumping stations and also interconnected reservoirs and sumps meant to feed or collect water sewerage etc. from these pumping stations. Whether benefit under S.No. 39 covers a situation where the service provider is not a Governmental Authority? - HELD THAT - The Adjudicating Authority was examining the broad description of the project and observed that unlike the works executed for RDA in the case of NRDA there is no breakup for each specified work and therefore he did not allow the benefit in respect of WCS provided to NRDA in terms of S.No. 12(e) of the notification - there is clear breakup in case of activities provided to RDA which helped in taking decision as to what services were covered or otherwise within the ambit of S.No. 12(e). However similar breakups were not provided in case of NRDA though it is apparent that on a broader level they are almost similar to the activities as that of RDA - the matter needs to be remanded back to the Original Adjudicating Authority to reexamine the eligibility under S.No. 12(e) in respect of WCS provided to NRDA on the similar lines as that of RDA and also keeping in view the as regards exclusions i.e. reservoirs sumps and pumping stations. Whether in the facts of the case limitation has been rightly invoked or otherwise and whether penalty has been rightly imposed? - HELD THAT - There was no substantive and positive grounds for alleging that there was deliberate and willful misstatement or suppression by the appellant to evade service tax in the facts of the case and therefore the invocation of extended period of limitation in terms of proviso to section 73(1) is not sustainable. Accordingly the decision of the Adjudicating Authority in the impugned order to the extent upholding the invocation of extended period is liable to be set aside and is accordingly set aside. Further since the extended period is not invocable the penalty imposed is also not tenable and accordingly the same is also set aside. Conclusion - i) The denial of exemption under S.No. 12(a) due to the commercial nature of the services provided to RDA and NRDA upheld. ii) The appellants were not eligible for exemption under S.No. 39 as they were not a governmental authority. iii) Since the extended period is not invocable the penalty imposed is also not tenable and accordingly the same is also set aside. Appeals are allowed by way of remand to the Original Sanctioning Authority.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

• Whether the appellants are entitled to exemption under S.No. 12(a) of Notification No. 25/2012-ST for services provided to Raipur Development Authority (RDA) and Naya Raipur Development Authority (NRDA).
• Whether the benefit under S.No. 12(e) of the same notification applies to certain excluded categories of work performed for RDA and NRDA.
• Whether S.No. 39 of the notification applies to the appellants, given they are not a governmental authority.
• Whether the invocation of the extended period for limitation and the imposition of penalties were justified.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Whether S.No. 12(a) would be admissible to appellants or otherwise:

The relevant legal framework is Notification No. 25/2012-ST, which exempts services provided to governmental authorities for non-commercial purposes. The Court examined whether the services provided by the appellants to RDA and NRDA were for commercial purposes, which would disqualify them from the exemption under S.No. 12(a).

The Court noted that both RDA and NRDA were engaged in commercial activities, such as selling developed plots at commercial rates. The Adjudicating Authority had determined that since these services were used for commercial purposes, they did not qualify for the exemption.

The Court upheld the Adjudicating Authority's findings, concluding that the appellants were not eligible for exemption under S.No. 12(a) because the services were predominantly for commercial use.

(b) Whether S.No. 12(e) covers the excluded category, which has been left out by the Commissioner or otherwise while extending the benefit under S.No. 12(e) to RDA:

S.No. 12(e) exempts services related to water supply, water treatment, or sewerage treatment. The Adjudicating Authority had granted exemptions for certain activities but excluded reservoirs and sumps.

The Court found that the term "plant" could include pumping stations and interconnected reservoirs and sumps. It remanded the matter to the Original Adjudicating Authority to determine if these facilities were interconnected and thus eligible for exemption.

(c) Whether benefit under S.No. 39 covers a situation where the service provider is not a Governmental Authority:

S.No. 39 applies to services provided by a governmental authority for municipal functions. Since the appellants were not a governmental authority, the Court agreed with the Adjudicating Authority that this exemption did not apply.

(d) Whether, in the facts of the case, limitation has been rightly invoked or otherwise and whether penalty has been rightly imposed:

The Court examined whether the extended period for limitation and penalties were justified. The Adjudicating Authority had invoked the extended period based on the appellants' failure to seek clarification on exemptions.

The Court found that there were interpretational issues regarding the exemptions, and the appellants had acted in good faith by paying service tax when the exemption was withdrawn. Therefore, the invocation of the extended period and penalties were not justified, and the Court set them aside.

3. SIGNIFICANT HOLDINGS

The Court upheld the denial of exemption under S.No. 12(a) due to the commercial nature of the services provided to RDA and NRDA. It found that the appellants were not eligible for exemption under S.No. 39 as they were not a governmental authority. The Court remanded the case to the Original Adjudicating Authority to reassess the eligibility of certain activities under S.No. 12(e), particularly regarding interconnected facilities like reservoirs and sumps.

The Court concluded that the extended period for limitation and penalties were unjustified due to the interpretational nature of the exemptions and the appellants' good faith actions. It remanded the appeals related to refund eligibility back to the Original Authority for reconsideration in light of its findings.