2025 (3) TMI 1320 - AT - Service Tax

Exemption under N/N. 25/2012 dated 28th June 2012 as amended by the subsequent Notification dated 30.01.2014 - NIT Patna and IIT Mandi fall within the definition of Governmental Authority - HELD THAT - The matter is already settled by Hon ble Patna High Court in the case of M/s Shapoorji Paloonji Company Pvt. Ltd 2016 (3) TMI 832 - PATNA HIGH COURT and further affirmed by Hon ble Supreme Court in 2023 (10) TMI 748 - SUPREME COURT . Hon ble Patna High Court has analysed the provisions of the above Notification in para 11 of their order and held that the construction activities undertaken by the petitioner in respect of Academic blocks of IIT Patna are exempt from service tax . This Tribunal has also considered this issue in the case of M/s. Dhanraj Jethwani Vs. Commissioner of CGST Customs Central Excise and Service Tax 2024 (6) TMI 133 - CESTAT NEW DELHI where it was held that MANIT is covered under Governmental Authority and it can not be made subject to the condition of 90% or more by way of equity or control to carry out any function entrusted to a Municipality under Article 243W of the Constitution. Both NIT Patna IIT Mandi are covered as Governmental Authority as defined under clause No. 2(s) of Notification No. 25/2012-ST dated 28thJune 2012 and as amended vide Notification No. 2/2014-ST dated 30thJanuary 2014. Accordingly the services provided to a Governmental Authority by way of construction erection commissioning installation repair maintenance renovation or alteration of any civil structure are exempt. Further as per Srl. No. 29(h) of the above Notification when principal contractor M/s. NBCC is exempt from Service Tax their sub-contractor (the appellant in this case) is also exempted. Exemption from service tax on the works contract services provided considering the specific contractual and statutory conditions - HELD THAT - M/s. NBCC was awarded work order by NIT Patna vide MOU dated 23.07.2013 and by IIT Mandi vide MOU dated 21.03.2014. These works were further sub-contracted by M/s. NBCC to the appellant vide letter reference No. NBCC/RBG (E)T (3)/2015/607 dated 08.04.2016 (in case of NIT Patna) Letter reference No. NBCC/GM/IIT/MANDI/2015/3000 dated 02.05.2015 (in case of IIT Mandi). Both these contracts have been entered into between the appellant and their principal after 01.03.2015. Both the work orders were awarded to the appellant after 01.03.2015 and therefore the conditions as mentioned in para 12 need to be verified by the lower authorities - this case is fit for remand to the adjudicating authority to examine whether the conditions imposed by Finance Act 2016 are satisfied in this case or not and accordingly decide the liability of service tax upon the appellant or otherwise. Confiscation - NIT Patna and IIT Mandi are Governmental Authorities exempting related services from service tax. However the case is remanded for further examination of the appellant s exemption eligibility under the Finance Act 2016 conditions. Appeal disposed off by way of remand.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

a) Whether NIT Patna and IIT Mandi qualify as "Governmental Authority" under Section 2(s) of Notification No. 25/2012-ST dated 28th June 2012, as amended, and are thus entitled to exemption under Serial No. 12 of the said Notification.

b) Whether the appellant is eligible for exemption from service tax on the works contract services provided, considering the specific contractual and statutory conditions.

ISSUE-WISE DETAILED ANALYSIS

Issue (a): Qualification as "Governmental Authority"

Relevant legal framework and precedents: The determination of whether NIT Patna and IIT Mandi qualify as "Governmental Authority" hinges on the interpretation of Section 2(s) of Notification No. 25/2012-ST, as amended. The precedent set by the Patna High Court in Shapoorji Pallonji & Company Private Limited v. C.C., Central Excise & S.T, Patna, and affirmed by the Supreme Court, serves as a crucial reference.

Court's interpretation and reasoning: The Tribunal relied on the Patna High Court's interpretation, which clarified that the definition of "Governmental Authority" includes entities set up by an Act of Parliament or State Legislature, independent of the 90% equity or control condition applicable under sub-clause (ii) of Clause 2(s).

Key evidence and findings: Both NIT Patna and IIT Mandi were established under respective Acts of Parliament, qualifying them as "Governmental Authority" under the clarified legal framework.

Application of law to facts: The Tribunal applied the legal interpretation from the Shapoorji Pallonji case, concluding that NIT Patna and IIT Mandi are "Governmental Authorities" and thus exempt from service tax under the relevant notification.

Treatment of competing arguments: The appellant's arguments were supported by legal precedents, while the respondent's reiteration of lower authority findings did not introduce new legal interpretations.

Conclusions: The Tribunal concluded that both NIT Patna and IIT Mandi qualify as "Governmental Authorities," thereby exempting the services provided to them from service tax.

Issue (b): Eligibility for Service Tax Exemption

Relevant legal framework and precedents: The exemption eligibility is governed by Notification No. 25/2012-ST and subsequent amendments, particularly the conditions introduced by the Finance Act, 2016.

Court's interpretation and reasoning: The Tribunal noted that the exemption under Serial No. 12A(a) is contingent upon contracts entered into before 1st March 2015, with appropriate stamp duty paid prior to this date.

Key evidence and findings: The contracts between the appellant and M/s. NBCC were executed after 1st March 2015, necessitating verification of compliance with the conditions for exemption under the amended notification.

Application of law to facts: The Tribunal determined that the lower authorities need to verify whether the specific conditions for exemption under the Finance Act, 2016 are met, given the contract dates and stipulations.

Treatment of competing arguments: The appellant argued for exemption based on the principal contractor's status, while the respondent maintained the lower authority's findings without additional legal arguments.

Conclusions: The Tribunal remanded the case to the adjudicating authority for verification of compliance with the conditions for exemption as per the Finance Act, 2016.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: The Tribunal cited the Patna High Court's reasoning: "The Authority set up by an Act of Parliament or State Legislature is not and cannot be made subject to the condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution."

Core principles established: Entities established by an Act of Parliament or State Legislature qualify as "Governmental Authorities" without needing to meet the 90% equity or control condition.

Final determinations on each issue: The Tribunal upheld that NIT Patna and IIT Mandi are "Governmental Authorities," exempting related services from service tax. However, it remanded the case for further examination of the appellant's exemption eligibility under the Finance Act, 2016 conditions.