2019 (2) TMI 951 - AT - Service Tax

Works contract services provided to various departments of Govt. of Uttar Pradesh - exemption in terms of the Entry No.12 of Notification No.25/2012-ST dated 20.06.2012 - Held that - The contracts with the Government were executed when the services were exempted in terms of various Sl.Nos. of Entry 12 of the Mega Notification - Admittedly in such a scenario the question of inclusion of any tax in the contract value would not arise. Further observed that the assessee was not raising any Bills for the work executed by them and only the contract amounts were being paid to them. When the legislation itself has legislated for the refund of Service Tax in terms of the provisions of section 102, the objections raised by Revenue cannot be appreciated. Appeal dismissed - decided against revenue.

Issues:
1. Whether the services provided by the respondent to the government departments were taxable following the changes in exemption notifications.
2. Whether the respondent was eligible for a refund of the service tax paid during a specific period.
3. Whether the respondent had passed on the incidence of service tax, impacting their eligibility for a refund.

Analysis:

Issue 1: Taxability of services provided to government departments
The case involved the provision of 'works contract services' by the respondent to various government departments. Initially, the services were exempt under Entry No.12 of Notification No.25/2012-ST. However, with the omission of this exemption through Notification No.06/2015-ST, the services became taxable. Subsequently, the exemption was reinstated via Notification No.09/2016-ST. The Tribunal noted that the contracts were executed during the period of exemption, and the respondent did not include the tax element in the contract value. The Commissioner(Appeals) found that the services provided were covered by the exemption, and the respondent did not raise invoices for the work executed, receiving funds directly from the government. The Tribunal upheld the findings, emphasizing that the objections raised by the Revenue were not valid given the legislative provision for refund under section 102 of the Finance Act.

Issue 2: Eligibility for refund under section 112 of the Finance Act
The respondents applied for refunds under section 112 of the Finance Act, which allowed for the refund of service tax collected during a specific period. The Deputy Commissioner rejected the refund claims, citing the lack of evidence regarding the non-passing on of the tax incidence. However, the Commissioner(Appeals) scrutinized the documents and found that the services were indeed covered by the exemption. The Tribunal concurred with the Commissioner's findings, emphasizing that the legislation provided for the refund of service tax during the relevant period, thereby dismissing the Revenue's appeals.

Issue 3: Passing on the incidence of service tax
The rejection of the refund claims by the Deputy Commissioner was based on the assertion that the respondent failed to demonstrate that they had not passed on the service tax incidence. However, the Commissioner(Appeals) observed that the contracts were executed during the exemption period, and the respondent did not include the tax element in the contract value. The Tribunal agreed with this observation, highlighting that the respondent did not raise invoices for the work executed and received funds directly from the government without the tax element. Consequently, the Tribunal rejected the Revenue's appeals and disposed of the stay petition and cross-objections filed by the respondents.

In conclusion, the Tribunal upheld the Commissioner(Appeals)'s decision, emphasizing the non-taxable nature of the services provided during the exemption period and the legislative provision for the refund of service tax, thereby dismissing the Revenue's appeals and affirming the respondent's eligibility for the refund.

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