2019 (5) TMI 75 - AT - Service Tax

Erection, Commissioning and installation services - Sub-contract - It is the case of the revenue that the main contractor M/s NCCL is the one who has rendered services to IIT, Kharagpur and if so they could have claimed refund of service tax under Section 102 of FA - HELD THAT - The ultimate client in this case is IIT, Kharagpur which is an educational establishment. Research park of this educational establishment was being constructed by the main contractor M/s NCCL and a portion or that work has been sub-contracted to the appellant. The exemption available to the services provided to IIT, Kharagpur does not depend on whether such services are provided directly by the main contractor or by the main contractor using the services of a sub-contractor. The services rendered by the appellant through the main contractor to IIT, Kharagpur are exempted under Sec.102 of the Finance Act, 1994. The application for refund has been filed within the time stipulated in the section. The appellant is not liable to pay service tax as he has already paid the same and he is entitled to refund under Sec.102 of the Finance Act, 1994 - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Interpretation of Sec.102 of the Finance Act, 1994 regarding exemption of service tax for construction activities related to Government buildings.
- Eligibility of a sub-contractor to claim refund under Sec.102 when services are rendered through a main contractor.
- Applicability of refund provisions under Sec.11B and Sec.102 to different parties involved in service provision.

Analysis:
1. Interpretation of Sec.102 Exemption: The appellant filed a refund claim for service tax paid as a subcontractor for a project at IIT, Kharagpur, a Government educational establishment. The dispute arose as services were rendered through the main contractor, M/s NCCL. The lower authorities denied the refund, arguing that Sec.102 exempts services to the Government, not private companies like M/s NCCL. However, the Tribunal held that services to IIT, Kharagpur are covered under Sec.102 regardless of direct provision or through a contractor, emphasizing the nature of the service and ultimate client's status.

2. Eligibility of Sub-Contractor for Refund: The revenue contended that since the appellant billed M/s NCCL, not IIT, Kharagpur, they are not eligible for the exemption. The Tribunal rejected this, stating that the exemption applies based on the nature of services provided to the ultimate client, IIT, Kharagpur. The Tribunal highlighted that the logic of exemption extends to subcontractors when services are ultimately for the exempt entity, as clarified in a CBEC circular.

3. Applicability of Refund Provisions: The appellant argued that regardless of who files the refund claim, the exemption should apply to the entity bearing the service tax burden. The Tribunal agreed, emphasizing that the taxability is based on the recipient of services, not the billing entity. Therefore, the appellant, as a subcontractor for a Government project, was entitled to the refund under Sec.102, as they had borne the service tax burden and met the application timeline requirements.

4. Conclusion: The Tribunal set aside the lower authorities' decision, allowing the appeal and granting the refund to the appellant. The judgment clarified that services to a Government entity, like IIT, Kharagpur, are exempt under Sec.102, irrespective of the service provider's position in the contractual chain. The ruling emphasized the importance of the nature of services and the recipient in determining eligibility for tax exemptions and refunds, ensuring fair treatment for subcontractors involved in Government projects.