2019 (11) TMI 539 - AT - Service Tax

Exemption from service tax - Works Contract Services or Commercial or Industrial Construction Services? - construction of railway lines for private parties and construction of private roads - case of the revenue is that both CICS and WCS exclude railways or roads - Demand of interest and penalty as well - HELD THAT - In respect of one of the appeals herein viz., M/S UNITED RAIL ROAD CONSULTANTS PVT LTD VERSUS COMMISSIONER OF CUSTOMS CENTRAL EXCISE SERVICE TAX, HYDERABAD-III 2019 (6) TMI 1409 - CESTAT HYDERABAD has decided that the charging section of works contract under section 65(105)(zzzza) of the Finance Act, 1994 excludes railways. Since it does not qualify the term by saying railways for public carriage or railways by the Government , it was held that the term railways includes any form of railways in the absence of any stipulation to the contrary in the charging section - the charging section under CICS is also identically worded and find no reason to take a different view. Demand of interest and penalties - HELD THAT - In both CICS and WCS the exclusions from railways, roads, dams, etc., extends to all forms of railways, roads, dams, etc., in the absence of any word restricting them to public railways, public roads, public dams etc. Consequently, demands raised in all these appeals must fail. Since the demands are themselves not sustainable, there is no question of any interest or penalty being imposed for non-payment of service tax. Appeal allowed - decided in favor of appellant.

Summary

Issues: Whether construction of railway lines for private parties and construction of private roads are taxable under Works Contract Services (WCS) or under Commercial or Industrial Construction Services (CICS).

Analysis:

1. Interpretation of Relevant Provisions: The issues in these appeals revolve around the interpretation of Section 65(25b) and Section 65(105)(zzzza) of the Finance Act, 1994. Section 65(25b) defines "Commercial or industrial construction" while Section 65(105)(zzzza) pertains to works contracts. The crux of the matter is whether the construction of private railways and roads falls under these definitions.

2. Assessees' Position: The assessees argue that services provided for private railways and roads should not be taxed under CICS or WCS. They contend that the exclusion clauses in the provisions do not specify that the roads must be public or the railways must be of a particular type. Therefore, they assert that no service tax should be levied on services related to any form of railways or roads.

3. Revenue's Stand: On the other hand, the revenue argues that both CICS and WCS exclude railways and roads, which should be understood as public railways and roads commonly used. They maintain that private railways within premises or factories do not qualify for exclusion. Consequently, the revenue asserts that the assessees are liable to pay service tax for the services provided by them.

4. Judicial Precedents: The Tribunal refers to its previous decision in the case of United Rail Road Consultants Pvt Ltd, where it was held that the term "railways" includes any form of railways unless specified otherwise. Additionally, the Tribunal cites the Supreme Court's ruling in Dilip Kumar & Co. and others, emphasizing that taxing statutes must be strictly interpreted in favor of the assessee in case of doubt regarding applicability.

5. Final Decision: Considering the interpretations of the provisions and the precedents, the Tribunal concludes that the exclusions from railways and roads encompass all forms of railways and roads unless specifically restricted to public entities. Therefore, the demands raised by the revenue are deemed unsustainable, leading to the allowance of appeals by the assesses and rejection of appeals by the revenue.

6. Outcome: As a result of the judgment, the demands for service tax, interest, and penalties are deemed unwarranted due to the non-applicability of the taxation provisions to the services provided in connection with private railways and roads.

This detailed analysis encapsulates the key aspects of the judgment, providing a comprehensive understanding of the issues involved and the Tribunal's decision.