2020 (9) TMI 837 - AT - Service Tax

Works Contract Services - service provided to organisations like Andhra Pradesh Power Generation Corporation (AP GENCO), Andhra Pradesh Tourism Development Corporation (APTDC), etc. - Government/ local authority/ Government authority or not - benefit of N/N. 25/2012-ST - whether the appellant has provided service to Government/ local authority/ Government authority as per the exemption Notification No. 25/2012-ST.? - HELD THAT - All the companies / Corporations have been established by the Government of Andhra Pradesh under the various Acts and /or Government order , as aforementioned and thus we hold that the appellant has provided service to Governmental authority. Evidently all the service recipients have been set up by the State Government, and are directly under the control of the various Ministries of the State Government. Thus, the service recipients are covered under sub clause (i) of clause (5), of the definition of the term Govt. Authority , in Notification No. 25/2012-ST as amended by Notification No. 2/2014-ST (by way of substitution). Accordingly, the appellant is entitled to exemption under Notification No. 25/2012-ST, and the demand of ₹ 97,63,710/- is set aside. Liability of service tax on the flats constructed and allocated to the land owner under the development agreement - HELD THAT - The construction of flats under the development agreement with the land owner by the appellant is on principal to principal basis. In such transaction, there is neither any element of service provided to the land owner, nor any element of sale. Accordingly, we hold that service tax is not imposable on this transaction and accordingly set aside the demand of ₹ 5,55,458/- - demand set aside. Non payment of service tax on trenching works done for GTL Limited - case of appellant is that the Court below failed to appreciate the fact that the said demand is for services rendered during the period 2010-11 whereas the show cause notice have been issued on 09.12.2016 - extended period of limitation - HELD THAT - The appellant has already provided the service as well as raised the invoice before 30.06.2011. Further, admittedly appellant have not given the option for payment of tax as per the date of receipt of consideration. Thus, we hold that demand of tax, relying of Rule 11 of Point of Taxation Rules is bad. Accordingly, we set aside the demand of ₹ 63,973/-. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Demand of ?97,63,710/- under 'Works Contract Service'
2. Liability of service tax on flats constructed and allocated to the landowner under the development agreement
3. Demand of ?63,973/- for non-payment of service tax on 'trenching works' done for GTL Limited

Issue-wise Detailed Analysis:

1. Demand of ?97,63,710/- under 'Works Contract Service':
The primary issue was whether the appellant provided services to Government/local authority/Government authority, qualifying for exemption under Notification No. 25/2012-ST. The learned Commissioner noted that the service recipients, including entities like AP GENCO and APTDC, were established under various State Acts but did not qualify as Government or local authority under the General Clauses Act, 1897, or the Finance Act, 1994. Consequently, the exemption was deemed inapplicable. However, upon review, it was determined that these entities were set up by the State Government and controlled by various State Ministries, thus qualifying as 'Governmental authority' under the amended definition in Notification No. 25/2012-ST by Notification No. 2/2014-ST. Therefore, the appellant was entitled to the exemption, and the demand of ?97,63,710/- was set aside.

2. Liability of service tax on flats constructed and allocated to the landowner under the development agreement:
The appellant argued that the construction of residential complexes under a development agreement with the landowner was on a principal-to-principal basis, with no element of service provision or consideration defined in the agreement. The lower court's reliance on a circular issued before the negative list regime was contested. The Tribunal found that the construction of flats under the development agreement did not constitute a service to the landowner, and thus, service tax was not applicable. Consequently, the demand of ?5,55,458/- was set aside.

3. Demand of ?63,973/- for non-payment of service tax on 'trenching works' done for GTL Limited:
The appellant contended that the demand was time-barred as the services were rendered, and invoices issued before 30.06.2011, falling outside the extended period of limitation. The lower court's reliance on Rule 9 of the Point of Taxation Rules, 2011, was disputed, emphasizing that the appellant did not opt to treat the date of receipt of payment as the taxable event. The Tribunal agreed that the demand was beyond the extended period of limitation and set aside the demand of ?63,973/-.

Conclusion:
All demands and penalties imposed were set aside, and the appeal was allowed, granting the appellant consequential benefits as per the law.