2022 (6) TMI 380 - AT - Service Tax

Works contract done through sub-contractorlaying of pipeline for fresh water - Applicability for exemption under N/N. - whether appellant-assessee, a company registered under Section 617 of the Companies Act 1956, a Government Company, 100% shares are held by the Rajasthan Government? - HELD THAT - It is admitted fact that the appellant was set up by the Government of Rajasthan in February, 1979 and registered as a Government Company under Section 617 of the Companies Act, 1956. Initially the company was registered in the name of Rajasthan State Bridge and Construction Corporation Limited, to act as a nodal agency for construction of Bridges, Buildings and other Industrial Structure funded by Government of Rajasthan. It is further found that the Government Authority‟ is mentioned in Sl. No. 25 of the exemption notification, and is further elaborated in definition clause (s) of the said notification, which provides that Government Authority means a Board, or an authority or any other body established with 90% or more participation by way of equity or controlled by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under Article 243W of the Constitution. Admittedly the appellant company is established by the Government of Rajasthan, which owns 100% of the equity and further 100% control is in the hands of the Government of Rajasthan - Further, the laying of fresh water pipeline is a work entrusted to a municipality under Article 243W of the Constitution of India. The appellant is entitled to exemption under Notification No. 25/2012-ST. - Appeal allowed - decided in favor of appellant.

Summary

Issues: Whether the appellant- assessee, a Government Company, is exempt from service tax under Notification No. 25/2012 for works contract done through a sub-contractor for laying a pipeline for fresh water.

Analysis:
1. The appellant, a Government Company registered under the Companies Act, received Works Contract Service from a sub-contractor but failed to pay service tax under reverse charge mechanism as per Notification No. 30/2012. The Adjudicating Authority confirmed the demand, imposed penalties, and late fees for non-compliance.

2. The appellant contended that they are entitled to exemption under Notification No. 25/2012 for services provided to the Government, local authority, or Government Authority related to water supply infrastructure. They argued that the works contract service they received should be exempt from tax.

3. The Commissioner (Appeals) found that the appellant, although established by the State Government, did not meet the criteria of being a Government, local authority, or Government Authority as per the exemption notification. Consequently, the demand and penalties were upheld.

4. The Tribunal noted that the appellant was set up by the Government of Rajasthan and registered as a Government Company. The definition of "Government Authority" in the exemption notification was analyzed, emphasizing the requirement of 90% equity participation and control by the Government. As the appellant met these criteria and the pipeline work fell under municipal functions, the Tribunal held that the appellant was entitled to exemption under Notification No. 25/2012.

5. The Tribunal allowed the appeal, setting aside the impugned order and granting consequential benefits to the appellant. The decision was based on the appellant's status as a Government Company with full equity ownership and control by the Government of Rajasthan, meeting the criteria for exemption under the notification.

This detailed analysis covers the issues involved in the legal judgment and provides a comprehensive understanding of the Tribunal's decision regarding the appellant's eligibility for exemption from service tax under the relevant notification.