2024 (1) TMI 891 - AT - Service Tax

Demands raised in the SCNs under the non-existent charging sections of Sections 65 (105) (zzd), (zzg) and (zzzza) - Exemption by notification no. 25/2012-ST dated 20.6.2012 (entry no. 12) - abatement of 90% of the total cost towards the material when the assessee was only required to pay VAT on 80% of the cost under the UPVAT Rules. Demand under the non-existent charging sections - HELD THAT - This is not a case of mere wrong mention of a provision in the SCN but a confirmation of demand on charging sections which did not exist during the relevant period at all. It is also a case of ascertaining the demand considering exemption notification which also did not exist during the relevant period. Not only were the wrong provisions invoked in the SCN, but the demands were confirmed under them in the impugned order which shows complete non-application of mind. The provisions were not only wrong but were non-existent during the relevant period - this question is answered in favour of the assessee and against the Revenue and it is held that the demand confirmed in the non-existent legal provisions cannot be sustained. Exemption under Notification no. 25/2012-ST dated 20.6.2012 (S.No. 12) - HELD THAT - It is undisputed that the services were rendered to the PWD and to NOIDA. PWD stands for Public Works Department which is a department of the State Government. Therefore, it is Government itself and not a Governmental authority. The notification exempts not only services rendered to governmental authorities but also services rendered to the Governments and Local authorities. PWD, being the Government, the question of it having to fall under the definition of Governmental authority does not arise. As far as NOIDA is concerned, it stands for New Okhla Industrial Development Authority which governs a part of the National Capital Territory of Delhi and is part of the State of Uttar Pradesh. The term local authority is not defined in the notification and hence the commonsensical meaning of the term should be applied. A perusal of the functions of the NOIDA as per section 6 of the Act reproduced above makes it abundantly clear that it falls in the definition of local authority . Therefore, neither the NOIDA nor the PWD need to fall under the definition of Government authority because NOIDA is a local authority while PWD is a part of the Government itself. The services of street lighting and other maintenance work carried out by the assessee to these two organizations, also cannot by any stretch of imagination, be called predominantly meant for commerce or business. Since it is held against the Revenue and in favour of the assessee on the first two questions, it is not necessary to answer the third question of extent of abatement under works contract service. It is also not necessary to go into any of other submissions. The impugned order cannot be sustained and needs to be set aside - Revenue s appeal is rejected and the three appeals of the assessee are allowed.

Summary

Issues Involved:
1. Validity of demands raised under non-existent charging sections.
2. Exemption eligibility under Notification No. 25/2012-ST dated 20.6.2012 (entry no. 12).
3. Correctness of the abatement allowed by the Principal Commissioner.

Summary:

1. Validity of demands raised under non-existent charging sections:
The Tribunal examined whether the demands raised under Sections 65(105)(zzd), 65(105)(zzg), and 65(105)(zzzza) could be confirmed, given that these sections were not in existence during the relevant period. It was established that these sections were repealed effective from 1.7.2012, and a new charging section 66B was introduced. The Tribunal concluded that demands raised under non-existent sections cannot be sustained. The Tribunal emphasized that this was not a case of merely citing the wrong provision but confirming demands under sections that did not exist, demonstrating non-application of mind. Thus, the demand confirmed under non-existent legal provisions was held unsustainable.

2. Exemption eligibility under Notification No. 25/2012-ST dated 20.6.2012 (entry no. 12):
The assessee contended that services provided to the Public Works Department (PWD) and New Okhla Industrial Development Authority (NOIDA) were exempt under the said notification. The Principal Commissioner had rejected this claim, stating that the services were of a commercial nature and the assessee did not prove the Government's 90% participation. The Tribunal found that PWD, being a State Government department, qualifies as "Government" and not merely a "Governmental authority." NOIDA, created under the UP Industrial Area Development Act, 1976, was deemed a "local authority" due to its functions. The Tribunal held that services provided to these entities were exempt, as they were not predominantly for commerce or business. This issue was decided in favor of the assessee.

3. Correctness of the abatement allowed by the Principal Commissioner:
Given the Tribunal's findings on the first two issues, it was deemed unnecessary to address the correctness of the 90% abatement allowed by the Principal Commissioner. The Tribunal set aside the impugned order and provided consequential relief to the assessee.

Conclusion:
The impugned order was set aside, the Revenue's appeal was rejected, and the assessee's appeals were allowed with consequential relief. The Tribunal pronounced this judgment in court on 18.01.2024.