2025 (1) TMI 938 - AT - Service Tax

Concessional rate of duty under the Works Contract Service composition scheme - denial of benefit for the reason that erection/construction of the electricity distribution lines do not fall under the ambit of service in relation to transfer of electricity - HELD THAT - The issue is no longer res integra having been decided by this Bench in their own case M/S. KEC INTERNATIONAL LTD. VERSUS COMMISSIONER OF CGST GURGAON AND COMMISSIONER OF S.T. DELHI 2022 (8) TMI 992 - CESTAT CHANDIGARH where it was held that The appellant is therefore clearly entitled to the benefit of both the notifications dated 20.07.2010 and 27.02.2010. Conclusion - The appellant s services fall within this scope qualifying for exemption. The impugned orders cannot be sustained - Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the appellant is eligible for the concessional rate of duty under the Works Contract Service composition scheme.
• Whether the services provided by the appellant in relation to the erection and construction of electricity transmission lines are exempt from service tax under the notifications dated 20.07.2010 and 27.02.2010.
• Interpretation of the phrase "relating to" in the context of the notifications granting service tax exemptions.
• The applicability of previous tribunal decisions and legal precedents to the appellant's case.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Eligibility for Concessional Rate under Works Contract Service

• Relevant legal framework and precedents: The appellant was issued show cause notices alleging ineligibility for the concessional rate under the Works Contract Service composition scheme. The legal framework involves the interpretation of the Works Contract Service under the Finance Act, 1994.
• Court's interpretation and reasoning: The court did not focus extensively on this issue as the primary argument revolved around the service tax exemption notifications.
• Key evidence and findings: The court noted the appellant's claim that their services fall under the exemption notifications, which would negate the need for concessional rates.
• Application of law to facts: The court's analysis primarily centered on the exemption notifications rather than the composition scheme itself.
• Treatment of competing arguments: The appellant's counsel argued that the issue of concessional rates was moot due to the service tax exemptions applicable to their services.
• Conclusions: The court did not make a specific determination on the concessional rate issue due to the overriding exemption considerations.

Issue 2: Exemption from Service Tax under Notifications

• Relevant legal framework and precedents: The appellant relied on two notifications: Notification No. 45/2010-ST dated 20.07.2010 and Notification No. 11/2010-ST dated 27.02.2010, which exempt services related to the transmission and distribution of electricity from service tax.
• Court's interpretation and reasoning: The court found that the services provided by the appellant are indeed exempt under these notifications. The phrase "relating to" was interpreted broadly, covering a wide range of services associated with electricity transmission.
• Key evidence and findings: The court considered the appellant's previous case decisions and the broad interpretation of "relating to" in similar contexts, as upheld by the Tribunal in Kedar Construction and other cases.
• Application of law to facts: The court applied the broad interpretation of the exemption notifications to the appellant's services, concluding that they are exempt from service tax.
• Treatment of competing arguments: The court rejected the revenue's argument that the services were not exempt, emphasizing the wide scope of the term "relating to" in the notifications.
• Conclusions: The court concluded that the appellant's services are exempt from service tax under the cited notifications, and thus, the impugned orders could not be sustained.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: The court stated, "The appellant is, therefore, clearly entitled to the benefit of both the notifications dated 20.07.2010 and 27.02.2010."
• Core principles established: The phrase "relating to" in exemption notifications should be interpreted broadly to include all services associated with the transmission and distribution of electricity. The appellant's services fall within this scope, qualifying for exemption.
• Final determinations on each issue: The court set aside the impugned orders, allowing the appeals based on the exemption from service tax under the relevant notifications.

The judgment emphasizes the importance of interpreting statutory exemptions broadly to fulfill legislative intent, particularly in the context of public utility services like electricity transmission.