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TMI Blog2020 (11) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... Projects Pvt. Ltd., (KRRTPL in short) are engaged in providing taxable services under clause (51) read with Clause (44) of Section 65B of the Act, viz. Works contract Service, Erection, commissioning or installation service, transport of goods by road service, renting of immovable property service, supply of tangible goods service etc., and registered with the department vide Registration No. AACCK6220FST001. 3. Intelligence gathered and investigations conducted by the Officers of Directorate General of Goods and Services Tax Intelligence, Hyderabad Zonal Unit (DGGI for short), including scrutiny of the records recovered from and data submitted by the assessee during the course of investigation and the statements recorded from the key personnel of M/s KRRTPL revealed the following. 4. The respondent are engaged in providing erection, commissioning and installation of transmission lines to various transmission corporations viz., i) M/s Power Grid Corporation of India Limited (Andhra Pradesh, Telangana, Karnataka & Uttar Pradesh), ii) M/s Transco, Telangana, iii) M/s Bihar State Power Transmission Company Limited, iv) M/s Haryana Vidyut Prasaran Nigam Limited, v) M/s Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered during the period from 01.10.2014 to 30.06.2017 under the category of Works Contract Service in terms of proviso to Section 73(1) of the Act; (ii) demand of service tax amounting to Rs. 1,16,11,175/- (inclusive of Cesses) due to non-inclusion of consideration received towards crop compensation/ right of way in the taxable value for the services rendered during the period from 01.04.2014 to 30.06.2017 in terms of proviso to Section 73(1) of the Act; (iii) demand of interest at applicable rates under Section 75 of the Act on the amount demanded at (i) and (ii) above; (iv) imposition of penalties under sections 76, 77 and 78 of the Act. 8. The show cause notice also proposed imposition of penalty under Section 78A on Shri K. Ramachandra Rao, Managing Director of M/s KRRTPL. 9. The show cause notice was assigned to the Commissioner, audit-II Commissionerate for adjudication vide letter C. No. IV/16/218/2018-CC (HZ) Tech dated 23.10.2018 of Chief Commissioner in terms of CBIC letter F. No. 137/19/2018-Service Tax dated 10.09.2018. 10. Vide the impugned order-in-original No. HYD-EXCUS-AUDIT-COM-06- 18-19 dated 30.11.2018 (OIO for short), read with corrigendum dated 21. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity or a Governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair maintenance, renovation, or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;" During the period from 01.04.2015 to 29.02.2016 are also exempted vide Section 102 of the Act. iv) As per the definition given at Clause 2(s) of Notification No. 25/2012-ST dated 20.06.2012, as amended, 'governmental authority', means "an authority or a board or any other body; i) set up by an act of Parliament or a State Legislature, or ii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243W of the Constitution". v) As per the above definition, during the material period, for an entity to get covered in the ambit of the definition of Governmental authority the following conditions are to be fulfilled- a) it should be set up by an Act of the Parliament or a State Legislature or established by Government (as promoter), and b) there should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porations are electricity boards, and since electricity is a public amenity, they satisfy the test of functionality of municipality under Article 243W, is erroneous and far stretched imagination. viii) In view of the above, as the transmission companies/ corporations are not fulfilling the most important condition in the definition of Governmental authority, they cannot be treated as Governmental Authorities. ix) Further, the said exemption notification, at Sl. No. 12(a)/12A (and also Section 102 of the Act for the period from 01.04.2015 to 29.02.2016), clearly provides for exemption to such services provided to the Government, a local authority or a governmental authority only if the works meant are predominantly for use other than for commerce, industry, or any other business or profession. In the instant case, the service receivers, transmission companies/ corporations are commercial/ business entities incorporated under provisions of Companies Act, 1956/2013, with an objective of making profits by carrying out the operations entrusted to these business entities. In fact Power Grid Corporation of India Limited is a public limited company with authorised share capital of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Work Order No. 2907/BSPTCL dated 05.12.2013 issued by M/s Bihar State Power Transmission Co. Ltd., at para No. 1.0 Contract Value of PACKAGE A, B and C, mentioned that value of execution component (including Tree & Crop compensation) are inclusive of service tax. The relevant parts of para 1.0 and para 31 of the above contract are as hereunder:- "This value is inclusive of service tax. In case of increase in rate of Service tax no extra payment shall be made. The breakup of the prices have been furnished in the price schedule annexed with this order. The landed cost of Pkg. -'A' , Pkg.-'B', & Pkg.-'C' in totality will be Rs. 2,74,25,505.00 inclusive of freight, insurance and service tax." Para 31. SERVICE TAXES: Applicable service tax etc. will be payable as included in quoted rates. Increase in *service (if so) as applicable at billing time shall be paid by you. (*sic for service tax)." xiii) Thus M/s KRRTPL paid service tax on services rendered to some transmission companies / corporations, while they chose to avail exemption erroneously from payment of service tax in respect of services rendered to other transmission companies/ corporations, which was not noticed by ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the commissioner's observation that the issue in dispute has already been examined by him in an earlier OIO No. HYD-SVTAX-000-COM- 37-15-16 dated 29.01.2016 in the case of same assessee is also erroneous as the said earlier OIO pertained to applicability of 'works contract composition scheme' for the different period i.e. 2010-11 to 2013-14 and therefore not relevant/ not having any bearing on the issue. 9. In view of the above, the subject order in original, in so far as and to the extent of dropping the demands of service tax of Rs. 9,77,17,404/- and Rs. 1,16,11,175/- as detailed supra and the consequential non-demand of interest thereon and non-imposition of penalties under Section 77 and 78 on the assessee in respect of the said demands, is not legal and proper. 10. Learned Authorised Representative appearing for the Revenue reiterated the grounds of appeal and submits that the service receiving company have not been set up by the Parliament or State Legislative, secondly, the service receiving companies are not created to carry function(s) of a municipality as per Article 243W of the Constitution of India, thirdly, the service receiving company - the principal is doing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oor families. Several other concessions are also extended to families of below poverty line, small scale industries, backward regions and areas. As several exemptions/ concessions on the power produced and transmitted by the corporations, are extended by the Union/ State Governments, the power corporations always depend upon budgetary supports from the respective governments for the maintenance and operational expenditure. The corporations are therefore set up predominantly for purposes other than for Commerce or Industry or any other business or profession. These projects constitute infrastructure facilities and civic amenities the state provides in public interest, and not activities of commerce or industry. Civil structures undertaken for government/ government undertakings are not primarily for commercial or industrial purposes but for delivering the affirmative obligations of the state or a state instrumentality under the constitution. Such transactions would stand excluded from the liability of service tax, not being primarily for industrial or commercial purposes. In the case of Lanco Infratech Limited vs. CCCE&ST, Hyderabad the Larger Bench of CESTAT at Bangalore -2015 (38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar exemption under the above notifications was extended by the same Commissioner for the period 2010-11 to 2013-14, which stands accepted by Revenue vide OIO No. HYD-SVTAX-000-COM-37-15-16, dated 29.01.2016. 19. Further urges, in the following cases services of civil structures provided to governmental authorities, which were for purposes other than for commerce/ industry or any other business or profession i.e. not being primarily for industrial or commercial purposes were held not liable to service tax. i) Vensa Infrastructure Limited vs. CST, Hyderabad GST Commissionerate F. O. No. A/31588/2018 dt. 21.12.2018 passed by the Regional Bench of CESTAT at Hyderabad. ii) KMV Projects Ltd. vs. CST Hyderabad -F. O. No. A/30436/2019, dated 27.03.2019 passed by CESTAT, Hyderabad. 20. The other issue of dispute relates to the amount of crop compensation received by the respondents, as reimbursement of expenditure incurred on behalf of the corporations. Work of erection and installation of transmission lines, run through the fields/ lands of the farmers during the execution of erection and installation of the transmission lines. Damages are caused to the standing crops of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orks contract basis and Shapoorji Paloonji will be responsible for payment of any tax levied on transfer of property in goods involved in the works contract under the Bihar Government Sales Tax Act, which shall not be reimbursable. Further provided that the contractor / Shapoorji Paloonji is required to have a valid service tax registration under works contract service. Further, specified that the rates quoted are exclusive of service tax. Further, provided that Shapoorji Paloonji will be required to submit service tax paid challans to NBCC for reimbursement. 25. Shapoorji Paloonji started paying service tax in respect of the said project. The Indian Audit and Account Department raised audit objection in June, 2015 to the effect that service provider is undertaking construction activity of educational institutions, is not required to pay service tax in view of Notification No. 25/2015-ST dated 20.06.2012, granting exemption in exercise of powers conferred under Section 93 of the Finance Act, 1994. The Revenue had taken similar objection and stand as in the facts of the present case and insisting that the service tax is payable placing reliance on a circular dated 19.09.2013, by cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrusted to a municipality under Article 243W of the Constitution, alone is the Government Authority, entitled to exemption from levy of service tax. As such provision in the notification as amended vide Notification No. 2/2014-ST, is applicable to both clauses of 2(s) and not to sub clause (ii) of clause 2(s) alone of the said notification. The High Court held that the contention of Revenue is not sustainable in law. The government authority as defined in the Notification dated 30.01.2014, means an Authority or a Board or any other body set up by an Act of Parliament or State Legislature. The provisions contained in sub-clause (i) and sub-clause (ii) of Clause 2(s) are independent, dis-conjunctive provisions and the expression "90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution" is related to sub-clause (ii) of Clause 2(s) alone. The clause (i) is followed by ";" and the word "or". Therefore, each of the sub-clauses is independent provision. The condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... domestic, industrial and commercial purposes. 6. Public health, sanitation, conservancy and solid waste management. 7. Fire services. 8. Urban forestry, protection of the environment and promotion of ecological aspects. 9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded. 10. Slum improvement and upgradation. 11. Urban poverty alleviation. 12. Provision of urban amenities and facilities such as parks, gardens, play grounds. 13. Promotion of cultural, educational and aesthetic aspects. 14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums. 15. Cattle ponds; prevention of cruelty to animals. 16. Vital statistics including registration of births and deaths; 17. Public amenities including street lighting, parking lots, bus stops and public conveniences. 18. Regulation of slaughter houses and tanneries." 32. From a bare reading of the provisions of Article 243W read with Schedule XII, we find that several functions and responsibilities set out include economic development, social justice, planning for economic and social development, water supply for domestic, industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be an entity which: a) Should be set up by an Act of the Parliament or a State Legislature or b) Established by the Government and there should be 90% or more participation by way of equity or control by the Government To carry out any functions entrusted to a municipality under Article 243W of the Constitution. In the case of Shapoorji Pallonji (supra) the Hon'ble High Court of Patna has held that the above clause is disjointed and therefore, the condition of performing functions entrusted to a municipality under Article 243W (read with Twelfth Schedule) applies only to those entities established by the Government and not to those set up by the Acts of Parliament or a State Legislature. 38. The service was rendered by the respondent to Transmission and Distribution Companies which transmit and distribute electricity which clearly is not a function entrusted to the municipalities under Article 243W read with the Twelfth Schedule of the Constitution of India. Therefore, if these companies are not set up by Acts of the legislature but only by the Government orders, they are not covered by the exemption notification. I respectfully disagree with Hon'ble Member (Judicial) in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and distribution of electricity is not one of the functions entrusted to Municipalities under Article 243W read with the Twelfth Schedule of the Constitution of India. From the records available before me, I am unable to ascertain the entire list of service recipients in this case and which of them, if any, were created by Acts of Parliament or State Legislatures. I, therefore, deem it proper to remand the matter to the Adjudicating Authority for the limited purpose of ascertaining the facts and re-determining the duty, if any, due and interest thereon, if any. (P. Venkata Subba Rao) Member (Technical) In view of difference of opinion, the following question(s) arise for consideration. 1. Whether the view of Member (Judicial) is correct, holding that within the extended meaning of Article 243W, read with 12th Schedule of the Constitution, 'Transmission and Distribution of Electricity' is included; Or as held by learned Member (Technical) that 'Transmission and Distribution of Electricity' is not included in Article 243W read with 12th Schedule of the Constitution? The Registry is directed to place the records before Hon'ble President for appointment of learned third Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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