Continued from Part 1
Findings in Impugned order:
1. The tax department ordered the appellant to pay 10,85,842 rupees for services provided between 2014 and 2017. These services included building check dams for the U.P. Project Corporation, lighting and electrification work for Mandi Parishad.
2. The appellant is appealing this order, specifically regarding the check dam construction. They argue that building check dams is a tax-exempt service under Notification 25/2012, which covers water-related infrastructure for the government. However, the original tax order rejected this claim and labeled the work as taxable.
3. The authority noted that the appellant’s documents failed to show if the check dams were for water supply or conservation. This matters because the exemption only applies to water supply systems. The central issue is determining if the appellant’s specific work meets the strict requirements for that exemption. Relevant portion of S. No.12 of Notification No.25/2012-ST dated 20.06.2012 is as follows:
S. No. 12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning installation, completion, fitting out, repair, maintenance, renovation, or alteration of-
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (i) water treatment, or (i) sewerage treatment or disposal; or
S. No.12(d) of the Notification provides exemption to construction of dam. The purpose of dam do not appear to be in consonance with the S. No.12(d) as the said condition is linked to S. No. 12(e) of the Notification.
The notification only grants tax exemptions if the services are provided to the government, a local authority, or a governmental authority. To decide this case, the legal status of the service recipient must be confirmed. The statutory definitions of these words are as follows:
SECTION 65B (26A) “Government” means the Departments of the Central Government, a State Government and its Departments and a Union territory and its Departments, but shall not include any entity, whether created by a statute or otherwise, the accounts of which are not required to be kept in accordance with article 150 of the Constitution or the rules made thereunder;
Section 65 (31) “local authority” means –
(a) a Panchayat as referred to in clause (d) of article 243 of the Constitution: b)
(b) a Municipality as referred to in clause (e) of article 243P of the Constitution
(c) a Municipal Committee and a District Board, legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund
(d) a Cantonment Board as defined in section 3 of the Cantonments Act, 2006 (4] of 2006);
(e) a regional council or a district council constituted under the Sixth Schedule to the Constitution;
(f) a development board constituted under article 371 of the Constitution; or g a regional council constituted under article 371A of the Constitution;
“Governmental Authority” in clause (s) of Notification No.25/2012-ST dated 20.06.2012 has been provided as 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;.
4. The appellant built check dams for M/s U.P. Project Corporation Ltd. To get the tax exemption, the recipient must be the government, a local authority, or a governmental authority. Investigation showed that U.P. Project Corporation is a registered company under the Companies Act is a U.P. Government undertaking. It appears that M/s U.P Project Corporation Ltd. is a registered company and do not fall under purview of the Government, a local authority or a governmental authority and it does not meet the legal requirements for the exemption. Consequently, the appellant must pay service tax on the payment received in 2014-15 and in 2015-16 from M/s U.P Project Corporation Ltd.
5. The appellant claims their lighting and electrification work for M/s Krishi Utpadan Mandi Parishad is tax-exempt under entries 12, 13, and 14 of Notification 25/2012. They argue the Parishad is a governmental authority because it was created by a specific state law. However, the original tax order denied this exemption, stating the Parishad does not qualify as a local or governmental authority. To resolve this, the legal requirements of those specific exemption entries must be examined against the Parishad’s actual status. The relevant provisions are as under:
S. No.”12A. Services provided to the Government, a local authority 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;
(b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65 B of the said Act;
under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:
provided that nothing contained in this entry shall apply on or after the 1st April, 2020;”
S. No.13. Services provided by way of construction, erection, commissioning installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-
(a) a road, bridge, tunnel, or terminal for road transportation ….;
(b) a civil structure or any other original works pertaining to a scheme..
(ba) a civil structure or any other original works pertaining to the „In-situ rehabilitation ….
(bb) a civil structure or any other original works ….
(c) a building owned by an entity registered under section 12 AA ….;
(d)a pollution control or effluent treatment plant, ……;
(e) a structure meant for funeral, burial or cremation of deceased;
14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a) railways, excluding monorail and metro;
(b) a single residential unit otherwise…….;
(c) low- cost houses up to a carpet area……;
“(ca) Low cost houses up to a of 60 square……..;
(ii) any housing scheme of a State Government.”.
(d) post- harvest storage infrastructure for agricultural produce……. ;or
(e) mechanised food grain handling system,.
Continue to Part 3
This is not a legal advice. This article is based on the judgment and order of the Court.