CESTAT Rules Excavation and Manpower Services for Dam Construction Exempted from Service Tax [Read Order]
CESTAT set aside the service tax demand, holding that the manpower and excavation services provided for the Koldam dam were exempt under Notifications 17/2005-ST and 25/2012-ST and that the extended period was unjustifiably invoked.
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal by setting aside the service tax demand, holding the authorities wrongly classified the services provided as taxable while ignoring specific statutory exemptions available for dam-related work under Notifications No. 17/2005-ST and 25/2012-ST.
The appellant, Austees Hydro Power & Construction Co. Pvt. Ltd., a subcontractor to Italian Thai Development Public Company Ltd. (ITD), carried out excavation of clay, loading, transportation, unloading and spreading of material at the Koldam Hydroelectric Project, along with cleaning and caulking work at the dam, spillway and galleries.
ITD was the main contractor of National Thermal Power Corporation Limited (NTPC) for the construction of the Koldam Hydro Electric Power Project on the Satluj River.
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The department alleged that the appellant had rendered taxable services under manpower recruitment or supply agency and site formation and clearance, excavation and earthmoving and demolition services, without obtaining registration or paying service tax.
A Show Cause Notice dated 01.10.2014 proposed a demand of ₹1,90,84,482 for the period 2009–2013, alleging evasion. The Original Authority confirmed the demand ex parte on 28.03.2018.
The Commissioner (Appeals) upheld the classification and held that the activities did not constitute works contract and did not involve transfer of property in goods.
Before the Tribunal, the appellant argued that the services were directly connected to construction, repair and maintenance of the dam and were exempt up to 30.06.2012 under Notification No. 17/2005-ST, which specifically exempted site formation, excavation and similar activities undertaken in the course of construction of dams.
The appellant also submitted that for the period from July 2012 onwards, services were covered under the Negative List via Notification No. 25/2012-ST, being services provided to NTPC, a governmental authority.
The appellant contended that no service-wise value breakup existed in the SCN or orders, and that the entire demand was time-barred due to their bona fide belief that dam-construction services were exempt.
The Bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) found that the activities of excavation, loading, transportation, unloading and cleaning work at the Koldam dam were specifically exempted under Notification No. 17/2005-ST and continued to remain exempt under the later Negative List regime.
The Tribunal also held that NTPC qualified as a “governmental authority” under settled Supreme Court law, thereby strengthening the exemption. It noted that the services were related, bundled and undertaken in the course of construction, repair, maintenance etc. of the same dam, and that the authorities had overlooked this statutory protection.
The Tribunal further observed that invocation of the extended period was unjustified, as the appellant’s belief regarding exemption was bona fide, they had not collected any service tax from ITD or NTPC, and there was no intent to evade.
The Tribunal concluded that the demand was not sustainable in law, set aside the impugned order and allowed the appeal with consequential relief.
The assessee was represented by A. S. Gill, while Anurag Kumar appeared for the Revenue.
Meta: CESTAT Sets Aside Tax Demand as Dam-Construction Services Were Exempt
The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed the appeal by setting aside the service tax demand, holding the authorities wrongly classified the services provided as taxable while ignoring specific statutory exemptions available for dam-related work under Notifications No. 17/2005-ST and 25/2012-ST.
The appellant, Austees Hydro Power & Construction Co. Pvt. Ltd., a subcontractor to Italian Thai Development Public Company Ltd. (ITD), carried out excavation of clay, loading, transportation, unloading and spreading of material at the Koldam Hydroelectric Project, along with cleaning and caulking work at the dam, spillway and galleries.
ITD was the main contractor of National Thermal Power Corporation Limited (NTPC) for the construction of the Koldam Hydro Electric Power Project on the Satluj River.
The department alleged that the appellant had rendered taxable services under manpower recruitment or supply agency and site formation and clearance, excavation and earthmoving and demolition services, without obtaining registration or paying service tax.
A Show Cause Notice dated 01.10.2014 proposed a demand of ₹1,90,84,482 for the period 2009–2013, alleging evasion. The Original Authority confirmed the demand ex parte on 28.03.2018.
The Commissioner (Appeals) upheld the classification and held that the activities did not constitute works contract and did not involve transfer of property in goods.
Before the Tribunal, the appellant argued that the services were directly connected to construction, repair and maintenance of the dam and were exempt up to 30.06.2012 under Notification No. 17/2005-ST, which specifically exempted site formation, excavation and similar activities undertaken in the course of construction of dams.
The appellant also submitted that for the period from July 2012 onwards, services were covered under the Negative List via Notification No. 25/2012-ST, being services provided to NTPC, a governmental authority.
The appellant contended that no service-wise value breakup existed in the SCN or orders, and that the entire demand was time-barred due to their bona fide belief that dam-construction services were exempt.
The Bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) found that the activities of excavation, loading, transportation, unloading and cleaning work at the Koldam dam were specifically exempted under Notification No. 17/2005-ST and continued to remain exempt under the later Negative List regime.
The Tribunal also held that NTPC qualified as a “governmental authority” under settled Supreme Court law, thereby strengthening the exemption. It noted that the services were related, bundled and undertaken in the course of construction, repair, maintenance etc. of the same dam, and that the authorities had overlooked this statutory protection.
The Tribunal further observed that invocation of the extended period was unjustified, as the appellant’s belief regarding exemption was bona fide, they had not collected any service tax from ITD or NTPC, and there was no intent to evade.
The Tribunal concluded that the demand was not sustainable in law, set aside the impugned order and allowed the appeal with consequential relief.
The assessee was represented by A. S. Gill, while Anurag Kumar appeared for the Revenue.
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