Maintenance of Streetlights under Contracts Issued after 01.03.2015 Not Exempt from Service Tax: CESTAT Strictly Interprets Exemption Notifications [Read Order]
CESTAT held that maintenance of streetlights under contracts issued after 01.03.2015 is not exempt from service tax, strictly construing the exemption notifications against the assessee.
Service - tax - notification - Taxscan
Service - tax - notification - Taxscan
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that maintenance of streetlights under contracts issued after 01.03.2015 is not exempt from service tax, holding that exemption notifications must be strictly interpreted.
Dariyanath Electricals and Party, the appellant, was registered under Works Contract Services and provided electrical installation, civil construction, and maintenance services to government agencies and private companies.
The department found that the appellant provided erection, commissioning, and installation services to Ajmer Vidyut Vitran Nigam Ltd. and maintenance of streetlights to Nagar Parishad, Bhilwara, without paying service tax. A show cause notice dated 18.04.2018 demanded Rs. 81,51,228/- for the period July 2012 to March 2016 by invoking the extended period.
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The adjudicating authority confirmed Rs. 68,36,735/-, and the Commissioner (Appeals) partly allowed the appeal by reducing the liability to Rs. 8,69,305/- for services to Nagar Parishad and others in 2015–16.
The appellant’s counsel argued that maintenance of streetlights is a public utility and not a commercial activity, and thus covered under Sl. No. 12(a) of Notification No. 25/2012-ST dated 20.06.2012.
They further argued that the show cause notice failed to properly classify the services, that the demand was time-barred, and that penalties under sections 77 and 78 were unsustainable. The counsel also submitted that the appellant should be entitled to cum-tax benefit and the threshold exemption limit.
The revenue counsel argued that exemption for such services was withdrawn from 01.04.2015 by Notification No. 06/2015-ST, and restored only for contracts entered prior to 01.03.2015 with appropriate stamp duty. Since the appellant’s work order for maintenance of streetlights was dated 31.03.2015, after the cutoff date, the exemption did not apply.
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The department further argued that the appellant failed to obtain service tax registration in time, did not file returns for several years, and suppressed facts with the intent to evade payment of service tax, justifying the extended period and penalties.
The two-member bench comprising Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) observed that the exemption had been withdrawn from April 2015 and was only available for contracts entered before 01.03.2015. Since the work order was dated 31.03.2015, the appellant could not claim the benefit.
The tribunal pointed out that the Supreme Court in Dilip Kumar & Company and Hari Chand Shri Gopal had explained that exemption notifications must be strictly construed and the burden to prove applicability lies on the assessee.
The tribunal explained that as the appellant’s case did not meet the conditions of the exemption, the demand of Rs. 8,69,305/- with interest and penalties was correct. The appeal was dismissed.
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