NHPC Responsible for Full Construction & Road Maintenance, Not Just Consultancy: CESTAT Holds Not Liable to Pay Service Tax [Read Order]
CESTAT ruled that NHPC was responsible for full construction and road maintenance work, not merely consultancy service. Thus, exempt from service tax under notification
Meta: NHPC Responsible for Full Construction & Road Maintenance, Not Just Consultancy: CESTAT Holds Not Liable to Pay Service Tax
The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that NHPC Ltd. was responsible for the full construction and maintenance of rural roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY) and not merely providing consultancy services. So, the company was entitled to exemption from service tax.
National Hydroelectric Power Corporation (NHPC) Ltd., a government undertaking, entered into a Tripartite Agreement in 2004 with the Government of Bihar and the Government of India to act as the executing agency for road construction and maintenance projects in Bihar. For its role, NHPC received an agency fee of 10% of the total project cost.
The department issued show cause notices for different periods, alleging that NHPC’s activities fell under “Consulting Engineering Service” and demanded service tax along with interest and penalties. NHPC argued that its role was not limited to consultancy but involved complete responsibility for construction and maintenance of roads, which were exempt under Notification No. 25/2012 dated 20 June 2012.
The appellant represented by CA Arun Kumar Agrwal & Pinky Agarwal argued that NHPC was working as an executing agency on behalf of the state and central governments and its activities were covered under the exemption for road construction.
The revenue represented by Prasenjit Das (AR) relied on the earlier decision in the case of Ircon International Ltd. where similar activities were treated as consultancy services and service tax was upheld.
The two-member bench comprising Ashok Jindal(Judicial Member) and K. Anpazhakan (Technical Member) observed that NHPC was entrusted with the entire project, including construction, supervision, quality control, and five years of maintenance. The tribunal explained that these responsibilities went beyond consultancy and amounted to bundled services of construction and maintenance, which are exempt from service tax.
Also Read:Rehabilitating or Renewing Railway Wagons Qualifies as “Original Works”, Exempt from Service Tax: CESTAT [Read Order]
The tribunal pointed out that the demands were raised by invoking the extended period of limitation. NHPC is a government undertaking, so the tribunal explained that no mala fide intention could be alleged and the extended period was not applicable. The tribunal observed that the whole demand was barred by limitation.
The appeals were allowed and the impugned orders were set aside, granting NHPC relief from service tax liability.
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