The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the works contract services including the sub-contracts of the railway are exempted from the service tax under the exemption notification.
Mahendra Kumar Anchalia, the appellant assessee engaged in providing Works Contract Services by way of construction of Railway infrastructure such as the Erection and Commissioning of Signaling and Telecommunication system of the Railway, and also provided the above Works Contract Service on a sub-contracting basis and undertaking Maintenance or Repair Service in respect of the above services.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the service tax demand on the works contract service of the railway and for the repair and maintenance service and for imposing the penalties under sections 77 and 78A of the Finance Act,1994.
Sushil Goel, the counsel for the assessee contended that the Notifications granted the exemption to “Railways” was not restricted to “Railways meant for the public carriage of passengers or goods” and the provision and exemption notification had a wider impact and were sufficient to cover any infrastructure as Railway.
Also submitted as there was no mention of the fact that the structure had to be used for public carriage, a general view should be given to all the cases.
S. Mukhopadhyay, the counsel for the revenue relied on the decisions made by the lower authorities and contended that the assessee was provided the Works Contract Service in respect Railways, Sub-Contract Works under Works Contract Service in respect of Railways and Maintenance or Repair of the above contracts and not paid the appropriate service tax.
Thus the demand raised by the department against the assessee was as per the law and liable to be sustained.
The Bench observed that Works Contract services including sub-contracts related to Railways are exempted by Notification No.25/2012 and not liable to pay the service tax.
Also the court observed in the case of Konkan Railway Corporation Ltd. Versus Commissioner of CGST and Central Excise, Mumbai, the court held that the provision and exemption notification have a wider impact and are sufficient to cover any infrastructure as Railway.
The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) quashed the demand for service tax imposed on the works contract service of the railway while allowing the appeal filed by the assessee.
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