Services Provided to Government Authorities and Public Sector Undertakings Not Liable for Service Tax: CESTAT [Read Order]

The Ahmedabad bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) ruled that services provided to government authorities and public sector undertakings are not liable for service tax. The Appellant had provided certain construction services to GETCO, a wholly owned subsidiary of the Government of Gujarat which was set up as a part of the ongoing reform towards restructuring of the Power Sector. As per the contracts entered into between the Appellant with GETCO, the scope of work for which the Appellant was engaged involved provision of services such as construction of roads, construction of residential quarters, laying of cables, construction of compound wall, construction of foundation, among other things. Further belief that the services rendered by it were not for any commercial or industrial purpose, therefore, the Appellant did not discharge any service tax on provision of such services. Further, the services of the Appellant were in fact, in relation to transmission and distribution of electricity and therefore, the same were exempted from levy of service tax in terms of Notification No. 45/2010-ST dated 20.07.2010. Accordingly, for the services provided to GETCO, no service tax was discharged by the Appellant. It was also providing construction services to the local Municipality i.e. Patan Municipality/ Mahanagar Palika. The nature of work in this case was rubble stone pitching surrounding the Gudhadi Lake. The Appellant did not discharge any service tax in respect of the said services also on the bona fide belief that the services were not for commercial purpose. Mr. Jigar Shah, representing the appellant submitted that the services rendered by the Appellant can be made classifiable under the aforesaid categories only if the same are for the purpose of commerce or industry. Further, the word 'commercial concern' as per dictionary meaning would mean a person must be established with the purpose of gaining profit and the word 'industry' as per the Black's Law Dictionary means any department or branch of art, occupation or business conducted as a means of livelihood or for profit. The bench found that as per the fact of the case the appellant has provided service along with the material and VAT has been paid. Accordingly, the services are correctly classifiable under works contract service. It is settled law that even though the activity of the assesse is taxable but if the assessee is not put to notice for demand of Service Tax specifying the correct classification, show cause notice proposing demand for under wrong head the demand cannot be sustained. Further the two member bench of the tribunal comprising Ramesh Nair ( Judicial member) and C.L Mahar ( Technical member) observed that the issue involved was interpretation of classification of service and admittedly service work provided to the Government Authority and Public Sector undertaking, the appellant’s bona fide belief that the activity was not liable to Service Tax cannot be doubted with. The services were provided to the Government Agency the transaction cannot be hidden hence the suppression of fact with mala fide intention to evade payment of Service Tax does not exist in the present case. Accordingly, the demand of Service Tax and consequential interest and penalties confirmed by the Adjudicating Authority will not sustain. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Services Provided to Government Authorities and Public Sector Undertakings Not Liable for Service Tax: CESTAT [Read Order]

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Services Provided to Government Authorities and Public Sector Undertakings Not Liable for Service Tax: CESTAT [Read Order]

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