Superintending Engineer Harbour Engineering Department Vs Commissioner of Central Excise (CESTAT Bangalore)
In Superintending Engineer Harbour Engineering Department Vs Commissioner of Central Excise, the CESTAT Bangalore examined service tax liability arising from a Government-funded coastal protection and construction project executed through a foreign company for the Government of Kerala.
The appellant, belonging to the Harbour Engineering Department, Government of Kerala, supervised and coordinated projects relating to rehabilitation, coastal protection, and construction funded through Government budgetary allocations. A foreign company, ASR Ltd., New Zealand, was entrusted with work relating to construction of an artificial reef at Kovalam under the project titled “Multipurpose Submerged Artificial Surf Reef for Water Sports and Beach Development at Kovalam.” Revenue alleged that the appellant had received works contract services from the foreign company and was liable to pay service tax on the gross amount paid for the project.
The Commissioner confirmed the demand of service tax amounting to ₹76,57,124 for the period from 28.03.2009 to 27.05.2010 under the category of Works Contract Services, along with interest and equal penalty. The appellant challenged the order before the Tribunal.
The appellant argued that the project was undertaken for the Government and was not commercial or profit-oriented in nature and therefore should not attract service tax. Reliance was placed on Circular No.116/10/2009-ST dated 15.09.2009 relating to exemption for Government Departments. It was further argued that Works Contract Service was not applicable because there was no transfer of property and the work was not executed for commercial or industrial purposes as defined under Section 65(105)(zzzza) of the Finance Act, 1994. The appellant also contended that Section 66A of the Finance Act, 1994 concerning services received from foreign service providers would not apply where the recipient was the Government of Kerala.
