Triveni Engicons Private Limited Vs Commissioner of C.G.S.T. and Central Excise (CESTAT Kolkata)
Summary: The appellant, Triveni Engicons Private Limited, was engaged in providing works contract services for construction of railway infrastructure, including laying tracks and other supporting structures. The project was awarded by M/s. Damodar Valley Corporation for its Mega Projects at various locations, requiring dedicated railway tracks and supporting structures for its exclusive use. The appellant did not pay Service Tax on the ground that the activity was exempt under Notification No. 17/2005-S.T. dated 07.06.2005 for the period up to 30.06.2012 and under Notification No. 25/2012-S.T. dated 20.06.2012 with effect from 01.07.2012. The period in dispute was 2011-12 to 2015-16.
A Show Cause Notice proposed Service Tax demand on the ground that the railway infrastructure was not covered by the exemption because the exemption was considered applicable to railways used for public carriage, whereas the tracks in question were constructed and used by M/s. Damodar Valley Corporation. The adjudicating authority accordingly confirmed the demand, against which the appellant preferred the appeal before the Tribunal.
The principal issue before the CESTAT Kolkata was whether construction of railway infrastructure, including tracks, was liable to Service Tax or entitled to exemption under Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012. The Tribunal considered the earlier decision in M/s. Hari Construction & Associates Pvt. Ltd. v. Commissioner of C.G.S.T. & Excise, Patna II, Final Order No. 76168 of 2023 dated 13.07.2023 in Service Tax Appeal No. 79066 of 2018.
In the Hari Construction decision, the Tribunal had considered the decision concerning Konkan Railway Corporation Limited and the scope of the railway exemption. The reasoning reproduced in the present order records that the Finance Act, 1994 and the relevant exemption notification did not create a distinction between public and private railways. It further records that a definition contained in another statute could not be used to artificially restrict the exemption where the Finance Act itself did not impose such a qualification. The reproduced decision also considered the treatment of railways under the pre-negative-list and negative-list service tax regimes and the absence of a restriction based on ownership or public carriage.
The reproduced decision specifically held that the exemption from tax was available to railways and that a distinction between railway for private purposes and railway for public service could not be artificially created. It also recorded that the order in that case had been affirmed by the Hon’ble Supreme Court in Civil Appeal Diary No. 22280/2023 dated 04.07.2023. The Tribunal in Hari Construction consequently held that the appellant was entitled to the benefit of Notification No. 17/2005-ST prior to 01.07.2012 and Notification No. 25/2012-ST for the period thereafter.
Following that decision, the CESTAT Kolkata held that the issue had already been settled and that there was no distinction between public railways and private railways for the exemption. The Tribunal therefore held that the appellant was entitled to the benefit of Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012. It concluded that no Service Tax demand was sustainable against the appellant.
The impugned order was accordingly set aside and the appeal filed by the appellant was allowed. The operative part of the order was pronounced in open court.
Cases Discussed
- M/s. Hari Construction & Associates Pvt. Ltd. v. Commissioner of C.G.S.T. & Excise, Patna II, Final Order No. 76168 of 2023 dated 13.07.2023 in Service Tax Appeal No. 79066 of 2018 — followed by the Tribunal for the proposition that railway-related exemption was available without a distinction between public and private railways.
- Konkan Railway Corporation Limited, Civil Appeal Diary No. 22280/2023, affirmed on 04.07.2023 — the reproduced Hari Construction decision recorded that the Tribunal’s order had been affirmed by the Hon’ble Supreme Court.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order wherein demand of Service Tax has been confirmed against them under the category of “works contract service”.
2. The facts of the case are that the appellant is engaged in providing works contract service by way of construction of railway infrastructure such as laying down of tracks and other support structures of railway. The said project was awarded to the appellant by M/s. Damodar Valley Corporation for their Mega Projects at various places, for which they needed dedicated tracks and other support structures for exclusive use by M/s. Damodar Valley Corporation. The appellant was not paying Service Tax on their activity of works contract service on the ground that their activities are exempt in terms of Notification No. 17/2005-S.T. dated 07.06.2005 up to 30.06.2012 and Notification No. 25/2012-S.T. dated 20.06.2012 with effect from 01.07.2012. The period of dispute in this case is from 2011-12 to 2015-16.
3. In these set of facts, a Show Cause Notice was issued to the appellant proposing to demand Service Tax from the appellant. The matter was adjudicated by holding that the exemption which the appellant has claimed does not cover since the exemption so provided is in respect of railways used for public carriage whereas these railways in question were constructed and used by M/s. Damodar Valley Corporation; therefore, they were not entitled for the exemption; accordingly, the demand came to be confirmed. Against the said order, the appellant is before us.
4. Heard the parties and considered their submissions.
5. We have gone through the submissions made by both the sides and we find that the short issue emerging from the arguments advanced by both the sides is whether the appellant is liable to pay Service Tax for their activity of construction of railway infrastructure i.e., tracks or are entitled for the benefit of exemption under Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012 or not.
6. The said issue has been examined by this Tribunal in the case of M/s. Hari Construction & Associates Pvt. Ltd. v. Commissioner of C.G.S.T. & Excise, Patna II [Final Order No. 76168 of 2023 dated 13.07.2023 in Service Tax Appeal No. 79066 of 2018] wherein it has been observed as under: –
“8. We find that the same issue came up before this Tribunal in the case of Konkan Railway Corporation Limited (supra), wherein this Tribunal has observed as under:
“6. Learned Authorised Representative submits that the decision of the Tribunal in re KVR Rail Infra Projects Pvt Ltd is pending before the Hon’ble Supreme Court and that the impugned project, undertaken exclusively for handling coal to be used by M/s National Thermal Power Corporation for generation of thermal energy, was not eligible for exemption intended for ‘railways’ engaged in public carriage of persons and goods.
7. It is interesting to note that the assessee had placed reliance upon the decisions of the Tribunal supra before the original authority which did not appear to have carried much impression with him and, 6ST/86191/2021 demonstrating inability to acknowledge the binding precedent of a judgment or decision of appellate authority or the manner in which it is to be read, the adjudication order has referred to decision in re Afcons Infrastructure Ltd but to the exclusion of everything therein other than submissions made on behalf of Revenue and his opinion therefrom that
‘52. Having arrived at the above conclusion, I turn my attention to the prime contention of the Noticee that the impugned SCN has resorted to a narrow understanding of expression ‘railways’ in the absence of a permissible referral under the Finance Act/Mega exemption notification. From my reading of the records of the case and the available material, I find that the Noticee is way off the mark in understanding the logic and the emphasis of the SCN which in my view is well founded and amply supported by the statute, be it the Finance Act or the Railways Act. For this reason, an examination of the judicial pronouncements quoted by the Noticee in their defence does not seem warranted.’ speaks for itself. This transgression on the part of the adjudicating authority is not acceptable. We do not wish to dilate further on this.
8. Entitlement of every sort of railways to the exemption provided, either by exclusion from the definition of ‘taxable service’ in the ‘pre-negative list’ regime or by specific exemption in the ‘negative list’ regime has been dealt with in several decisions of the Tribunal. While addressing the issue of ‘commercial consideration’ being the 7 ST/86191/2021 bench mark for determining eligibility for exclusion/exemption, the Tribunal, in re Hindustan Construction Company Ltd, held that
‘5. The exclusion, whether under the separate entry or within the umbrella of the new taxable service, of ‘railways’ continued unabated. It would appear that the adjudicating authority was particularly impressed by the activity brought within the tax net to be ascertained on the basis of commerciality to bring it in conformity with the description of the taxable activity. Hence, according to him, the operation of the two recipients of service, being evidently commercial, did not merit the exclusion contained therein. For a better appreciation of the arguments, we deem it appropriate to record the particular finding the adjudicating authority that
‘3.7 The Term “Railways” mentioned in Section 65(25b) for the purpose of exclusion from the scope of levy of Service Tax needs to be understood in the appropriate context and especially the scheme of taxation of services under the Finance Act, 1994. The objective to levy Service Tax under Section 65(105)(zzzp) read with Section 65(25b) is clearly to levy Service Tax on Commercial or Industrial construction service. However, Commercial or Industrial construction of building or structure in respect of ”railways” is excluded from the scope of the levy.
3.8 … … It is the general principle followed in the levy of Service Tax that when Government undertakes commercial or business activity, then they should be treated on par with similar activity undertaken by non-governmental bodies or any other persons for the purpose of taxation. This is essential to avoid competitive disadvantage to other similar nongovernmental service providers and to ensure level playing field to all similar service providers.
3.9 Indian Railways under the Ministry of Railways is part of the Government of India and not on commercial basis. Therefore, Indian Railways cannot be compared or equated with MMO/DMRC, a Company formed under the Companies Act and is committed to run purely on commercial lines even if it is fully owned by the Government…. ”Railway” in the Indian Context is popularly known as “Indian Railways” and is more appropriately understood as Railways operated under the Indian Railways Act especially for the purpose of 8 ST/86191/2021 any special dispensations such as tax exemptions.’
6. We find no authority for these sweeping statements on the intent of Finance Act, 1994, the scope of the taxable service under which the levy has been confirmed or the status of railway operations in the country. In the context of the claim of the appellants, limited to the exclusion from the taxability otherwise attached to ‘commercial or industrial construction service’, we are not required to define the scope of the taxable service; the test of commercial imperative of the impugned activity is not in dispute. All that we are required to ascertain is the conformity of the operation of the recipients of the service to the excluded aspect of the taxable service. The adjudicating authority is far from correct in assuming that the dutiability devolving, under Customs Act, 1962 and Central Excise Act, 1944, on governmental transactions by specific inclusion in the statutes is, similarly, present in Finance Act, 1994. Nor does the reason ascribed by him as the prompting for such inclusion in the commodity tax statutes find resonance in any decision, circular or elucidation. Furthermore, to the extent of our understanding, the operations, or its popular designation as ‘Indian Railways’, of Government-run Railways is not stripped of its commercial mantle. A stray reference to the statute governing railway operations does not establish the postulate of such definition to be applicable in every special dispensation.
7. The definitions in the statute governing Railways is intended for fencing in the operational component to such objects as are included in that law. It is not appropriate to place reliance on such definitions save under the express authority of Finance Act, 1994. It is also not correct to contend that the coverage of the statute governing Railways is limited to Government Railways; no such distinction is drawn except for the purposes of jurisdiction of the railway 9 ST/86191/2021 authorities specified therein for the governance of the Railways belonging to the Government.
8. In the absence of any qualification for the ‘railway’ incorporated in the exclusion component of the taxable service, any railway, irrespective of ownership, is covered. Within the scheme of ‘negative list’, there is a specific exemption for metro or monorail within the broader exclusion available to Railways. The exclusion of ‘metro’ or ‘monorail’ has occurred only after the period of dispute and therefore does not concern us.’
9. It is, thus, clear that the proposition of strict construction of intent of exemption notification must also go hand in hand with strict construction of every word/phrase therein. The exemption from tax is available to ‘railways’, excluding mono rail or metro, by notification no. 25/2012-ST dated 20th June 2012 after 1st July 2012 and, as conceded by the adjudicating authority, there being no definition of ‘railway’, either therein or in Finance Act, 1994, the distinction between railway for private purpose and railway for public service cannot be artificially contrived to suit tax administration; neither can the definition in another statute be drawn upon for the purported purpose of illumination. The Railways Act, 1989 was enacted to authorize Government of India to operate the railway network of the country; it also affords a framework for administration of the railway services and jurisdictional monopoly. The ‘taxable service’ in Finance Act, 1994 excluding ‘railways’ from the ambit of the service did not place any restriction on benefit going to private railways. The statute, 10 ST/86191/2021 too, did not consider it necessary to fall back on the definition of ‘railways’ in another statute for determination of taxability and it is not open to the adjudicating authority to arrogate that privilege in an executive capacity. The intent of exclusion prior to 1st July 2012, and exemption for the period, thereafter, is abundantly clear.”
The said order has been affirmed by the Hon’ble Apex Court in Civil Appeal Diary No.22280/2023 dated 04.07.2023.
9. We, therefore, hold that the issue is no more res-integra and the appellant is entitled for benefit of Notification No.17/2005-ST dated 07.06.2005 prior to 01.07.2012 and under Notification No.25/2012-ST dated 20.06.2012 for the period post 01.07.2012.
10. In view of this, we do not find any merit in the impugned order and the same is set aside.
11. In the result, the appeal is allowed with consequential relief, if any.”
7. We find that the issue has already been settled by this Tribunal and it has been categorically held that there is no distinction between public railways and private railways. In these circumstances, following the decision of this Tribunal in the case of M/s. Hari Construction & Associates Pvt. Ltd. (supra), we hold that the appellant is entitled to the benefit of exemption vide Notification No. 17/2005-S.T. dated 07.06.2005 and Notification No. 25/2012-S.T. dated 20.06.2012, as claimed. Accordingly, no demand of Service Tax is sustainable against the appellant.
8. In these set of facts, we set aside the impugned order and allow the appeal filed by the appellant.
(Operative part of the order was pronounced in open court
