Electrical repair service to government entity exempt from service tax vide notification 25/2012

Titco Electricals Vs Commissioner of Central Excise & CGST (CESTAT Allahabad)

CESTAT Allahabad held that electrical repair services provided to governmental entities is exempt from payment of service tax vide notification no. 25/2012-ST dated 20.06.2012. Accordingly, the order is set aside and appeal is allowed.

Facts- Appellant is registered with the Service Tax Department w.e.f. 26.07.2010 and engaged in providing taxable services under the category of Consulting Engineer Services. They are providing services mainly to M/s Military Engineering Services (MES), Northern Central Railway (NCR), Airport Authority of India (AAI-CATC).

An inquiry was initiated against the appellant and they were asked to provide information for the period 2010-11 to 2014-15 vide letter dated 23.10.2015. A show cause notice dated 23.10.2015 was issued to the appellant for the period 2010-11 to 2014-15 demanding service tax on the amount allegedly short paid.

Notably, the demand was dropped vide Order-in-Original dated 30.03.2024. Being aggrieved, revenue preferred an appeal before Commissioner (A) which was disposed of. Being aggrieved, appellant has preferred the present appeal.

Conclusion- Held that the nature of services provided by the appellant have already been decided in the earlier proceedings and it has been held that exemption under Notification No.25/2012 would be admissible in respect of the same and appellant has duly discharged the service tax liability in respect of the services provided after allowing the benefit of the exemptions available as has been observed in the Order-in-Original. Impugned order do not record any findings in respect of the same also. In view of the above, I do not find any merits in the impugned order and set aside the same. Appeal is allowed.

FULL TEXT OF THE CESTAT ALLAHABAD ORDER

This appeal is directed against Order-in-Appeal No.118/ST/Appl/Alld/2025 dated 17/07/2025 passed by Commissioner (Appeals) Central Excise & Service Tax, Allahabad. By the impugned order following has been held:-

“6.0 Thus in view of the foregoing, I allow the appeal filed by the appellant department and set aside the Order-in-Original No.47/ST/Div-II/Alld/2023-24 dated 30.03.2024 to the extent of dropping of the demand of Service Tax on the amount of Rs. 68,71,058/- received by the appellant as per Table-A given under para 3.1 above alongwith resultant interest and penalty, on the basis of the facts/reasons stated above and remand the matter back to the original Adjudicating Authority for passing legal and proper order in a reasoned manner. The appeal is accordingly, disposed of in above terms.”

2.1 Appellant is registered with the Service Tax Department w.e.f. 26.07.2010 and engaged in providing taxable services under the category of Consulting Engineer Services. They are providing services mainly to M/s Military Engineering Services (MES), Northern Central Railway (NCR), Airport Authority of India (AAI-CATC).

2.2 An inquiry was initiated against the appellant and they were asked to provide information for the period 2010-11 to 2014-15 vide letter dated 23.10.2015. A show cause notice dated 23.10.2015 was issued to the appellant for the period 2010-11 to 2014-15 demanding service tax on the amount allegedly short paid.

2.3 Subsequently, for the period from 2015-16 to 2016-17 again certain information was called for and the appellant provided the information in the form of Form 26AS, Balance Sheet and profit and loss account for the said period along with the copy of challans they also provided work order and bills/invoices raised to the AAI, MES and NCR for the services provided during this period.

2.4 In terms of Section 73(1A) of the Finance Act, 1994 an statement of demand was issued to the appellant in continuation of the earlier show cause notice dated 23.10.2015 for the period in dispute. It was observed that there was difference in the receipts as indicated in the ST-3 records and financial records of the appellant as detailed in table below:-

2.5 On the basis of above differences, it was observed that appellant has short paid service tax as detailed in table below:-

2.6 In the statement of demand appellant was called upon to show cause as to why:-

“(i) The Service Tax (including Ed. Cess and S & H Ed. Cess) total amounting to Rs.18,10,517/- (Rupees Eighteen Laes Ten Thousand Five Hundred Seventeen Only) should not be demanded and recovered from them under proviso to sub Section (1) of Section 73 of chapter V of the Finance Act, 1994 along with interest as applicable under Section 75 of the Act, ibid.

(ii) The penalty should not be imposed upon them under Section 76 and 77 of chapter V of the Finance Act, 1994 for each default for not paying service tax in accordance with the provision of Section 66, 67, 68 of chapter V of the Finance Act, 1994 read with Rule 6 and 7 of the Service Tax Rules, 1994 and Service Tax (Determination of Value) Rules, 2006. ‘

2.7 After following the principles of natural justice taking into the consideration and the submissions made by the appellant, statement of demand was adjudicated as per Order-in-Original No.47/ST/DIV-II/ALLD/2023-24 dated 30.03.2024 by holding as follows:-

“Order

I drop the proceedings initiated vide SCN No.ST/RU- II/SCN/Titco Electricals/267/2015/55 dated 19.04.2018 against the party, M/s Titco Electricals, 3, Thornhill Road, Civil Lines, Allahabad-211001 (U.P.).”

2.8 Aggrieved by the dropping of demand, revenue filed appeal before Commissioner (Appeals) which has been disposed of as per the impugned order.

2.9 Aggrieved appellant have filed this appeal.

3.1 I have heard Shri Manish Kumar Deorah learned Chartered Accountant appearing for the appellant and Shri A.K. Choudhary learned Authorised Representative appearing for the revenue.

3.2 Arguing for the appellant learned Counsel submits that-

> When the department initiated inquiry for the period from 2010-11 to 2014-15 and the show cause notice was issued on 23.10.2015 by invoking extended period of limitation, statement of demand for subsequent period again invoking the extended period of limitation issued on 19.04.2018 is bad in law in view of the decision of Hon’ble Supreme Court in the case of M/s Nizam Sugar Factory [2006 (197) ELT 465 (SC)].

> Demand for the earlier period was even dropped by the departmental authorities. It is only for certain issues with regards to valuation matter reached to the Tribunal and the Tribunal has vide Final Order No.70427/2025 dated 27.04.2025 decided the issue in favour of the appellant.

> In respect of the same contracts, same agreements between them and the service recipient, issue was already examined in the demand made for earlier period and the demand has been dropped it is for the consistency also that this demand should also have followed the same and the same findings recorded in the impugned order that works perform under this agreement are not original work and is not justified. In respect of the same agreement contrary view was taken in the demand made for the earlier period. Each and every contract/agreement in respect of NCR and MES was examined in the earlier round of proceedings and the benefit of exemption under Notification No.12 of Notification No.25/2012 was allowed.

> The copies of all agreements and contracts were submitted before Commissioner (Appeals) during the hearing of appeal. However, Commissioner (Appeals) neither considered these documents nor recorded any findings and in a non-speaking manner decided the entire issue.

> As the demand itself is not sustainable, the penalties imposed also cannot be upheld.

3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authorities.

4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.

4.2 Impugned order records as follows:-

“5.1 I will limit myself only to the issued on which appeal has been made. I note that the appeal has been filed mainly on the issue of extending exemption for the consideration in lieu of services provided against agreements, mentioned in the table above. I further note that the Adjudicating Authority dropped the whole demand however the appeal has been filed on the issue that the taxable value of Rs. 6871058/- has wrongly been not confirmed by the Adjudicating Authority as the nature of work covered in the above mentioned table is outside the scope of entry no 12A of the Notification No. 25/2012-ST dated 20.06.2012, as amended.

5.2 I note that the issue is whether the respondent has provided works contract service which is covered under original work or not. The appeal has been raised on the ground that in the above mentioned contracts, the respondent has provided services regarding repair of electrical equipments which is neither civil structure nor original work as per the provisions of entry no. 12A of the Notification No. 25/2012-ST dated 20.06.2012, as amended. The relevant provisions of the clause is given as under-

12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;

(b) a structure meant predominantly for use as (1) an educational, (ii) a clinical, or(iii) an art or cultural establishment, or

(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation I to clause (44) of section 65 B of the said Act;

under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date: provided that nothing contained in this entry shall apply on or after the 1st April, 2020:]

Further the term ‘original work’ has been defined under explanation 1(a) appended to Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 which means that-

(a) all new constructions:

(b) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable:

(c) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre­fabricated or otherwise;

5.3 Thus it is evident that the services provided by the respondent regarding repair of electrical equipment is outside the ambit of clause 12A of the Notification No. 25/2012-ST dated 20.06.2012, (as amended) as well as the definition of original works’ as defined above. Accordingly, I find that the Adjudicating Authority has erred in allowing the exemption on the considerations received in lieu of services provided in the contract mentioned above.

5.4 I agree with the version of the appellant department and find that the contract meant for electrification, repair and maintenance of electrical equipments is not exempted from service tax as per the provision of entry no. 12A of the Notification No. 25/2012-ST dated 20.06.2012. Hence I am inclined towards the analogical deduction that consideration received in lieu of services provided as per contract mentioned above, is a pure service contract for which the respondent is liable to pay service tax accordingly.”

4.3 From the plain reading of the impugned order reproduced above, I find that the order is totally a non-speaking order and do not record any reason for coming to conclusion and setting aside the Order-in-Original. On merits of the issue, Order-in-Original records as follows:-

“It is observed that in the instant case, statement of demand of service tax has been issued on the basis of differential value of Gross Receipts as per Balance Sheet/Form 26AS and Gross amount declared in ST-3 returns pertaining to period 2015-16 and 2016-17.

It is observed that the party has submitted that they are engaged in contract works and have provided services to NCR, CWE/Air Force and Airport Authority of India. The value shown in the balance sheet pertains to amount received from these service recipients only. It has been submitted by the party that earlier SCN for the prior period on the similar work contracts has been adjudicated in their favour vide Order in Original No.ST-30/2019/ADC-III/51 of 2022 dated 24.11.2022 and the work contracts executed by them are eligible for cum tax benefit, abatement and RCM benefits as well as some work orders are exempted as per the nature of the works.

In the instant case, it is observed that in order to ascertain the genuineness ( of the claim of the party, all the documents related to activities done by the party are required to be examined so that nature of the services and taxable amount attributable to it and service tax leviable upon it could be ascertained. Here party has provided copies of work orders, Balance sheet, Form 26AS for the period 2015-16 and 2016-17.

On going through the documents provided by the party, it is observed that they have provided following work orders, the details of the same are as under:

It is observed that party has provided different types of work contracts including exempted nature of work contracts. From the above details it is observed that the noticee has executed exempted nature of work contracts during the impugned period and have provided details of payments received on account of these exempted work contracts as payment receipt details and their Form 26AS against these work contracts as under:

Thus, it is observed that party has received Rs.68,71,058/- during the period 2015-16 to 2016-17 on account of exempted nature of work contracts and therefore this amount on account of exempted nature is not leviable to service tax.

Further, on analysis of taxable nature of work contracts, it is observed that valuation of the taxable value has to be done in accordance to provisions of Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 which provides abatement of 60%/30% from the gross amount as per nature of work to be original or other Repair/maintenance category as under:

“Rule 2A. Determination of value of service portion in the execution of a works contract. Subject to the provisions of section 67, the value of service portion in the execution of a works contract, referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely:-

(i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Explanation. For the purposes of this clause,-

(a)…. to (c)………

(ii) Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:-

(A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract;

(B) in case of works contract, not covered under sub-clause (A), including works contract entered into for,-

(i) maintenance or repair or reconditioning or restoration or servicing of any goods;

or

(ii) maintenance or repair or completion and finishing services such as glazing or plastering or floor and wall tiling or installation of electrical fittings of immovable property,

service tax shall be payable on seventy per cent. of the total amount charged for the works contract.”

On analysis of the taxable work contracts of the party, it is observed that some of the work orders of AAI are containing separate works under two categories and analysis of the details provided in the work orders shows that it contains details of work as Manpower supply and Repair & Maintenance as sub- works in the same work order. Accordingly, such work orders are separately classifiable under two categories as provided in the work order details, they need to be separately classified under the sub-heads of Manpower supply and Repair & Maintenance and further taxability of the same has to be arrived accordingly in such work orders.

Specifically it is found that work order No. Bha. Vi. Pra./Na.Vi.Pra. Ka /Saha.M.Pr.Abhi. (Vi.)/Ka.San/2014-15/Ti-05/1125-1133 dated 16.10.2014 and W/O No Bha. Vi.Pra./Na. Vi. Pra. Ka/Saha.M.Pr.Abhi. (Vi.) /Ka. San/2014-15/Ti-10/30000-09/134857 dated 04.02.2016 of AAI is classified into two types of works mentioning separate rates for cach type of work in the work orders namely work contract work and manpower supply service.

Further the work orders falling under taxable work contract category are eligible for abatement as per category of the work contract as Rule 2A(ii) of Service tax (Determination of Value) Rules, 2006 as under:

It is observed that taxable value after abatement for the work contract services provided by the notice/ party for different service recipients comes out Rs.38,51,837/-which is leviable to service tax at the appropriate rate of service tax from time to time for the period 2015-16 to 2017-18(upto June 17).

It is seen that Notification No.30/2012-ST dated 20.06.2012 provides for reverse charge mechanism in case of providing manpower supply services and work contract services to business entity registered as body corporate as per S. No. 8 and 9 of the table of taxable services provided in the Notification as under:

It is observed that the party has provided work contract services to AAI which has been found to be business entity registered as body corporate as found in the earlier Order-in-Appeal No.231-ST/APPL/LKO/2018 dated 26.03.2018 and 0-1-0 No.ST-30/2019/ADC-III/51 of 2022 dated 24.11.2022 issued in the case of the party for the past period from 2010-11 to 2014-15. Therefore, the service tax liability against the party for the taxable work contracts provided to CWE, GE(West) and AAI comes out as under:

Further it is observed that party has provided manpower supply services to AAI who as service recipient are liable to pay service tax under reverse charge mechanism as per Notification No.30/2012-ST dated 20.06.2012 as amended from time to time. It is observed that party has provided Manpower recruitment/supply agency services to AAI on which reverse charge mechanism is applicable as under:

In view of the above discussion and analysis the taxable value and service tax liability against the party needs to be re-quantified as under:-

It is observed that party has been found liable for payment of service tax Rs.5,38,697/- for the period 2015­16 and 2016-17. However, it is further observed that the party has already deposited service tax of Rs.6,52,257/-during the period 2015-16 and 2016-17 as per the chart B of the SCN issued to the party. Therefore, it is observed that party have discharged their service tax liability for the impugned period 2015-16 and 2016-17 properly and there is no short payment of service tax by them as alleged in the instant SCN against the notice during the period 2015­16 and 2016-17.

In light of above discussion and findings, it is observed that the party is not liable to pay service tax during the period 2015-16 and 2016-17. As the party is not liable to pay any service tax during the impugned period 2015-16 and 2016-17, therefore, applicability of payment of interest under Section 75 of the Act is not found in the instant case. Further, since no service tax liability has been found against the party, therefore proposal for imposition of penalty alleged in the impugned SCN is not proper and sustainable.”

4.4 From the above order of the Original Authority, I find that this order clearly records the facts and also in detail examined the contract, conditions. It also refers the earlier order whereby the demand made in respect of similar services provided to the same responds under the same/similar contract/agreements has been dropped.

4.5 As it is an admitted fact that the present show cause notice has been issued in terms of Section 73(1A) having recorded so should have considered the orders passed in respect of show cause notice itself. It is settled position in law that departmental authorities could not be selective in making demands unless and until any changes in position of law and other facts. The basic purpose of interaction of Section 73(1A) are making consistency in the process of decision making. As I do not find anything new being brought on record or any change in position of law, I do not find any merits in the view expressed by the Commissioner (Appeals) which in any case is totally non­speaking and without recording any reasons.

4.6 The nature of services provided by the appellant have already been decided in the earlier proceedings and it has been held that exemption under Notification No.25/2012 would be admissible in respect of the same and appellant has duly discharged the service tax liability in respect of the services provided after allowing the benefit of the exemptions available as has been observed in the Order-in-Original. Impugned order do not record any findings in respect of the same also.

4.7 In view of the above, I do not find any merits in the impugned order and set aside the same.

5.1 Appeal is allowed.

(Order pronounced in open court on-24 March, 2026)