IL & FS Water Ltd. Vs Commissioner of GST & Central Excise (CESTAT Chennai)
CESTAT Holds BOOT Water Supply Project Was Works Contract Because Dominant Intention Was Execution of Project; No CENVAT Credit Reversal Because Material Transfer in Works Contract Was Not Trading: CESTAT; CESTAT Sets Aside Service Tax Demand Because Works Contract Could Not Be Split Into Trading Activity; Transfer of Goods in Pipeline Project Did Not Amount to Sale or Exempt Service: CESTAT.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, allowed the appeal challenging an Order-in-Original dated 15.12.2016 which had confirmed demand of Rs.2,83,34,028 along with interest and penalties under the CENVAT Credit Rules, 2004 and the Finance Act, 1994. The dispute arose from a water supply project executed for Indian Oil Corporation Ltd. at Paradip, Odisha, under a Build, Own, Operate and Transfer (BOOT) arrangement for supply of treated water for 25 years.
The department alleged that the appellant had wrongly availed common input service credit while paying service tax only on the service portion of the works contract and excluding the value of goods transferred on which VAT had been paid. According to the department, the material component constituted “trading” or exempted activity and therefore Rule 6(2), Rule 6(3), and Rule 6(3A) of the CENVAT Credit Rules required reversal of proportionate credit.
