Custom, Excise & Service Tax Tribunal
Cr18G Bscpl Jv vs Hyderabad-Ii on 20 April, 2026
1 Appeal No. ST/25537/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 25537 of 2013
(Arising out of Order-in-Original No.23/2012-(Service Tax)-Commr. dated 22.11.2012
passed by Commissioner of Customs, Central Excise & Service Tax, Hyderabad)
M/s CR 18G-BSCPL JV .. APPELLANT
6-2-913/914,
Progressive Towers,
5th Floor,
Khairatabad,
Hyderabad,
Telangana - 500 004.
VERSUS
Commissioner of Central Excise .. RESPONDENT
and Service Tax
Hyderabad - I
Kendriya Shulk Bhavan,
Basheerbagh,
Hyderabad,
Telangana - 500 004.
APPEARANCE:
Shri Dr. T. Satya Murthy, Advocate for the Appellant.
Shri V. Srikanth Rao, Authorized Representative for the Respondent.
CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL)
HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL)
FINAL ORDER No. A/30246/2026
Date of Hearing: 20.04.2026
Date of Decision: 20.04.2026
[ORDER PER: ANGAD PRASAD]
M/s CR 18G - BSCPL JV (hereinafter referred to as appellant) is in
appeal against the Order-in-Original dated 22.11.2012, whereby, demand
was confirmed and equal penalty was imposed on the appellant by the
Adjudicating Authority (impugned order).
2. The issue, in brief, is that the appellant is engaged in providing certain
taxable services of Works Contract Service (WCS) in relation to certain
2 Appeal No. ST/25537/2013
turnkey EPC projects in respect of canals. The Department felt that the said
activity would fall under Section 65(105)(zzzza) of the Finance Act 1994
specifically covered under Clause (e) of Explanation (ii) to Section
65(105)(zzzza) of the Finance Act 1994. Department felt that by virtue of
certain notifications and definitions, only those EPC contracts which are in
respect of roads, airports, railways, transport terminals, bridges, tunnels and
dams or construction of airports were not taxable or exempted under the
category of WCS.
3. On adjudication, the Adjudicating Authority examined the nature of
contract awarded by Andhra Pradesh State Government of Irrigation and
Command Area Development Department and interalia, felt that these are in
the nature of EPC Turnkey contracts. It was also said that work executed by
them was for irrigation purposes of the Government and was non-
commercial in nature. The Adjudicating Authority also examined the issue of
Notification No. 41/2009-ST dated 23.10.2009, whereby, specific exemption
was provided in relation to execution of a work contract in respect of canals
and held that said notification is prospective in nature and cannot be given
retrospective effect and the demand pertains to period prior to the issue of
the notification. He also relied on the judgment of Co-ordinate Bench in the
case of M/s Ramky Infrastructure Ltd., and Others Vs CST, Hyderabad vide
Final Order No. 299-301/2012 dated 14.05.2012. Thereafter, he classified
the said activity under the WCS and also did not considered that the said
activity eligible for exemption under notification prevailing during the
material time.
4. Learned Advocate for the appellant has mainly contested that the issue
is no longer res-integra in view of the judgment by the Larger Bench in the
3 Appeal No. ST/25537/2013
case of Lanco Infratech Ltd., Vs CC, CE & ST [2015 (38) STR 709 (Tri-LB)],
as also judgment by this Bench in the case of Progressive Construction Ltd.,
Vs CST, Hyderabad [2023 (10) CENTEX 20 (Tri-Hyd)] and IVRCL-Navyuga-
Sew Joint Venture Vs Commissioner of Service Tax, Hyderabad [2020 (34)
GSTL 468 (Tri-Hyd)]. His main submission is that in view of these
judgments, the classification of the said activity itself could not be covered
within the definition of WCS and therefore on this ground itself the demand
will fail.
5. On the other hand, Learned AR reiterates the findings and also
highlights that Commissioner has correctly held that notification dated
23.10.2009 cannot be applied retrospectively, whereby, the exemption was
extended for construction of canal for the Government.
6. Heard both the sides and perused the records.
7. The short issue to be decided in this case is whether their activity of
constructing canal is covered and classifiable under the category of WCS or
otherwise. Secondly, whether the notification dated 23.10.2009 is applicable
for exempting their activity or otherwise.
8. In so far as the first issue is concerned, we find that this issue has
been analysed in detail by the Larger Bench of the Tribunal, supra, in terms
of Order dated 15.09.2014 of the Hon'ble Supreme Court which directed that
the entire issues covered under various appeals to be heard by a full Bench
preceded by the President and to be disposed of by a specific date. The
Larger Bench framed various questions covered in the said appeals. One of
the questions framed by the Larger Bench is at para 7(b) which is relevant to
the facts of this appeal. We find that after going through various submissions
4 Appeal No. ST/25537/2013
and definitions of WCS etc., as also notification dated 23.10.2009 they,
interalia, concluded as follows. Para 21(b) is relevant and is reproduced
below for ready reference:
21. In the light of the foregoing analyses, we record our conclusions on the several issues framed, as
follows :
.
.
.
(b)Issues (B), (C) and (D) :
(i) Construction of canals for irrigation or water supply; construction or laying of pipelines/conduits for lift irrigation conceived and integrated into a dam project, must be classified as works contract "in respect of dam" and is thus excluded from the scope of "Works Contract Service" defined in Section 65(105)(zzzza) of the Act, in view of the exclusionary clause in the provision;
(ii) Turnkey/EPC project contracts, enumerated in clause (e), Explanation (ii) in Section 65(105)(zzzza) of the Act is a descriptive and ex abundant cautela drafting methodology. In the light of the decision in Alstom Projects India Ltd., fortified by the Special Bench decision (dated 19-3-2015) in Larsen & Toubro Ltd. reference, a turnkey/EPC contract is taxable prior to 1-6-2007 as well. On and since 1-6-2007, turnkey/EPC contracts must be classified on the basis of the essential character of the service provided thereby, with the aid of classification guidelines set out in Section 65A(2) of the Act. Consequently, a turnkey/EPC contract must be classified under any of the clauses (a) to (d), Explanation (ii), Section 65(105)(zzzza). The bundled bouquet of services provided as turnkey/EPC contract, classifiable as Commercial or Industrial Construction Service (CICS) prior to 1-6-2007, would be classifiable under clause
(b), Explanation (ii), Section 65(105)(zzzza) on and from 1-6-2007 and would not be exigible to Service Tax if the rendition of service thereby is primarily for non-commercial, non-
industrial purpose, in view of the exclusionary clause in clause (b) of the definition of WCS. This is the only possible and harmonious interpretation possible of the several clauses under Explanation (ii) of Section 65(105)(zzzza), a distinct taxable service defined with constituent elements thereof substantially drawn from elements of pre-existing taxable services like ECIS, CICS or COCS; and other services when bundled to amount to turnkey/EPC;
(iii) Construction of canals/pipelines/conduits to support irrigation, water supply or for sewerage disposal, when provided to Government/Government undertakings would be for non- commercial, non-industrial purposes, even when executed under turnkey/EPC contractual mode and would fall within the ambit of clause (b), Explanation (ii) of Section 65(105)(zzzza); and would consequently not be exigible to Service Tax, in view of the exclusion enacted in clause (b); and
9. We find that in this case, there is no dispute that it is an EPC contract. There is no dispute that it is in relation to construction of canal. It is not in dispute that this work has been awarded by the Government of Andhra Pradesh. We find that as per the contracts involved in the present appeal, 5 Appeal No. ST/25537/2013 the contracts were for construction of canal linking dams or reservoirs and therefore it is apparently relating to carrying water for irrigation or for drinking water purpose only. Therefore, following the decision of the Larger Bench, supra, as the judicial discipline would require us to do, we find that in this case, the activity of construction of canal in relation to reservoir, dam etc., which has been awarded by the Government of Andhra Pradesh and for a non-commercial activity, would get excluded from the definition of WCS itself. In view of the same, the demand would not sustain on the ground that the Department has held the said activity classifiable under WCS while confirming the demand.
10. In so far as the issue of notification is concerned, we find that Commissioner has rightly held that the said notification cannot be made retrospectively applicable unless there is a specific provision to that effect. However, we find that it becomes immaterial in as much as when the classification itself is not sustained, the benefit of exemption notification or otherwise becomes irrelevant. Therefore, in view of the same, the demand would not sustain on merit. Moreover, as the demand is not sustained on merit, penalties etc., will also not sustain.
11. Appeal allowed.
(Dictated and Pronounced in the open court) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Jaya