Custom, Excise & Service Tax Tribunal
Konkan Railway Corporation Ltd vs Commissioner Cgst And Central ... on 17 February, 2022
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
WEST ZONAL BENCH
SERVICE TAX APPEAL NO: 86191 OF 2021
[Arising out of Order-in-Original No: 84/MA/Commissioner/Belapur/2020-21
dated 24th March 2021 passed by Commissioner of CGST & Central Excise,
Belapur.]
Konkan Railway Corporation Ltd
Belapur Bhavan, Plot No.6, Sector 11, CBD Belapur,
Navi Mumbai 400 614 ... Appellant
versus
Commissioner of CGST & Central Excise
CGO Complex, CBD Belapur, Navi Mumbai - 400614 ...Respondent
APPEARANCE:
Shri Bharat Raichandani, Advocate for the appellant Shri S. K. Hatangadi, Assistant Commissioner (AR) for the respondent CORAM:
HON'BLE MR ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) FINAL ORDER NO: A / 86247 /2022 DATE OF HEARING: 17/02/2022 DATE OF DECISION: 17/02/2022 PER: C J MATHEW This appeal lies against order-in-original no. 84/MA/ ST/86191/2021 2 Commissioner/Belapur/2020-21 dated 24th March 2021 of Commissioner of CGST & Central Excise, Belapur in which the appellant, M/s Konkan Railway Corporation Ltd, has been subjected to tax liability of ` 15,27,59,160/- under section 73 of Finance Act, 1994, along with applicable interest under section 75 of Finance Act, 1994, and imposed with penalty under section 78 of Finance Act, 1994.
2. The demand was raised in relation to payment of ` 2,58,24,30,000 and ` 1,70,00,000/- received in advance by the appellant between April 2015 and June 2017 from M/s National Thermal Power Corporation Limited in accordance with contract for 'construction and commissioning of railway sliding and signaling telecommunication systems including associated electrical and mechanical instruments' for facilitating handling of coal at the Kudgi and Gadarwara super thermal power projects. The adjudicating authority discarded the claim of the appellant that notification no.
25/2012-ST dated 28th June 2012 [at serial no. 14(a) incorporated by notification no. 9/2016-ST dated 1st March 2016] covering 'Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
"(a) railways, excluding monorail and metro; ..........' applied to this receipt by holding that the said sidings are nothing but ST/86191/2021 3 'material handling system' for private purpose and, therefore, not covered by '(31) "railway" means a railway, or any portion of a railway, for the public carriage of passengers or goods, and includes--
(a) all lands within the fences or other boundary marks indicating the limits of the land appurtenant to a railway;
(b) all lines of rails, sidings, or yards, or branches used for the purposes of, or in connection with, a railway;
(c) all electric traction equipments, power supply and distribution installations used for the purposes of, or in connection with, a railway;' in section 2 of The Railways Act, 1989 though the benefit of exclusion of the 'goods component' in composite contracts provided for in rule 2(a)(ii)(A) of Service Tax (Determination of Value) Rules, 2006 was extended to them. The liability was computed by applying the tax rate on 40% of the amount so received.
3. According to Learned Counsel appearing for the appellant, the issue stands settled by several decisions of the Tribunal commencing with Afcons Infrastructure Ltd v. Commissioner of Central Excise, Mumbai - II [2015 (38) STR 194 (Tri.Mumbai)] which held that '.....exclusion of 'railways' from commercial and industrial construction service,'.
ST/86191/2021 4 in section 65(25b) of Finance Act, 1994 excluded Delhi Metro Rail Corporation Ltd from taxability under section 65(105)(zzp) of Finance Act, 1994.
4. It is also contended that the same issue had come up before the Tribunal in SMS Infrastructure Ltd v. Commissioner of Central Excise & Customs, Nagpur [2017 (47) STR 17 (Tri.-Mumbai)] which relied upon other decisions to conclude that '8. Learned Authorised Representative places reliance on the decision of this Tribunal in AB Projects Pvt. Ltd. v. Commissioner of Central Excise, Nagpur [2010 (19) STR 886 (Tri-Mumbai)] to contend that any activity of construction that is able to generate revenue will not be exempt from levy of service tax. We take note of the specific exclusion of railway work from the definition (supra). Revenue contends that the exemption is accorded to railways that are used as public carriage of passengers and goods which the projects undertaken by the appellant are not. Appellant relies upon the decision of the Tribunal in Afcons Infrastructure Ltd. v. Commissioner of Central Excise Mumbai-II [2015 (38) STR 194 (Tri.-Mumbai)] and Delhi Metro Rail Corporation Limited v. Municipal Corporation of Delhi and Others [2008 (103) DRJ 369] to drive home the point that coverage under Railways Act, 1989 is sufficient to consider any such infrastructure as railways. We notice that the Railway Act, 1989 provides for railways with public investment and private investment and both function under the same statute. Such railways established in the private sector have a statutorily acknowledged Administrator. Consequently, we too hold that railway sidings built by the appellant fall within the ST/86191/2021 5 exclusionary portion of Section 65(25a) and are outside the ambit of taxation.'
5. Furthermore, it is contended that, taking note of these decisions and others, the Tribunal, in KVR Rail Infra Projects Pvt Ltd v.
Commissioner of Central Tax, Secunderabad [2019 (27) GSTL 549 (Tri.-Hyd.)], had held that exemption from tax, either as provider of 'commercial or industrial construction service' or of 'works contract service', was available. The decision of the Tribunal in Hindustan Construction Company Ltd v. Commissioner of Service Tax, Mumbai
- VII [2021 (44) GSTL 369 (Tri.-Mumbai)] and in NMC Industries Pvt Ltd v. Commissioner of Service Tax-II, Mumbai [2020 (43) GSTL 551 (Tri.-Mumbai)] were also cited.
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, ST/86191/2021 6 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 ST/86191/2021 7 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 ST/86191/2021 8 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 ST/86191/2021 9 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, ST/86191/2021 10 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.
10. Consequently, following the decisions of the Tribunal that have consistently interpreted the legislative intent of the exemption, we set aside the impugned order and allow the appeal.
(Operative Part of the Order pronounced in the open court on 17th February 2022) (ANIL CHOUDHARY) (C J MATHEW) Member (Judicial) Member (Technical) */as