Whether service rendered in relation to execution of work contract in relation to Railway is excluded from definition of taxable services?

PJ-Case law-2013/14-1598

Case:- B.M.R. CORPORATION LTD. VERSUS MINISTRY OF FINANCE, GOVT. OF INDIA

Citation:- 2013(29) S.T.R. 469 (Kar.)

Issue:-
Brief Facts:-M/s. Bangalore Metro Rail Corporation Ltd. is the petitioner in this writ petition. Learned Counsel appearing for the petitioner submits that the writ petition may be disposed of by clarifying the legal position that services rendered in relation to the execution of a works contract in respect of Railways is not taxable under Section 66 of the Finance Act, 1994 (‘the Act’ for short).

Reasoning of Judgment:The High Court found no legal impediment to clarify the legal position. It is relevant to refer to the following provisions of the Act:
Section 65. Definitions.

In this Chapter, unless the context otherwise requires,-

(1)……………………………………………………………………………..
…………………………………………………………………………………
(105) “taxable service” means any service provided or to be provided,-
…………………………………………………………………………………..
…………………………………………………………………………………..
(zzzza) to any person, by any other person in relation to execution of a works contracts, excluding works contract in respect of road, airports, railways, transport terminals, bridges, tunnels and dams.

Explanation : For the purposes of this sub-clause, “works contract” means a contract wherein,-

(i)            Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii)           Such contract is for the purposes of carrying out,-

(a)   Erection, commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duck work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, life and escalator, fire escape staircases or elevators; or

(b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

(c)   Construction of a new residential complex or a part thereof; or

(d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c) or

(e) Turnkey projects including engineering, procurement and construction or commissioning(EPC) projects;

(zzzzb)……………………………………………………………………………………………..
Section 66. Charge of Service tax

There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent of the value of taxable services referred to in sub-clauses (a), (d), (e), (f), (g), (h), (i), (j), (k), (l),(m), (n), (o), (p), (q), (r), (s), (t), (u), (v), (w), (x), (y), (z), (za), (zb), (zc), (zh), (zi), (zj), (zk), (zI), (zm), (zn), (zo), (zq), (zr), (zs), (zt), (zu), (zv), (zw), (zx), (zy), (zz), (zza), (zzb), (zzc), (zzd), (zze), (zzf), (zzg), (zzh), (zzi), (zzk), (zzl), (zzm), (zzn), (zzo), (zzp), (zzq), (zzr), (zzs), (zzt), (zzu), (zzv), (zzw), (zzx), (zzy), (zzz), (zzza), (zzzb), (zzzc), (zzzd), (zzze), (zzzf), (zzzg), (zzzh), (zzzi), (zzzj), (zzzk), (zzzI), (zzzm), (zzzn), (zzzo), (zzzp), (zzzq), (zzzr), (zzzs), (zzzt), (zzzu), (zzzv), (zzzw), (zzzx), (zzzy), (zzzz), (zzzza), (zzzzb), (zzzzc), (zzzzd), (zzzze), (zzzzf), (zzzzg), (zzzzh), (zzzzi), (zzzzj), (zzzzk), (zzzzl), (zzzzm), (zzzzn), (zzzzo), (zzzzp), (zzzzq), (zzzzr), (zzzzs), (zzzzt), (zzzzu), (zzzzv) and (zzzzw) of clause (105) of section 65 and collected in such manner as maybe prescribed."

                                                                                                                        (Emphasis supplied)

A reading of the above provisions would show that any service rendered in relation to the execution of a works contract in respect of Railways which is excluded under clause (zzzza) referred to above will fall outside the definition of taxable service and consequently no service tax shall be leviable under Section 66 of the Act on the value of such services. With this clarification, the writ petition stands disposed of.

Decision:-Petition disposed off

Comment:- In light of the above said provision, it can be concluded that services rendered to railways shall not fall under the ambit of taxable services and thus not leviable to service tax.

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PJ-Case law-2013/14-1598

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