Services rendered for public projects are not taxable under Works Contract Service as they are non-commercial in nature.

JUDGMENT :

T.S. Sivagnanam, C.J. :

1. These appeals filed by the revenue under Section 35G of the Central Excise Act, 1944 (the Act) are directed against the orders passed by the Customs, Excise and Service Tax Appellate Tribunal, Calcutta, (the Tribunal) in Service Tax Appeal No. 75419 of 2014 and 75420 of 2014 dated 9th August, 2024. The revenue has raised the following substantial questions of law for consideration:-

(i) Whether the impugned order dated 09.08.2024 passed by the Learned Tribunal is in contrary to the Provisions of Section 11B of Central Excise Act, 1944?

(ii) Whether the issue of unjust enrichment is squarely applicable in the case of the respondent ?

(iii) Whether the order dated 09.08.2024 passed by the Learned Tribunal on the issue No. (c) is against the decisions of the Hon’ble Supreme Court as well as the Hon’ble High Courts?

(iv) Whether the Learned Tribunal committed gross error of law in sanctioning the refund to the respondent by ignoring the statutory obligation, finding of the adjudicating authority as well as the Appellate Authority when the respondent had voluntarily deposited the service tax by correctly classifying the service under “Commercial and Industrial Construction Service” and later under “works Contract Service”?

2. We have heard learned Advocate appearing for the appellant/assessee and learned standing Counsel appearing for the respondent department.

3. The first issue is to be considered in the instant case is whether the services rendered by the respondent/assessee is liable for payment of service tax. It is not in dispute that the assessee performed the composite service including the construction/laying down of drinking water supply line awarded or Kerala Water Authority (KWA) in Thiruvanantapuram City Region for the period from 01.06.2007 to 31.10.2012. The assessee entered into an agreement with the Kerala Water Authority on 3.10.2006 prior to which a letter of acceptance dated 19th September, 2006 was given to the assessee by the Kerala Water Authority. The works included construction of distribution system for water supply for Thiruvanantapuram City. Prior to 1st June, 2007 such service although was classifiable as commercial and industrial commercial service (CICS) was not taxable as the same was not commercial and not industrial in nature and service tax was not charged on the invoices raised upon Kerala Water Authority before the period 01.06.2007. With effect from 01.06.2007 “Work Contracts Services” were covered as taxable services under Section 65(105)(zzzza) of the Finance Act, 1994. The assessee opined that the services provided by them were covered under works contract services and they started raising invoice reflecting service tax and suo-motu depositing the same with the Government exchequer.

4. The assessee parallelly approached the Kerala Water Authority for payment of service tax. The assessee was informed that laying of pipeline for drinking water supply project for State Agency do not fall under the expression CICS and as such no service tax was payable.

5. Accordingly, the service tax deposited by the assessee was never paid to the assessee by the Kerala Water Authority.

6. Upon receipt of such information the assessee filed refund application under Section 11B of the Central Excise Act covering the period from 01.06.2007 to 30.09.2010 and from 01.01.2011 to 31.10.2011.

7. The adjudicating authority by order dated 18.10.2012 rejected such application, firstly on the ground that supporting documents for exemption of service tax for work awarded by the Kerala Water Authority was not provided by the assessee.

8. Further it was alleged that in the bid document which has been mentioned that all duties, taxes and other levies payable by the director under the contract shall be included in the rates and prices and the total bid price submitted by the bidder should include the same. Thirdly, there was some discrepancy pointed out in the R.A. Bill value etc. Once again there was