The main legal point established in the judgment is that the exemption of Service Tax for canal works done by the government or on its behalf, as per the notifications and circulars issued by the Ministry of Finance, Government of India, should be extended without any condition.

ORDER :

1. In all these writ petitions, the petitioners are aggrieved the action of the respondent authorities in seeking to recover the Service Tax amounts from the petitioners. Hence, they are taken up together and being disposed of by this Court.

2. For the purpose of disposal of the cases, the facts in W.P.No.10387 of 2020 are narrated hereunder.

3. The then Government of Andhra Pradesh has awarded the work of Pranahitha Chevella Lift Irrigation Scheme Link-II Package 7 now renamed as Kaleshwaram Project – Link-II – Package No.7. The nature of work included “Detailed investigation, designs and execution of lift irrigation scheme for drawl of 146.24 TMC of water from Medaram (v), Dharmaram (M), Karimnagar District to lift 32 TMC of water to drop in Kakatiya Canal and to facilitate to carry balance of 114.24 TMC water further with the components such as approach channel, CM & CD works, lifts, pressure mains and lined tunnels with all associated civil, hydromechanical and electro mechanical works, improvements and enhancing the capacity of existing Medaram Reservoir and improvements to Kakatiya Canal near Ragampet.”

4. Respondent No.2 vide letter dated 30.07.2008 has issued a letter of acceptance with respect to the subject works. A contract in the nature of EPC (Engineering Procurement and Construction) dated 17.11.2008 was executed between the respondent and the petitioner in respect of the work related to Pranahitha Chevella Lift Irrigation scheme Link-II – Package No.7 now renamed as Kaleshwaram Project – Dr.B.R.A. PCSS-Link II – Package No.7 main work. Accordingly, the petitioner has been carrying out the contractual work allotted to it in terms of the specifications and directions enumerated in the contract and the general instructions to the bidders. Clause 18.1(6) of the general instructions to the bidders enumerates on the recoveries of amounts from the running account bills of contractor are to be effected. The said clause as per the corrigendum No.5/2007-08, dated 22.05.2008 states that Service Tax would be recovered @ 4.12% on items applicable. The exemption of service tax for the Government irrigation works under Government of India notification No.41/2009-Service Tax dated 23rd October, 2009 and circular No.116/10/2009 dated 15th September, 2009, the respondents have illegally deducted amounts towards Service Tax @ 4.12% from the bills of the petitioner upto RA Bill No.44 and the same has been returned upon the representations of the petitioner that the subject works are exempted. Accordingly, the illegally deducted amounts were given to the petitioner in the RA Bill No.45 dated 29.11.2015. Thereafter, the subject work has been completed by the petitioner to the satisfaction of the Respondents as on 19th December, 2019, and necessary completion certificate has also been issued to the petitioner. The case of the petitioner is that the petitioner being exempted from paying any service tax in respect of the contract work, the respondents pursuant to clause 18.1 of the General Instructions to bidders has deducted service tax @ 4.12% from the running account bills of the petitioner. It is the specific grievance of the petitioner that the impugned letter has been issued proposing to effect the recovery of service tax for an amount of Rs.14.7329 crores and credit the same to the work. Hence, W.P. No.10387 of 2020 is filed.

5. A counter has been filed by respondent No.3 primarily contending that the Account General audit has raised audit para under Section-A & instructed to effect the recovery or the Service Tax payable by the petitioners as per the terms of the contract. It is further stated that though the circulars were issued by the Ministry of Finance, exempting EPC works meant for Government purposes from service tax, recovery was effected as per clause 18.1 of the Agreement and as per the instructions of Director of Works Accounts. It is further stated that even if the exemption is given to the Agency, as the provisio