PER: R. BHAGYA DEVI

This appeal is filed by the appellant ‘The Superintending Engineer, Harbour Engineering Department, South Circle, Thiruvananthapuram against Order-in-Original No. TVM-EXCUS-000-27-13-14 dated 20.02.2014 passed by the Commissioner of Central Excise and Customs, Thiruvananthapuram.

Briefly stated the facts are the appellant belongs to the Harbour Engineering Department, Government of Kerala who undertook Government funded projects. ASR Ltd. a foreign company who was entrusted with certain works relating to rehabilitation, costal protection and construction activities for Government of Kerala funded through Government budgetary allocations which was implemented, coordinated and supervised by the appellant on behalf of the Government. Alleging that the appellant had received the services of works contract on construction of Artificial Reef at Kovalam from a foreign company, Revenue issued a notice demanding service tax on the gross amount paid to the foreign company. The Commissioner in the impugned order confirmed the services received by the appellant under the category of Works Contract Services and demanded service tax amount of Rs.76,57,124/- for the period from 28.03.2009 to 27.05.2010 along with interest and imposed equal amount of penalty. Aggrieved by this order, the appellant is in appeal before us.

The Learned Counsel on behalf of the appellant submitted that the works undertaken was for the Government and cannot be considered as a Commercial in nature with profit ; hence, not liable to pay service tax. He also relied on the Circular No.116/10/2009-ST dated 15.09.2009 where service tax was exempted for Government Departments. He further submitted that Works Contract Services is not attracted since there is no transfer of property, no execution for commercial or industrial purpose as defined under Section 65(105)(zzzza) of the Finance Act, 1994. Further, it is stated that the service is rendered by foreign service provider and the recipient being Government of Kerala, Section 66A of Finance Act, 1994 does not apply; hence, claimed that the impugned order needs to be set aside.

The Learned Authorised Representative (AR) for the Revenue reiterating the findings of the Commissioner submitted that the Works Contract Service included execution of turn-key projects including Engineering, Procurement and Construction or Commissioning (EPC) projects and since the project undertaken by the appellant was an EPC project, the same was liable to service tax under Works Contract Services.

Heard both sides. As per the documents placed on record, we find that the project undertaken by the appellant was ‘Multipurpose Submerged Artificial Surf Reef for Water Sports and Beach Development at Kovalam’ undertaken by the Department of Tourism, Government of Kerala. As per the tender documents, it is seen that the proposal of M/s. ASR Ltd. New Zealand @ USD 11,64,500 for construction of multipurpose reef was accepted. The documents also stated statutory taxes and levies as applicable will be extra. The Tender Schedule at Clause-4 mentioned as follows:

The rate should be inclusive of Value Added Tax, Income tax and contribution to Kerala Construction Welfare Board’ and the above amount @ 6.2% of the contract value was to be deducted from the total amount due to the contracting firm on account of the completion of the project.

Thus, from the above facts, it is seen that the project was undertaken by the Department of Tourism and the tender was allotted to a foreign company. The Commissioner in the impugned order acknowledges the fact that the appellant had provisioned the service tax liability in the price bid dated 05.11.2007. We find that in the price bid dated 05.11.2007 and revised price bid on 08.01.2008, the appellant has categorically mentioned USD 11,64,500 exclusive of all taxes and under the taxes category, we find service tax, VAT, Kerala Constructions Welfare Fund and Customs duty and the final price incl

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