By TIOL News Service

HYDERABAD, FEB 14, 2017: THE appellant undertook work for Krishnapatnam Port Company Limited for construction of new bulk handling terminal system on an EPC contract. The dispute has arisen on the nature of services provided by appellant to KPCL and their taxability or otherwise under service tax law. Vide interim order, the Tribunal ordered pre-deposit of Rs 10 crores and the appellant filed a modification application.

Revenue objected for modification on the ground that the entire dispute centres around the eligibility of the appellant for the notifications relied upon by them and therefore allowing the Miscellaneous Application would tantamount to allowing the appeal. The application for modification of stay was opposed on the ground that Tribunal has no powers for modification.

After hearing both sides, the Tribunal held:

+ The Tribunal has inherent powers for modification of the stay order passed. In cases where there are changes of circumstances and the interim order needs to be consequently modified, the Tribunal is not barred from exercising its powers under the Statute. In the instant case it is not disputed that the law in relation to WCS as it stood at the time of passing of the impugned stay order had been overturned by the Hon'ble Supreme Court (in Larsen & Toubro case), that too within the time specified by Tribunal for compliance of pre-deposit. Further the inherent power of modification has been endorsed by the High Court of Calcutta in 2014 (301) E.L. T 7 (Cal.), Polar Industries Vs CESTAT.

+ It is held that the services carried out by the appellant during the period of dispute are indeed in the nature of works contract services. It is also seen that the nature of their work, in relation to construction of port or other port, are fully exempted from the whole of service tax livable thereon right from 07-06-2005 till date, by a series of notifications. In fact it is interesting to note that after bringing Works Contract Service into the tax net vide Section 65(105) (zzzza) of the Finance Act, 1994, notification 25/2007-ST dated 22-05-2007 had incorporated "services provided in relation to execution of a works contract", for exemption from service tax liability, in relation to construction of a port or other port.

+ It is further held that the works contract services provided by the appellant prior to 01-06-2007 cannot be vivisected in view of Hon'ble Supreme Court judgment in Larsen & Toubro case. Further, for period after 01-06-2007 the works contract services provided by appellant continue to be exempt from service tax liability in view of the exemption notifications. In the result, the appeals are allowed with consequential reliefs.

(See 2017-TIOL-424-CESTAT-HYD)