Konkan Railway Not Liable To Pay Service Tax On Use Of Mangalore-Roha Line: CESTAT
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Konkan Railway is not liable to pay service tax on the use of the Mangalore-Roha Line.The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that both the Konkan Railway Corporation Ltd. and Indian Railways are not separate...
The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that Konkan Railway is not liable to pay service tax on the use of the Mangalore-Roha Line.
The bench of Suvendu Kumar Pati (Judicial Member) and Anil G. Shakkarwar (Technical Member) has observed that both the Konkan Railway Corporation Ltd. and Indian Railways are not separate entities.
The appellant/assessee, Konkan Railway Corporation Ltd. (KRCL), entered into an agreement on 15.7.2002 with the Ministry of Railways, Government of Maharashtra, Goa, and Kerala for the construction of a new Broad Gauge Railway Line between Mangalore and Roha. It was allowing Indian Railways to use the railway lines, including signals and systems, for the transportation of Goods and passengers between Roha and Mangalore. It was receiving consideration for the use of assets in terms of apportionment of revenue for the usage of its infrastructure facilities, including railway tracks, in accordance with the agreement.
It was noticed by the department that transportation of goods and passengers was provided by Indian Railways and not by the appellant, and collection of revenue was done by Indian Railways only, which was being apportioned by stakeholders, namely, participating State Governments and Indian Railways, and the same was nothing but charges paid for allowing Indian Railways to use the infrastructure of the appellant that is classifiable under ‘Business Support Service’.
The show cause notices were issued demanding duty with a proposal for interest under Section 75 of the Finance Act, 1994, penalties under Sections 76 and 77, as well as an equal penalty under Section 78 of the Finance Act, 1994, for the extended period.
The appellant submitted that, as per the Budget speech of the Railway Minister made on 14.3.1990, a proposal for the formation of a Railway company in terms of the Companies Act 1956 for the purpose of construction and operation of railway lines had received the Cabinet approval of the Government of India.
The appellant contended that, as per the agreement, the company will be deemed to be a railway company under the provisions of the Indian Railways Act, 1890. The main objective of the company was to construct Konkan Railway lines and operate them for a period up to which the company discharges its liabilities arising out of the project, and the cost of service shall be met by equity and by collecting loans, debentures, bonds, etc., with the equity participation of Indian Railways of more than 50%.
The appellant urged that no service can be said to have been rendered by the Appellant to the railway since both are not two separate entities.
The tribunal has held that the appellant and the Indian Railways are not separate entities. The Indian Railways are exempt from paying service tax for the prior period up to October 1, 2012. Therefore, confirmation of demand by the Commissioner is unsustainable, for which the order passed by the Commissioner is required to be set aside.
Case Title: Konkan Railway Corporation Ltd. Versus Commissioner of Service Tax, Mumbai
Case No.: Service Tax Appeal No. 87709 of 2019
Date: 22.06.2023
Counsel For Appellant: Chirag Shetty
Counsel For Respondent: Nitin M.Tagade