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II. High Court
The IIT, a governmental authority – services not taxable under 2(s) of the Mega Exemption Notification-25/2012-ST an independent provisions and the expression “90% or more equity participation….” not applicable.
Facts
The Petitioner was awarded a works contract for construction of an academic complex of Indian Institute of Technology, Patna (IIT) by a project consultant appointed by IIT. On payment of appropriate taxes, a refund claim was filed contending that the activity was exempted under clause 12(c) of the Mega Exemption Notification as services were provided to a governmental authority by way of construction of a structure meant predominantly for use as an educational institution. According to the revenue, only an authority with 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution alone is a governmental authority and thus the refund claim was inadmissible.
Held
The High Court observed that the provisions contained in sub-clause (i) and (ii) of clause 2(s) of the Mega Exemption Notification-25/2012 are independent disconjunctive provisions and the expression “90% or more participation…..” is related to sub-clause (ii) alone. Since the clause (i) is followed by “;” and the word “or” it is an independent provision. Accordingly, IIT set up by the Act of Parliament i.e. Indian Institutes of Technology Act, 1961 not subjected to the condition of 90% or more participation… is a governmental authority and thus the construction activity is exempted and the tax paid is to be refunded. Further, it was also observed that as per the terms of contract with the project consultant, the service tax paid challans were to be submitted by them and the same would be reimbursed on receipt of the amount from IIT and accordingly, since the tax was paid by the petitioner alone, it was not a case of undue enrichment.
Note: It is important to note that in the present case, the contract is entered into between the Petitioner and the Project Consultant of IIT. However, since the transfer of property in goods takes place from the petitioner to IIT, the works contract service is determined to be provided directly to the governmental authority and thus is eligible for the benefit of the exemption notification.
