2026-VIL-1035-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax liability on turnkey/engineering, procurement and construction (EPC) projects for irrigation work – Appellants were awarded work contracts by the Irrigation and CAD Department for execution of turnkey/EPC projects involving construction of irrigation infrastructure - Department sought to levy service tax on these activities as works contract services - Whether the appellants are liable to service tax under the category of works contract service during the relevant period – HELD - The involves interpretation of the Larger bench decision in Lanco Infratech case which has examined the classification of turnkey/EPC contracts. The larger bench had concluded that turnkey/EPC contracts must be classified based on the essential character of service provided, and where such contracts relate to construction of canals, pipelines or conduits for irrigation, water supply or sewerage disposal when provided to government or government undertakings, they would be for non-commercial, non-industrial purposes and would fall under the exclusionary clause of works contract service definition, thereby not being exigible to service tax. However, since the revenue had filed an appeal against the Larger bench decision before the Supreme court and the outcome of that appeal was not readily ascertainable at the time of hearing, the matter requires consideration of the Supreme court's decision before final adjudication - The appeals are allowed by way of remand, and the matter is remanded back to the original adjudicating authority with a direction to first ascertain the status of the Supreme court's decision and thereafter decide the issue keeping in view both the Larger bench order and the Supreme court decision - the appeal is allowed
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