2026-VIL-1013-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax on upfront water supply infrastructure charges collected from lessees of industrial plots – Appellant collects a one-time upfront charge equal to fifty percent of the capital cost of water supply infrastructure from each lessee, with the appellant bearing the remaining fifty percent - Whether the fifty percent upfront capital cost collected towards water supply infrastructure constitutes a taxable service under the service tax provisions or qualifies as an exempt upfront amount under Section 104 of the Finance Act, 1994 – HELD - The fifty percent capital cost for water supply is an upfront fee received for setting up water supply infrastructure and qualifies as an exempt amount under Section 104 of the Finance Act, 1994. The statute exempts one-time upfront amounts by whatever name called in respect of taxable services provided by a State Government Industrial Development Corporation or Undertaking to industrial units by way of grant of long-term lease of thirty years or more for industrial plots during the period from first June 2007 to twenty-first September 2016 - Unlike the annual water charges paid on the basis of consumption, the capital cost is a one-time amount collected separately and forms part of the lease deed for a period of ninety-nine years. Since the department itself had decided the identical issue on merits in favour of the appellant for earlier periods by dropping the service tax demand on the same fifty percent capital cost under Section 104, and such decision was not challenged in appeal, it binds the department and precludes it from taking a different stand in subsequent proceedings for the dispute period - The impugned order is set aside and the appeal is allowed
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