2016 (1) TMI 1272 - AT - Service Tax

Construction service/commercial or industrial construction service - construction of building was done for various educational institutions run by a charitable organisation - whether commercial or non-commercial in nature? - Held that - private educational institutions cannot be said to be non-commercial in nature only because they are run by charitable organisation as that merely implies that the profit earned by such institution has to be ploughed back and used for the objectives of the charitable organisation - there is no allegation of suppression of facts or wilful misstatement with intent to evade payment of service tax - in the present case the entire demand is beyond the normal period of one year and is time barred - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax demand confirmation for construction services provided to educational institutions by a charitable organization, invocation of extended period for demand, applicability of service tax prior to 1.6.2007, suppression of facts or wilful misstatement for evasion of service tax, interpretation of non-commercial nature of private educational institutions, time bar on demand beyond one year.

Analysis:
The appeal was filed against an order confirming a service tax demand for construction services provided to educational institutions by a charitable organization. The appellant argued that since the buildings were for educational purposes and run by a charitable organization, they were not meant for commerce or industry, thus service tax was not payable. Additionally, the appellant contended that the extended period for demand could not be invoked as there was no allegation of suppression of facts or wilful misstatement to evade service tax.

The Departmental Representative (DR) argued that private educational institutions are not non-commercial and invoked the proviso to Section 73(1) of the Finance Act, 1994, pertaining to the extended period. The Tribunal considered the contentions and referred to a Supreme Court decision stating that no service tax was leviable for construction works contracts involving material before 1.6.2007. The Tribunal clarified that private educational institutions being run by charitable organizations did not automatically make them non-commercial, as profits were reinvested for charitable objectives. Regarding the allegation of suppression of facts, the Tribunal analyzed the show cause notice and found no specific mention of wilful misstatement or intent to evade service tax.

The Tribunal cited various Supreme Court judgments emphasizing that mere non-disclosure of facts was insufficient to invoke the extended period for demand. It was highlighted that a positive act beyond mere inaction or failure was required to establish wilful misstatement. The Tribunal concluded that the demand was beyond the normal one-year period and, based on the analysis, ruled the demand as time-barred, setting aside the impugned order and allowing the appeal.