2013 (6) TMI 488 - AT - Service Tax

Commercial construction activity - bulk of constructions undertaken are School buildings, Ayurvedic Medical Colleges and Engineering Colleges and so on. - on other commercial constructions the principal contractor has discharged the Service Tax liability - Held that - From the above circular, it is clear that educational institution, government building etc. do not come under the category of Commercial or Industrial Construction services . Therefore, prima facie services rendered in respect of educations institutions would not come within the purview of tax liability and, therefore, the demand of Service Tax, in this regard, without verifying the nature of construction as certified by the local authorities, cannot sustain in law. Regarding other construction - matter remanded back - The appellant is also directed to co-operate with the department and submit all the documentary evidence with regard toe classification of the buildings they have constructed within a period of one month from the date of receipt of this order and thereafter, the adjudicating authority shall decide the matter in accordance with law after granting a reasonable opportunity of hearing to the appellant to make their submissions.

Summary

Issues Involved:
Appeal against Order-in-Original for Service Tax demand on construction services.

Analysis:
The appellant, registered under the category of 'Commercial or Industrial Construction Services,' faced a demand for Service Tax amounting to Rs.1,65,11,409/- for the period 2006-07 to 2010-11. The appellant contended that most of their constructions were non-commercial, such as school buildings and educational institutions, and for commercial projects, they acted as sub-contractors with the principal contractor responsible for Service Tax. The Revenue argued that some constructions were commercial, necessitating the appellant's liability for Service Tax on those specific projects. The Tribunal considered the submissions and decided to address the appeal.

The Tribunal referred to Circular No.80/10/2004-ST, which clarified the tax liability for 'Commercial or Industrial Construction Services' based on the purpose of the building or structure. Constructions for educational, charitable, or non-profit purposes were deemed non-taxable, while commercial projects like government buildings for commercial use were taxable. The Tribunal emphasized the need to verify the nature of construction certified by local authorities before imposing Service Tax. For projects of commercial nature like factory buildings or residential quarters, the classification of the property was crucial for determining tax liability. Therefore, the matter was remanded to the adjudicating authority for reevaluation considering the local authorities' approval for construction classification. The appellant was instructed to cooperate with the department, submit documentary evidence on building classification within a month, and participate in the reevaluation process.

In conclusion, the appeal was allowed for remand, and the stay application was disposed of. The Tribunal directed a fresh consideration by the adjudicating authority, emphasizing the importance of verifying the nature of constructions and classification for determining Service Tax liability accurately.