2014 (1) TMI 772 - AT - Service Tax

Demand of service tax - Industrial or Commercial Construction - construction activities of buildings for Hindustan Aeronautics Ltd. and also for the Nuclear Fuel Complex (NFC) belonging to the Department of Atomic Energy, Govt. of India - Held that - Tax liability on services rendered to Hindustan Aeronautics Ltd. is only about Rs.33,000/-. The issue is arguable in the case of Nuclear Fuel Complex in the light of the Board s Circular which has been relied upon. The case relied upon by the appellant, that is the case of Nagarjuna Construction Co. Ltd. was in the matter of construction of supply of drinking water and maintenance of sewerage system which cannot be compared with manufacture of nuclear fuel for sale for determining whether it is an industrial activity. So we are not convinced that this is a case where total waiver of predeposit is to be granted - Conditional stay granted.

Summary

Issues:
1. Whether the construction activities undertaken by the applicant for certain entities were liable for service tax.
2. Whether the entities for whom the constructions were done fall under the category of 'commercial or industrial construction.'
3. Whether the applicant is required to pay service tax for the construction activities.

Analysis:
1. The applicant, engaged in construction activity, did not pay service tax for certain constructions for Hindustan Aeronautics Ltd. and the Nuclear Fuel Complex (NFC) of the Department of Atomic Energy. A show-cause notice led to a demand of service tax of Rs.51,49,856/- along with interest and penalties. The appellant challenged this order.

2. The appellant argued that constructions for commercial and industrial purposes are taxable under specific sections. They relied on CBEC clarifications stating that activities by the Government are not 'commercial or industrial construction.' Citing a previous case, Nagarjuna Constructions Co. Ltd. Vs. CCE 2010 (19) STR 259, the appellant contended that the impugned activity did not fall under the taxable categories.

3. The Joint Commissioner (AR) opposed, stating Hindustan Aeronautics Ltd. is not a government arm but a Public Limited Company. Referring to a Tribunal decision, he argued service tax must be paid for services to Hindustan Aeronautics Ltd. For the Nuclear Fuel Complex, he highlighted it as an industrial unit of the Department of Atomic Energy, selling products commercially. He emphasized that the unit's activities were not sovereign functions of the Government, making it liable for service tax.

4. The Tribunal noted the tax liability for services to Hindustan Aeronautics Ltd. was minimal. Regarding the Nuclear Fuel Complex, the Board's Circular was considered. The Tribunal found the appellant's case not comparable to the manufacture of nuclear fuel for commercial sale. Thus, a predeposit of Rs.10,00,000/- was ordered within six weeks, with waiver and stay for the balance dues upon compliance by a specified date.

This judgment clarified the tax liability for construction activities, interpreting relevant sections and applying precedents to determine the taxable nature of the services provided to different entities.