2014 (12) TMI 283 - AT - Service Tax

Commercial or industrial construction service - construction of colleges, Government hospitals or open university - Works Contract Service - Notification No. 1/2006-S.T., dated 1-3-2006 - Aabatement of 67% of the gross amount - Held that - For a construction to be levied to Service Tax, whether under commercial or industrial construction service or under works contract service the same has to be used for commerce or industry. The construction of colleges, Government hospitals or open university cannot be said to be commercial or industrial in nature. In other words, at the relevant time, the levy did not cover non-commercial or non-industrial construction (other than residential). Therefore, prima facie, there is merit in the contention of the appellant that they are not liable to Service Tax on the amount of ₹ 5,61,69,307/- received by them. If the department has still any doubt, they can call for the copy of the contract and approved plans for the said constructions to satisfy that they are non-commercial or non-industrial in nature, falling outside the purview of service tax levy and the appellant is also directed to submit all the relevant documents in this regard to the department. The work order issued by Maharashtra State Agricultural Marketing Board also indicates the activity undertaken as construction of market yard, cold storage and so on. These are all civil constructions coming under the category of commercial or industrial construction service and not completion and finishing services as concluded by the department. If completion and finishing services are undertaken as part of the construction service, then the full service rendered has to be seen as a whole to decide the eligibility to the abatement under Notification No. 1/2006-S.T. - None of the issues germane to the transaction has been examined or considered by the adjudicating authority. Therefore, we set aside the impugned order and remand the case back to the adjudicating authority - Decided in favour of assessee.

Summary

Issues:
1. Whether non-commercial constructions are liable to Service Tax under works contract service.
2. Whether the appellant is eligible for abatement under Notification No. 1/2006-S.T.

Analysis:
1. The appellant, a construction company, claimed deduction for non-commercial constructions for the Government, arguing they are not liable to Service Tax. The department issued a show cause notice demanding Service Tax, contending there is no provision for excluding non-commercial construction from works contract service. The appellant claimed abatement under Notification No. 1/2006-S.T. The Tribunal found that constructions for the Government are non-commercial and not subject to Service Tax. The department was directed to review the contracts to verify the nature of the constructions and determine if they fall outside the service tax levy.

2. The appellant claimed abatement under Notification No. 1/2006-S.T. for commercial/industrial construction services rendered. The department viewed these services as "completion and finishing services" and denied the abatement. The Tribunal examined the contracts awarded to the appellant, which clearly indicated commercial/industrial constructions. It was highlighted that if completion and finishing services are part of the construction service, the entire service should be considered for abatement eligibility. The Tribunal set aside the impugned order, remanding the case for a fresh examination based on the directions provided and all relevant documents to be considered. The appellant was granted the opportunity to present supporting evidence.

This detailed analysis of the legal judgment highlights the key issues addressed by the Tribunal concerning the liability of non-commercial constructions to Service Tax and the eligibility of the appellant for abatement under Notification No. 1/2006-S.T. The Tribunal's decision to remand the case for further examination based on specific directions ensures a thorough review of the relevant documents and contracts, providing a fair opportunity for the appellant to present their case.