2016 (2) TMI 486 - AT - Service Tax

Claim of refund of service tax paid by them during the period from April, 2011 to March, 2012 on services of constructions of college building - The said refund claim was rejected by the Adjudicating Authority on the ground that the appellant have not produced (a) approved plan of the building (b) they have not produced proof such as MOU or certificate that the construction of building for the purpose of educational, religious, charitable, health, sanitation or philanthropic purpose and not for any purpose of profit, (c) and appellant recovered the amount of service tax by way of issuing debit note. Held that - it is clear that building constructed by the respondent is not commercial and industrial construction, therefore does not fall under the category of taxable services, as the same is not used for commercial and industry but it is used for providing education. Therefore service tax paid by the respondent is liable to be refunded. - there is no dispute raised as regard the facts that the respondent by issuing credit note not collected the service tax from the service recipient. Ld. Commissioner (Appeals) by proper application of mind set aside rejection of refund claim and allowed appeal of the respondent. - Refund cannot be denied - Decided against the revenue.

Summary

Issues:
Refund claim rejection based on lack of approved building plan, MOU, and debit note - Interpretation of taxable services under Construction Service - Applicability of service tax on educational institution construction.

Analysis:
The appeal challenged the Order-in-Appeal that set aside the Order-in-Original rejecting a refund claim by the respondent, an educational institute providing construction services for a college building. The dispute centered around the categorization of services under 'Construction Service' and the eligibility for a refund of service tax paid. The Adjudicating Authority rejected the refund claim due to missing documentation like an approved plan, MOU, and proof of non-profit use. However, the Commissioner (Appeals) allowed the appeal, considering the educational purpose of the building and the issuance of a credit note instead of a debit note for service tax refund.

The Revenue argued that the commercial or industrial use of the building should be determined from the approved building plan, emphasizing that being a charitable trust does not automatically exempt service tax. They cited CBEC Master Circular to support their stance that Income Tax Act exemptions do not apply to service tax liabilities. In contrast, the respondent contended that service tax is only applicable to commercial and industrial constructions, presenting evidence of the building's use for educational purposes by a charitable trust, with approved plans.

The Tribunal examined the evidence, including the building plan, the trust's charitable nature, and the educational approval from AICTE and the Maharashtra government. It concluded that the building was not for commercial or industrial use but for education, making it eligible for a service tax refund. The Tribunal upheld the Commissioner (Appeals)'s decision, emphasizing the educational objective of the trust and the issuance of a credit note for service tax refund, in line with previous judgments supporting the non-taxable status of educational institution constructions.