2016 (3) TMI 571 - AT - Service Tax

Waiver of pre-deposit - Sustainability of Service tax demand - Works Contract - Construction of Post Graduate Girls Hostel at Sardar Vallabhbhai National Institute of Technology (SVNIT) Surat and constructed /modernised ESIC hospital at Jaipur - Held that - demand relating to construction of ESIC hospital would not be covered under construction of new building or structure for the purpose of commercial or industry as ESIC hospitals are not commercial or industrial ventures. Therefore, demand relating thereto do not sustain. As regards the girls hostel, it would get covered under the scope of construction of new residential complex as is evident from the definition of residential complex service under Section 65(105)(91a) because it will not get covered under the exclusion category as the construction was not done by directly engaging the appellant inasmuch as SVNIT did not directly engage the appellant who is a sub-contractor of NBCC which was directly engaged by SVNIT. Thus the demand pertaining to construction of girls hostel sustains. - stay granted partly.

Summary

Issues:
1. Classification of service tax demand for the construction of Post Graduate Girls Hostel and ESIC hospital.
2. Interpretation of sub-clauses under the Explanation to Section 65(105)(zzzza) for Works Contract Service.
3. Application of the definition of residential complex under Section 65(105)(91a) for service tax liability.

Analysis:
The judgment involves a stay application and appeal against a service tax demand for construction projects. The appellant argued that the demand falls under EPC projects and should be covered under specific sub-clauses of the Explanation to Section 65(105)(zzzza). Referring to the case law of M/s Lanco Infrtech Ltd., the appellant contended that the demand does not fit within the mentioned sub-clauses, making it unsustainable. The appellant claimed that the ESIC hospital is not for business or commercial purposes, while the girls hostel was meant for personal use, falling outside the scope of a residential complex as defined in Section 65(105)(91a).

The Revenue, however, argued that the service was correctly classified as Works Contract Service, emphasizing that the hostel falls under the definition of a residential complex due to the appellant's role as a sub-contractor. The Tribunal considered both arguments and found that the impugned service was classified as Works Contract Service, and therefore, the demand was not fatally hit by the lack of specific sub-clauses mentioned. The Tribunal opined that the construction of the ESIC hospital did not qualify as construction for commercial or industrial purposes, warranting a stay on the demand. On the other hand, the construction of the girls hostel was deemed prima facie sustainable under the definition of a new residential complex, as the appellant was engaged indirectly through a sub-contractor.

Consequently, the Tribunal ordered a pre-deposit of a specific amount with interest, with a deadline for compliance. The remaining adjudicated liability was stayed pending the appeal, subject to the pre-deposit. Failure to comply would result in the dismissal of the appeal for non-payment. The judgment carefully analyzed the arguments presented by both sides and provided a reasoned decision based on the classification of services and the applicability of relevant legal provisions.