2016 (5) TMI 451 - AT - Service Tax

Waiver of pre-deposit - Service tax confirmed under the category of commercial or industrial construction services - Appellant pleaded that its none of its 4 construction projects would be covered under the service tax category - Held that - we are of the prima facie view that NRDA engaged in commercial activity of land development and sale for profit. They are primarily engaged in commerce and building for such work may be correctly categorized for tax purpose as done in the impugned order. It is recorded that the applicant has not submitted any compelling documentary evidence to substantiate that NRDA is not primarily engaged in commercial activity. As such we find the tax liability on that, prima facie, may stand. It is also found that tax liability on the office building of NRDA is, prima facie, sustainable and the financial position of the applicant is not in such bad shape in order to consider for total waiver of pre deposit. Therefore it is fit and appropriate to order for a pre deposit of ₹ 7 crore within a period of 8 weeks. - Stay granted partly

Summary

Issues:
Waiver of pre-deposit of confirmed service tax due under commercial or industrial construction services.

Analysis:
The application sought a waiver of pre-deposit of confirmed service tax due amounting to ?10,45,18,675 for undertaking four construction projects. The appellant's counsel argued that the projects, including an educational institution, a testing center, and a hostel, were not primarily engaged in commerce and thus not liable for service tax. However, the respondent contended that one project, the office building for a development authority, was engaged in commercial activity and should be subject to tax. The Tribunal noted the arguments and examined the nature of each project.

Upon examination, it was found that the projects other than the office building for the development authority might not fall under the tax liability as confirmed in the impugned order. However, the Tribunal held that the development authority was engaged in commercial activity of land development and sale for profit, making it liable for service tax. The appellant failed to provide compelling evidence to refute the commercial nature of the authority's activities. Therefore, the tax liability on the office building was deemed prima facie sustainable.

The appellant's counsel argued that the financial position of the applicant was not strong, presenting balance sheets reflecting net losses. In response, the respondent pointed out substantial cash and bank balances, along with trading receivables, indicating a healthy financial position. The Tribunal considered the financial evidence and concluded that the applicant was not in significant financial difficulty to warrant a total waiver of pre-deposit. Consequently, a pre-deposit of ?7 crore was ordered within eight weeks, with a stay on the recovery of remaining dues, interest, and penalties until the appeal's disposal.

In light of the findings regarding the tax liability on the office building of the development authority and the applicant's financial position, the Tribunal ordered a partial pre-deposit while staying the recovery of the remaining dues pending appeal. The case was scheduled for compliance on a specified date.