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2016 (8) TMI 590 - AT - Service TaxClassification - work contract service -demand of tax, interest and penalty - taxability - CBEC Circular No. 123/5/2010-TRU dated 24.05.2010 - government construction would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to Service Tax - Held that - The works contract services (at the cost of repetition) falling under Construction of Complexes or commercial construction are exempted as per CBEC Circular No. 80/10/2004 dated 17.09.2004 and CBEC Circular 123/5/2010-TRU dated 24.05.2010. All the services of the appellant related to civil construction under Management, Maintenance or Repair and construction of govt. buildings, rendered to Varanasi Development authority are not liable to Service Tax. This is also held in the case ECP HOUSING (INDIA) PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NASHIK 2011 (9) TMI 122 - CESTAT, MUMBAI. Assessee not liable to pay service tax - stay application rejected - decided against revenue.
Issues:
1. Service tax liability on construction services provided to a government authority. 2. Applicability of service tax on construction of government buildings. 3. Exclusion of non-commercial government construction from service tax. Issue 1 - Service tax liability on construction services provided to a government authority: The appellant was alleged to have evaded service tax amounting to ?20,44,410 on construction services provided to M/s Varanasi Development Authority. The appellant contested the show cause notice (SCN) and penalties imposed, arguing that they were registered under Works Contract with the Sales Tax department and had paid Sale Tax/Trade Tax. The Commissioner (Appeals) allowed the appeal, citing that the construction was for government buildings used for personal government purposes, falling under the exclusion clause of taxable services. The CBEC Circulars also supported the non-taxability of government constructions for non-commercial purposes. Issue 2 - Applicability of service tax on construction of government buildings: The Commissioner (Appeals) found that the construction of government buildings under the Kanshi Ram Yojna was not for commercial or industrial purposes, thus not liable for service tax under "Work Contract" or "Construction of Complex" services. The government used the buildings for its own purposes, and ownership was not transferred, leading to the exclusion of these activities from taxable services. Issue 3 - Exclusion of non-commercial government construction from service tax: The Tribunal referred to previous cases where construction for low-cost housing, welfare schemes, and non-commercial purposes was held not liable for service tax. The Tribunal emphasized that activities like construction of sports complexes or stadiums were not commercial or industrial in nature, thereby not subject to service tax. The Tribunal rejected the revenue's stay application, stating that no sufficient grounds were presented for granting the stay. In conclusion, the Tribunal set aside the original order, ruling in favor of the appellant, stating that all services related to civil construction for government buildings provided to Varanasi Development Authority were not liable for service tax. The judgment highlighted the non-taxability of government constructions for non-commercial purposes and emphasized the exclusion of such activities from taxable services based on relevant legal provisions and precedents.
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