2016 (9) TMI 737 - AT - Service Tax

Waiver of pre-deposit - Construction services - non-commercial use - they were primarily providing construction services to various institutions, which were either charitable institutions or being run on no profit no loss basis or were State Governments Educational Institutions or Societies. - Held that - the appellant has deposited an amount of more than a crore either during the course of investigations or subsequent to the passing of the adjudication order. - Though the period in the present appeal is not post amendment to Section 35F, but in view of our observations, as regards nature of the constructions as also the limitation aspect, we are of the view that the deposits made by the appellant are sufficient to satisfy the condition of the provisions of Section 35F of Central Excise Act. - Stay granted.

Summary

Issues: Stay petition for dispensing with the condition of pre-deposit of service tax under construction services for the period 2007-2013; liability of service tax for construction services provided to charitable institutions; acceptance of certificates from Income-tax Authorities; time bar aspect for service tax liability; adequacy of deposits made by the appellant; applicability of amended provisions of Section 35F for pre-deposit.

Analysis:
The appellant sought to dispense with the pre-deposit condition of service tax amounting to ?11,50,25,691/- and ?36,30,677/- confirmed for construction services provided from 2007-2013. The appellant claimed that most buildings constructed were for charitable or non-commercial purposes, citing a circular exempting service tax for such cases. Despite producing certificates from Income-tax Authorities supporting their claim, the Commissioner rejected it, alleging contracts were not directly with the institutions. However, it was acknowledged that some buildings might be used for commercial purposes, incurring service tax liability.

Regarding the time bar aspect, it was noted that the appellant, providing services to charitable institutions, may have genuinely believed no service tax was due. The appellant had already deposited significant amounts, including ?69,70,995/- during investigation and two cheques of ?20 lakhs each, totaling over ?1 crore. The amended Section 35F required a 7 1/2% deposit of the confirmed demand for appeal hearings. Despite the appeal period predating the amendment, considering the nature of constructions and limitation aspect, the deposited amounts were deemed sufficient. Consequently, the pre-deposit condition for the remaining dues, interest, and penalty was waived, and the stay petition was allowed for the substantial amount involved, allowing both parties to expedite the appeal process.