2017 (5) TMI 762 - AT - Service Tax

Levy of service tax - construction of Dilli Haat under Commercial or Industrial Construction - demand dropped on the ground that the activity was not covered under CIC since the building constructed is not intended primarily for Commerce and Industry - Revenue on the other hand has pleaded that the building constructed is being let out in the form of various stalls for brand promotion and hence, the constructing activity is to be covered under CIC and liable to payment of Service Tax - Held that - there can be no levy of service tax for the period upto 31.05.2007 if the contracts executed are in the nature of composite works contract as claimed by the respondent. However, this fact will need verification by going through the Original contracts. For this purpose, we considered necessary to remand the matter to the Original adjudicating authority. Appeal allowed by way of remand.

Summary

Issues:
1. Whether the construction activity undertaken by the respondent for Dilli Haat is liable for service tax under Commercial or Industrial Construction Services.
2. Whether the contracts executed by the respondent are composite contracts involving both supply of goods and construction services, and thus not liable for service tax prior to 1.06.2007.
3. Whether the building constructed for Dilli Haat is primarily intended for commercial purposes, making it liable for service tax.

Analysis:
1. The appeal was filed by Revenue against the Order-in-Original dropping the demand of Service Tax made against the respondent for the construction of Dilli Haat. The respondent contended that Dilli Haat was not a commercial building, emphasizing its purpose for promoting tourism and cultural activities. The Commissioner accepted this contention and dropped the service tax demand. However, Revenue argued that Dilli Haat was a commercial venture earning profits, and thus, liable for service tax under Commercial or Industrial Construction Services.

2. The respondent claimed that the contracts executed were composite contracts involving supply of goods and construction services, citing a Supreme Court decision that such contracts are not liable for service tax before 1.06.2007. The Tribunal noted the Apex Court's ruling and remanded the matter to verify if the contracts were indeed composite in nature. If so, no service tax would be applicable before 31.05.2007, but liable under Works Contract Services from 01.06.2007.

3. The Tribunal found merit in the respondent's argument that if the contracts were not composite works contracts, service tax would be due for the construction activity under Commercial or Industrial Construction Services. Despite the respondent's claim of Dilli Haat being for tourism and cultural promotion, the Tribunal emphasized the commercial use of the stalls for brand promotion. The matter was remanded for a fresh decision by the Original adjudicating authority, considering the Apex Court's decision and allowing additional evidence if necessary.