2018 (1) TMI 374 - AT - Service Tax

Liablity of tax - construction activities - works contract service - Held that - Admittedly, in the present case the construction activity of the appellant is with reference to student s hostel and the public hospital. These are non-commercial buildings. Accordingly, these are excluded from tax liability under works contract service - appeal allowed - decided in favor of appellant.

Summary

Issues:
Tax liability of the appellant for construction activities - Classification of services as works contract service and turn-key projects - Applicability of tax entry under Section 65 (105) (zzzza) of the Finance Act, 1994 - Interpretation of turn-key projects under works contract service.

Analysis:
The judgment revolves around the tax liability of the appellant concerning construction activities for a hostel and a hospital. The original authority classified the services as works contract service and turn-key projects, imposing tax liability and a penalty. The appellant argued that the buildings were for non-commercial use and that turn-key projects should be read along with other sub-clauses of works contract service to determine tax liability. The Tribunal noted the error in the original authority's interpretation of the tax entry under Section 65 (105) (zzzza) and explained the scope of turn-key projects within the works contract service.

The Tribunal highlighted that turn-key projects refer to the nature of project execution and may relate to activities mentioned in clauses (a) to (d) of works contract service. Referring to a previous case, the Tribunal clarified that turn-key projects must be classified based on the essential character of the service provided, with a focus on whether the service is primarily for commercial or non-commercial purposes. In the present case, as the construction was for a student's hostel and a public hospital, both non-commercial buildings, they were excluded from tax liability under works contract service.

Consequently, the Tribunal found the original order to be without merit and set it aside, allowing the appeal with consequential relief. The judgment emphasizes the correct interpretation of turn-key projects within the works contract service framework and the exclusion of non-commercial buildings from tax liability.