2018 (6) TMI 333 - AT - Service Tax

Commercial or Industrial Construction Service - Civil Construction of Residential Houses & Staff Colonies - It appeared to Revenue that the said Civil Construction undertaken by M/s Padam Chand & Co., was Industrial Construction Service - Held that - if the Civil Construction is intended for personal use of such person i.e. the owner of the property, then it does not get covered by definition of Residential Complex Service - the Civil Construction was to be used for residential purposes by the service recipients and therefore, the same cannot be considered to be under Commercial or Industrial Construction Service . The demand confirmed by the Original Authority to the tune of ₹ 13,71,473/- under the provisions of Section 73A of the Finance Act, 1994 is not sustainable since the same has travelled beyond Show Cause Notice. Further, the Service Tax cannot be demanded on the goods but it can only be demanded on service and therefore, the demand of Service Tax to the tune of ₹ 14,61,137/- is not sustainable. Appeal dismissed - decided against Revenue.

Summary

Issues: Classification of construction activity for Service Tax, applicability of Commercial or Industrial Construction Service, demand of Service Tax, sustainability of penalties.

Analysis:

1. Classification of Construction Activity: The case involved a dispute regarding the classification of construction activities undertaken by M/s Padam Chand & Co. The Revenue contended that the construction activities qualified as "Commercial or Industrial Construction Service," leading to a demand for Service Tax. However, M/s Padam Chand & Co. argued that their construction work for Sugar Mills and personal residences did not fall under this classification.

2. Demand of Service Tax: A Show Cause Notice was issued to M/s Padam Chand & Co. for the period from 2005-06 to 2009-10, alleging that the construction activities undertaken were taxable under the "Commercial or Industrial Construction Service." The Revenue raised a demand of ?1,67,90,738, out of which a portion was paid by M/s Padam Chand & Co. The dispute centered around whether the construction activities were indeed taxable under the relevant classification.

3. Sustainability of Penalties: The Original Authority's order imposed a penalty on M/s Padam Chand & Co. under the provisions of Section 73A of the Finance Act, 1994. However, during the appeal, it was argued that this penalty was not proposed in the Show Cause Notice, rendering it unsustainable and beyond the scope of the original proceedings.

4. Judgment and Decision: The Appellate Tribunal, after considering the contentions of both parties and reviewing the facts, ruled in favor of M/s Padam Chand & Co. The Tribunal found that the demand for Service Tax and penalties were not sustainable under law. It was determined that the construction activities were intended for residential purposes, which did not align with the classification of "Commercial or Industrial Construction Service." Therefore, the appeal filed by M/s Padam Chand & Co. was allowed, while the appeal filed by Revenue was dismissed.

In conclusion, the judgment by the Appellate Tribunal CESTAT ALLAHABAD clarified the classification of construction activities for Service Tax, emphasizing the importance of the intended use of the constructed properties in determining tax liability. The decision highlighted the necessity for proper classification and adherence to procedural requirements in tax assessments to ensure fairness and legality in tax disputes.