2018 (7) TMI 1119 - AT - Service Tax

Works contract - Whether the construction of Ashram Type School (Rajkiya Ashram Padhdhati Vidyalaya) constructed by the appellant for U.P. Samaj Kalyan Nirman Nigam Ltd. (U.P. Government undertaking) is commercial construction and liable to service tax under the Head Works Contract for the work done during the period 2010-11 2011-12? Held that - The appellant have constructed facility for school and Rajkiya Ashram Padhdhati Vidyalaya which is made for providing school education as a Residential School to Orphan, Schedule Caste and Schedule Tribes, Extremely Backward Classes, Extremely Poor Sections of the society as is evident from letter dated 10th August, 2006 of the Chief Secretary of U.P. address to Director of Samaj Kalyan/Janjaati Vikash, U.P., Lucknow in respect of admission policy to Rajkiya Ashram Padhdhati Vidyalaya which provides preference in education to the aforementioned classes of children/students - the construction of Asharam Padhdhati Vidyalaya by the appellant is not in the nature of commercial or industrial construction. Appeal allowed - decided in favor of appellant.

Summary

Issues: Whether the construction of an Ashram Type School for a government undertaking qualifies as commercial construction liable for service tax under Works Contract during 2010-11 & 2011-12.

Analysis:
1. The appellant undertook the construction of an Ashram Type School for a government undertaking, U.P. Samaj Kalyan Nirman Nigam Ltd., alongside other non-disputed construction works. The issue revolved around whether this specific construction project falls under the definition of 'Works Contract' liable for service tax under Section 65(105)(zzzza) of the Finance Act.

2. The Learned Commissioner determined that both the service provider (appellant) and the service receiver (U.P. Samaj Kalyan Nirman Nigam Ltd.) were commercial concerns created for business interests. Consequently, the construction of the Ashram Type School was considered within the scope of 'Works Contract Service,' leading to the imposition of service tax, penalties under Section 78, and additional penalties under Section 77(1) and 77(2) of the Act.

3. Upon appeal, the Tribunal analyzed the nature of the construction project, emphasizing that the facility was intended to provide school education to marginalized sections of society, as highlighted in official communications and policies. The Tribunal concluded that the construction of the Ashram Type School was not of a commercial or industrial nature, contrary to the Commissioner's assessment. As a result, the appeal was allowed, the tax levied under 'Works Contract' was set aside, and all penalties were revoked. The appellant was granted consequential benefits as per the law.