2018 (9) TMI 917 - AT - Service Tax

Refund of Service tax paid wrongly - refund rejected on the ground that appellant/assessee being a sub-contractor of M/s NBCC Ltd., they are the provider of construction service to M/s NBCC and not to the Government of India and thus they have rightly paid service tax on the service provided by them to M/s NBCC which is not a part of Government of India and therefore exemption as provided under Circular No. 80/2004-ST dated 17/09/2004 is not available to them. Held that - The sub-contractor providing service to NBCC who is the main contractor for construction of the residential complex for the Government of India will also be entitled for exemption category which is given in the definition of the residential complex itself - Since the activity itself of construction of the houses for personal use is beyond the taxable category even if this activity is undertaken by any sub-contractor the category for the levy of service tax will not change and the sub-contractor will also be entitled for exemption which is given in the definition itself. Refund allowed - appeal allowed - decided in favor of appellant.

Issues Involved:

1. Entitlement to refund claim of service tax paid under construction of complex service.
2. Applicability of exemption from service tax for construction of residential complexes for government use.
3. Treatment of sub-contractors in relation to service tax exemptions available to main contractors.

Issue-wise Detailed Analysis:

1. Entitlement to Refund Claim of Service Tax Paid Under Construction of Complex Service:

The appellant/assessee filed a refund claim of ?52,52,745/- on the grounds that they wrongly paid service tax under the construction of complex service, arguing that they were exempted from such tax. The Assistant Commissioner rejected the refund claim, stating that the appellant, being a sub-contractor to NBCC Ltd., provided construction services to NBCC and not directly to the Government of India. Consequently, the exemption under Circular No. 80/2004-ST dated 17/09/2004 was not applicable. The Commissioner (Appeals) upheld this decision.

2. Applicability of Exemption from Service Tax for Construction of Residential Complexes for Government Use:

The appellant contended that under Section 65 (91a) of the Finance Act, 1994, residential complexes constructed for personal use, including use by the Central Government, are exempt from service tax. They argued that the houses constructed were for the use of Government of India officials, thus qualifying for the exemption. The CBEC Circular No. 332/16/10-TRU dated 24th May 2010 clarified that residential complexes constructed for personal use by engaging another person are exempt from service tax. The Tribunal noted that the houses were indeed meant for Government of India officials, and thus the construction activity fell under the exemption category.

3. Treatment of Sub-Contractors in Relation to Service Tax Exemptions Available to Main Contractors:

The appellant argued that as a sub-contractor to NBCC, they should be entitled to the same exemptions as NBCC. The CBEC Circular No. 137/57/2011-ST dated 21st October 2011 clarified that if the main contractor is exempt from service tax for a works contract service, the sub-contractor is also entitled to the same exemption. The Tribunal agreed with this interpretation, stating that the sub-contractor providing services to NBCC, which is the main contractor for constructing residential complexes for the Government of India, is also entitled to the exemption.

The Tribunal referenced several judgments, including R.B. CHY Ruchi Ram Khattar & Sons vs. CST, New Delhi, and Khurana Engineering Ltd. vs. CCE, Ahmedabad, which supported the view that service tax is not leviable on activities exempted for the main contractor, even if performed by a sub-contractor.

Conclusion:

The Tribunal concluded that the appellant/assessee was entitled to the exemption from service tax for the construction of residential complexes for the Government of India, even as a sub-contractor. The order-in-appeal was set aside, and the appeal was allowed with consequential benefits to the appellant/assessee. The Tribunal emphasized that the construction of houses for personal use by the Government of India falls outside the taxable category, and this exemption extends to sub-contractors as well.

Operative Part:

The appeal was allowed with consequential benefits to the appellant/assessee, and the order-in-appeal was set aside. The Tribunal pronounced the operative part of the order in the open court.

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