2018 (9) TMI 1670 - AT - Service Tax

Construction of Complex Service - appellant executed works contract pertaining to construction of police quarters - Held that - The appellant has provided construction activity for construction of police quarters which is owned by TNPHCL, which is a Government undertaking - The Tribunal in the case of M/s. SIMA Engineering Constructions 2018 (5) TMI 405 - CESTAT CHENNAI has considered the very same issue and held to be not taxable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability to pay service tax on construction of police quarters
2. Applicability of service tax on construction activity for the Government of Tamil Nadu
3. Interpretation of 'personal use' under the definition of residential complex

Analysis:
1. The appellant, a building contractor, engaged in the construction of police quarters, faced a demand for service tax under the category of Construction of Complex Service. The adjudicating authority confirmed the demand, leading to the appeal. The appellant argued that for the period before 1.6.2007, the levy cannot be sustained as per a Supreme Court decision. For the period after 1.6.2007, the appellant contended that since the construction was for the Government of Tamil Nadu without any commercial purpose, there was no liability to pay service tax.

2. The appellant's counsel highlighted that the construction activity was carried out for the Tamil Nadu Police Housing Corporation Limited (TNPHCL), a government undertaking, and the ownership of the constructed houses vested with the Government of Tamil Nadu. It was argued that TNPHCL, being an extended arm of the government, was akin to the Public Works Department (PWD). The appellant's services were provided to the government for 'personal use,' as per the explanation to the definition of a residential complex. Reference was made to a Tribunal decision in a similar case to support this argument.

3. The Additional Commissioner (AR) supported the findings in the impugned order, but the Tribunal, after hearing both sides, considered the appellant's construction activity for police quarters, owned by TNPHCL, a government undertaking. The Tribunal referred to a previous decision involving a similar issue and held that the activity was not taxable. Consequently, the demand for service tax was deemed unsustainable, the impugned order was set aside, and the appeal was allowed with any consequential relief.

This judgment clarifies the applicability of service tax on construction activities for government entities and the interpretation of 'personal use' under the definition of a residential complex, providing a favorable outcome for the appellant based on the specific circumstances of the case and relevant legal precedents.