2019 (3) TMI 448 - AT - Service Tax

Construction services - non-payment of service tax - it was alleged that appellant had constructed building for Manyavar Kanshi Ram Hospital at Greater Noida and did not pay service tax - burden to prove - CBEC Circular No.80/10/2004-ST dated 17.09.2004 - Held that - Through the proceedings, we have came to know that revenue has repeatedly passed on the onus on the appellant to establish that the building constructed for use by Manyavar Kanshiram Hospital was not for commercial purpose. However, as per the said clarification onus was on revenue to prove that the said building was being used or to be used for making profit. The construction of the building was done during the year 2008-09 and 2009-10 where the show cause notice was issued on 24.10.2013. For issue of show cause notice Revenue could not give any evidence to establish that the said building was being used for such purposes by which the organization using the same was making profit. Therefore, in terms of the said circular service tax was not leviable on the said activity performed by the appellant. Since the service tax was not leviable and appellant is succeeding on merit the issue of limitation need not be discussed and decided. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of the definition of 'Industrial & Commercial Construction Service' under Section-65(25b) of the Finance Act.
2. Application of Circular No. 80/10/2004-ST dated 17.09.2004 in determining service tax liability for construction activities.
3. Burden of proof on revenue to establish that a building was used for commercial purposes.
4. Consideration of bonafide belief and limitation period in tax liability cases.

Analysis:

1. The case involved the interpretation of the definition of 'Industrial & Commercial Construction Service' under Section-65(25b) of the Finance Act. The appellant contended that only construction activities primarily used for commercial or industrial purposes are subject to service tax, citing specific terms from the definition. The appellant argued that construction for non-commercial purposes, such as public health or charitable activities, should not be taxable under the Act.

2. The application of Circular No. 80/10/2004-ST dated 17.09.2004 was crucial in determining the service tax liability for the construction activities in question. The Circular clarified that service tax depends on whether a building is used or to be used for commercial or industrial purposes. It also stated that buildings used for educational, religious, charitable, health, or philanthropic purposes, and not for profit, are not taxable. The appellant relied on this Circular to support their argument that the construction for a hospital with charitable purposes should be excluded from tax liability.

3. The burden of proof was on the revenue to establish that the building in question was used for commercial purposes. The Tribunal noted that the revenue failed to gather evidence or make inquiries regarding the registration of the hospital to determine if it was used for profit-making activities. The Tribunal emphasized that the revenue did not meet the onus of proving that the building was used for profit, as required by the Circular, thereby concluding that service tax was not leviable on the appellant.

4. The Tribunal also considered the appellant's bonafide belief and the limitation period in the case. The appellant argued that they believed the construction for the hospital was non-commercial based on the Circular and the MOA of the society running the hospital. They contended that the demand was barred by limitation due to their belief and communication with the department regarding the nature of the construction. The Tribunal found merit in the appellant's arguments and set aside the impugned order, allowing the appeal based on the substantive merit of the case.

By carefully analyzing the legal issues surrounding the interpretation of relevant provisions and circulars, burden of proof, bonafide belief, and limitation period, the Tribunal provided a comprehensive judgment in favor of the appellant, emphasizing the importance of adherence to legal principles and evidentiary requirements in tax liability cases.