2023 (2) TMI 782 - AT - Service Tax

Levy of service tax - commercial construction service or not - construction service to GERMI (construction of a building is in respect of educational university which is under a trust) - HELD THAT - The lower authorities had no occasion to deal with this issue. In this position we are of the view that the issue in respect of construction of GERMI needs to be re considered from the angle of work contract service. As regard the issue of service tax on supply of furniture the Lower Authority have held the said activity as commercial construction and demanded tax accordingly. Mere supply of readymade furniture cannot be classified as commercial construction service supply of furniture is nothing but sale of furniture. Hence the same cannot be classified as taxable services. Accordingly the service tax demand of Rs.52, 228/- is not sustainable and the same is set aside. Demand of Service tax of Rs. 34, 483/- on the activity of strengthening of culverts on roads - HELD THAT - This service is directly connected to the road and any work related to the public road is excluded from the service of commercial or industrial construction. For this reason the same cannot be taxed under commercial or industrial construction service - the demand of Rs. 34, 483/- is set aside. The appeal relates to demand ot Rs. 52, 228/- of supply on furniture and Rs. 34, 483/- relates to strengthening of culverts on road is allowed. Appeal relates to the issue of construction of building for GERMI is allowed by way of remand to the Adjudicating Authority for passing a fresh order on all the issues. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
(A) Classification of service under commercial construction for a university building.
(B) Tax demand justification for commercial or industrial construction services related to furniture supply.
(C) Tax liability for strengthening culverts under commercial or industrial construction services.
(D) Applicability of demand for an extended period.

Analysis:

(A) Classification of service under commercial construction for a university building:
The appellant argued that the construction for an educational university under a trust should not be considered commercial and taxed under commercial construction service. They contended that the service, if taxable, should fall under "works contract service." The Tribunal noted that the issue of works contract service was raised for the first time, requiring reconsideration. The judgment referred to various precedents to support this argument.

(B) Tax demand justification for commercial or industrial construction services related to furniture supply:
The Lower Authority had classified the supply of furniture as commercial construction and imposed a tax demand. However, the Tribunal disagreed, stating that the mere supply of ready-made furniture should not be considered a taxable service as it is akin to a sale of furniture. Therefore, the tax demand of Rs. 52,228 related to furniture supply was set aside.

(C) Tax liability for strengthening culverts under commercial or industrial construction services:
Regarding the demand of Rs. 34,483 for strengthening culverts on roads, the Tribunal ruled that such services directly connected to public roads are excluded from commercial or industrial construction services. Consequently, the demand for tax on this activity was deemed unsustainable and set aside.

(D) Applicability of demand for an extended period:
The judgment concluded that the appeal related to the tax demand for furniture supply and strengthening culverts on roads was allowed. However, the issue concerning the construction of a building for GERMI was remanded to the Adjudicating Authority for a fresh order on all issues, indicating a partial allowance and remand of the appeal.

In summary, the Tribunal partially allowed the appeal, setting aside tax demands related to furniture supply and strengthening culverts on roads, while remanding the issue of construction for GERMI for further consideration by the Adjudicating Authority.