2023 (8) TMI 348 - AT - Service Tax

Taxability of Construction Services provided to State Governments - providing services inter-alia related to construction works and repairs/renovation for police quarters, Police Stations, Education Institution, Educational Museum, Court Building, Public Health Centers and other Buildings as per the requirement of State Government - HELD THAT - In the present matters demand of Service tax has been confirmed by the Ld. Commissioner under the category of Construction of Complex Services and Commercial or Industrial Construction Services as defined under the Section 65(30a) 65(91a) and 65(105)(zzzh) 65(105) (zzq) of Finance Act, 1994. Appellants claimed that their construction activity provided to the government not covered under the above sections as per the Explanation of Section 105 (zzzh) of the finance Act, 1994 and not covered under Section 105(zzq) of the Finance Act, 1994 as they have not provided services to commerce or industries. It is observed that in impugned orders Learned Commissioner has not considered the aforesaid claim of the appellants and confirmed the service tax demand on the ground that appellants have not directly provided the services to the government of Gujarat or Police department or others. The facts of each case needs to be examined to apply the ratio of the judgments relied upon by the appellants, which has not been done by the adjudicating authority in the present case. Since the adjudicating authority has not examined the claim of the appellants and the judgments relied upon in impugned orders, the matter needs to be remanded to the Adjudicating authority for fresh decision. Appeal allowed by way of remand.

Summary

Issues:
The issues involved in the judgment are related to the taxability of Construction Services provided to State Governments, specifically under the categories of "Construction of Complex Services" and "Commercial or Industrial Construction Services" as defined under the Finance Act, 1994.

Details of the Judgment:

Issue 1: Taxability of Construction Services
The appellants, engaged in construction and repair works for state government authorities, were alleged to have not discharged their service tax liability. The preventive wing initiated an inquiry, leading to show cause notices for demanding service tax and imposing penalties. The appellants contended that the services provided were not covered under the relevant sections of the Finance Act, as they were not directly provided to commerce or industries. The Tribunal observed that the Commissioner had not considered this claim and confirmed the service tax demand without analyzing the appellants' arguments.

Issue 2: Legal Precedents and Circulars
The appellants cited various judgments and a circular by CBIC to support their argument that the construction activities provided to the government were not taxable under the sections mentioned in the show cause notices. They relied on decisions such as RD Contractor & Company Vs. CCE, Kanubhai Ramjibhai Makwana Vs. CCE & ST, and others to establish the non-taxability of their services. However, the Tribunal noted that the adjudicating authority had not examined these legal precedents in the impugned orders.

Decision and Remand
After hearing both sides, the Tribunal found that the matter needed to be remanded to the Adjudicating Authority for a fresh decision. The Tribunal set aside the impugned orders and allowed the appeals, keeping all issues open for further examination. The judgment was pronounced in open court on 24th July 2023.

This summary provides a detailed overview of the issues involved in the judgment, the arguments presented by both parties, the legal precedents cited, and the ultimate decision of the Tribunal to remand the matter for fresh consideration by the Adjudicating Authority.