2023 (10) TMI 431 - AT - Service Tax

Classification of services - works contract services or not - activity of construction of Mega Sports Complex for hosting 34th National Games by Government of Jharkhand - period June 2007 to May 2008 - HELD THAT - The adjudicating authority has held that the activity undertaken by the Appellant are covered under Clause (e) mentioned above as EPC project, whereas the Appellant claimed that their activity would fall under Clause(b) mentioned above as it is construction of a civil structure not primarily meant for commerce or industry. A perusal of the activity undertaken by the Appellant indicate that the sports complex is a civil structure, primarily meant for conducting sports activities and not meant for commercial purposes - the contention of the Appellant agreed with that the facilities like Restaurants, VIP Guest house, Hotel facility etc. is only for the purpose of making the sports complex habitable and functional and in accordance with international standards. The same in no way make the Sports complex is meant for commercial purposes - thus, the activity of the Appellant are covered under Clause (b) of the definition of 'Works Contract Service'. The same view has been held by the Principal Bench of CESTAT, New Delhi, in the case of Jatan Construction Pvt Ltd vs. CCE, Jaipur 2018 (1) TMI 374 - CESTAT NEW DELHI , wherein identical case has been decided in favour of the assessee by relying on the Larger Bench decision in M/S. LANCO INFRATECH LTD. AND OTHERS VERSUS VERSUS CC, CE ST, HYDERABAD 2015 (5) TMI 37 - CESTAT BANGALORE (LB) . Thus, the activity undertaken by the Appellant is 'Works Contract Service' as defined under Clause (b) of Section 65(105)(zzzza) and hence the activities undertaken are not liable to service tax as the mega sports complex is not primarily meant for commercial purposes. In view of the above, the demands confirmed in the impugned order are set aside. As the demand itself is not sustainable, the question of charging interest and imposing penalty does not arise. The impugned order set aside - appeal allowed.

Summary

Issues involved:
The issue in this case revolves around whether the construction of a Mega Sports Complex for hosting the 34th National Games by the Government of Jharkhand qualifies as Works Contract Services under the Finance Act, 1994.

Details of the Judgment:

Issue 1: Classification of Activity
The Appellant, engaged in constructing the Mega Sports Complex, argued that their work falls under the category of construction of a civil structure not primarily meant for commerce or industry. They contended that the facilities like restaurants, VIP guest house, and hotel were essential for making the sports complex functional and did not indicate commercial activities. The Tribunal agreed with the Appellant, citing similar decisions and held that the activities were covered under Clause (b) of the Works Contract Service definition, which pertains to construction not primarily meant for commerce or industry.

Issue 2: Precedents and Legal Interpretation
The Appellant relied on precedents such as the case of CCE&ST Pune Vs B J Shirke Construction Technology Pvt Ltd and decisions by the CESTAT in Jatan Construction Pvt Ltd vs. CCE, Jaipur, to support their argument. These cases highlighted that for construction to be subject to service tax, it must be primarily used for commerce or industry. The Tribunal, in alignment with these precedents, concluded that the Mega Sports Complex was not primarily meant for commercial purposes, thus not liable for service tax.

Issue 3: Decision and Outcome
Based on the legal interpretations and precedents, the Tribunal set aside the demands confirmed in the impugned order. As the construction of the sports complex was not primarily for commercial purposes, the activities undertaken were not subject to service tax. Consequently, the Tribunal allowed the appeal filed by the Appellant, emphasizing that the demand, interest, and penalties were not sustainable due to the non-applicability of service tax.

Separate Judgment:
The judgment was delivered by HON'BLE MR. K. ANPAZHAKAN MEMBER (TECHNICAL) of the Appellate Tribunal CESTAT KOLKATA. The decision favored the Appellant's argument that the construction of the Mega Sports Complex did not qualify as Works Contract Services under the Finance Act, 1994, as it was not primarily meant for commercial purposes.