2013 (8) TMI 604 - AT - Service Tax

Commercial or Industrial Construction Service u/s 65(105)(zzq) - Held that - Prima facie there was force in the argument that they had only acted as an executor and not rendered service in the construction of the Marketing complex, hence, service tax was not payable by them under the category of commercial or industrial construction service - The assesse had constructed the marketing complex being entrusted which claimed to have been under a bona fide belief that ultimately the marketing complex would be used for the persons, namely, unemployed youth and women vendors and not for commercial purpose - In nutshell, the claim was that the construction was not for commercial purpose. The issue of limitation had been raised but the Ld. Commissioner had not recorded any finding on the same Assesses claimed that the project had been sponsored by the Central Govt. and aimed at for removal of urban unemployment and poverty alleviation in the region - It was meant for unemployed youth and women vendors in the area. Waiver of Pre-deposit 5 lakhs were ordered to be submitted as pre-deposit Rest of the duty to be waived till the disposal Stay granted partly.

Issues:
1. Waiver of pre-deposit of Service Tax and penalties for M/s. National Building Construction Corporation Ltd. and M/s. Simplex Projects Ltd.
2. Whether the construction of a marketing complex under a Central Govt. sponsored scheme is liable for Service Tax under the category of commercial or industrial construction service.
3. Financial hardship faced by M/s. Simplex Projects Ltd.
4. Determination of time bar for the demands raised by the Revenue.

Issue 1: Waiver of pre-deposit of Service Tax and penalties
The Appellate Tribunal heard arguments from the representatives of M/s. National Building Construction Corporation Ltd. and M/s. Simplex Projects Ltd. regarding the waiver of pre-deposit of Service Tax and penalties. The main contention was that the funds received for the project were meant for poverty alleviation and unemployment eradication, thus should be exempt from Service Tax. M/s. NBCC argued that they acted as an executor and not a service provider in the construction of the marketing complex. The Tribunal noted the absence of a finding by the Adjudicating Authority on the issue of time bar. Ultimately, the Tribunal directed M/s. Simplex Projects Ltd. to deposit Rs.5.00 Lakhs within six weeks, with the balance amount of dues waived during the pendency of the Appeals.

Issue 2: Liability for Service Tax under commercial or industrial construction service
The Tribunal considered whether the construction of a marketing complex under a Central Govt. sponsored scheme is subject to Service Tax under the category of commercial or industrial construction service. M/s. Simplex Projects Ltd. argued that the project was not profit-oriented and aimed at poverty alleviation. However, the Revenue contended that the nature of services provided determines the tax liability, irrespective of the funding source. The Tribunal found that the construction was indeed for commercial purposes, as indicated by the project's nomenclature and purpose. Despite being constructed under a government scheme, there was no evidence to suggest it was used differently post-construction. The Tribunal acknowledged the financial hardship faced by M/s. Simplex Projects Ltd. and accepted their offer for partial deposit.

Issue 3: Financial hardship faced by M/s. Simplex Projects Ltd.
M/s. Simplex Projects Ltd. highlighted their financial crisis and liquidity crunch, with a substantial decline in profits. The company offered to deposit a nominal amount due to financial constraints. The Tribunal considered this aspect along with the overall circumstances in deciding on the waiver of the remaining dues.

Issue 4: Determination of time bar for demands raised by the Revenue
The Revenue argued that the demands for the financial years 2008-09 were not time-barred. However, M/s. Simplex Projects Ltd. contended that a significant portion of the demand was beyond the limitation period. The Tribunal noted the lack of a specific finding by the Adjudicating Authority on the plea of time bar, emphasizing the importance of addressing procedural aspects in such cases.

In conclusion, the Appellate Tribunal granted partial relief to M/s. Simplex Projects Ltd. by directing them to make a nominal deposit, considering the financial hardship faced by the company. The judgment emphasized the need for clarity on the tax liability of construction services provided under government schemes and the importance of addressing procedural issues such as time bar in tax disputes.

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