2014 (10) TMI 204 - AT - Service Tax

Waiver of pre deposit - commercial or industrial Construction Service - Held that - Nagpur Improvement Trust gets flats constructed for renting out to low income group or slum dwellers, it would be construction of complex by a person directly engaging the service of another person and such complex is intended for personal use. Such complexes are specially excluded from the scope of the levy. Therefore, as far as the demand of service tax in respect of residential complex built for Nagpur Improvement Trust and Ramtek Municipal Council is concerned, the appellant has made out a prima facie case for grant of stay. - in respect of construction of meditation centre for Nagpur Municipal Corporation, prima facie it appears that the said activity cannot be considered as a Commercial or Industrial Construction Service. Thus, out of a total of ₹ 7,14,903/-, service tax liability would accrue mainly in respect of construction of tourist centre for MTDC and liability in this regard would be approx. ₹ 85,000 - Partial stay granted.

Summary

Issues:
Service tax demand on construction activities for low-cost housing, construction of tourist center, and meditation center.

Analysis:
The appeal challenged an Order-in-Appeal confirming a service tax demand against the appellant for construction activities. The appellant, a construction company, argued that the construction of low-cost housing for Nagpur Improvement Trust and Ramtek Municipal Council, which were leased to low-income groups, should be excluded from service tax liability under the definition of "residential complex." The appellant contended that since the flats were constructed for the Trust and Council, they were intended for personal use as per the Finance Act, 1994. The appellant also argued that the construction of a meditation center for Nagpur Municipal Corporation should not attract service tax liability as it was not for commercial use. The appellant admitted that the construction of a tourist center for Maharashtra Tourism Development Corporation fell under commercial or industrial Construction Service.

The appellant's counsel highlighted that the construction for low-income groups and slum dwellers should be exempt from service tax as it falls within the exclusion clause of the Finance Act. The counsel emphasized that the construction for Nagpur Improvement Trust and Ramtek Municipal Council was intended for personal use, meeting the criteria for exclusion from service tax liability. Additionally, the counsel argued that the meditation center constructed for Nagpur Municipal Corporation was not for commercial use, further supporting the exemption from service tax.

The Revenue's representative countered the appellant's arguments by stating that there was no specific exemption for construction activities benefiting low-income groups or slum dwellers, implying that such activities should be taxable. Referring to a previous Tribunal order involving the appellant, the Revenue sought to enforce terms against the appellant for the current service tax demand.

After considering both sides' submissions, the Tribunal found merit in the appellant's argument regarding the construction activities for Nagpur Improvement Trust and Ramtek Municipal Council. The Tribunal agreed that these constructions fell within the exclusion clause of the Finance Act, thus making a prima facie case for granting a stay on the service tax demand related to these projects. However, the Tribunal acknowledged the service tax liability for the construction of a tourist center for Maharashtra Tourism Development Corporation and directed the appellant to make a pre-deposit for the same. The Tribunal granted a waiver on the balance of the dues upon the pre-deposit and stayed the recovery during the appeal's pendency.