2016 (6) TMI 832 - AT - Service Tax

Demand of service tax - construction of quarters for personal use of staff of RSRDC - construction of Daramshala - Held that - the staff quarters were made by the appellant as sub-contractor engaged by a contractor and therefore the exclusion clause does not come to its rescue as that reuired the engagement of the contract directly by RSRDC to be covered under the exclusion clause in Section 65(105)(zzzh) of Finance Act 1994. The Daramsala construction prima facie also cannot be taken out of the CICS because the facility of Dharamsala was not free of cost. Regarding the construction of the building for KHTPL which was used for administration/ staff welfare training centre canteen dispensary staff room Crhche etc. the appellant tried to make out an arguable case that is was for non-commercial purpose. However M/s KHTPL is a commercial organization and so it is also arguable that its building was for business or commerce. - Prima facie case is not favor of assessee - Stay granted partly.

Summary

Issues:
1. Construction of quarters for personal use.
2. Construction of Daramshala for commercial purposes.
3. Construction of building for staff welfare by a commercial organization.

Analysis:
1. The appellant argued that the demand related to the construction of quarters for personal use of staff was not sustainable. However, it was found that the appellant acted as a sub-contractor engaged by a contractor, not directly by RSRDC. Therefore, the exclusion clause under Section 65(105)(zzzh) of the Finance Act, 1994 did not apply. The demand of approximately ?16.00 Lakhs for this construction was upheld.

2. Regarding the construction of Daramshala, the appellant claimed it was not for commercial purposes. However, it was observed that the facility was used for various commercial activities, including marriages, and thus fell within the scope of Construction of Complex Services (CICS).

3. In the case of the building constructed by M/s. KHTPL for staff welfare, training center, canteen, etc., the appellant argued it was for non-commercial purposes. Despite the appellant's contention, it was noted that KHTPL is a commercial organization. The argument was made that the building was for business or commerce. The Tribunal found that the construction could be considered commercial due to the nature of the organization.

4. Considering the appellant's contention that the demand was time-barred, the Tribunal ordered a pre-deposit of ?10.00 Lakhs within 6 weeks as per Section 35F of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. Compliance was required by a specified date, failing which the appeal would be dismissed. The remaining liability was stayed pending the appeal upon the pre-deposit. Any amount already deposited towards the impugned order would be counted towards the pre-deposit.