2017 (4) TMI 591 - AT - Service Tax

Construction of commercial, industrial and residential complex - Charitable Institutions or not? - Held that - the Hon ble Supreme Court in the case of Larson & Toubro Limited 2015 (8) TMI 749 - SUPREME COURT has clearly laid-down that no service tax is leviable for the period prior to 01.06.2007 in respect of activities which are in the nature of works contract. Works contract as a separate service was included in the statute only from 01.06.2007 - The nature of the activity carried out by the appellant definitely involves service alongwith supply of materials required for construction. Accordingly, the activity would be rightly covered under the category of works contract from 01.06.2007 - The decision of the Apex Court in the case of Larsen & Toubro Limited was not available to the lower authorities at the material time when the impugned order was passed. Consequently, matter on remand the issue to the original adjudicating authority for denovo decision - appeal allowed by way of remand.

Summary

Issues:
1. Whether the appellant is liable to pay service tax for construction services provided to educational institutions?
2. Whether the demand for service tax is time-barred?
3. Application of the decision in the case of CCE vs. Larsen & Toubro Ltd on the nature of construction activity.

Analysis:
1. The appellant contended that the services provided to educational institutions registered as Charitable Institutions under Section 12AA of the Income Tax Act should not be considered commercial construction, hence not liable for service tax. The appellant also argued that the MOA with the institutions indicated their non-commercial nature. However, the Revenue argued that the construction activity falls under Commercial or Industrial Construction (CIC) service, citing a Board Circular. The Tribunal noted that the construction activity involved service along with the supply of materials, falling under works contract from 01.06.2007. The Tribunal remanded the issue to the original authority for re-quantification under Works Contract Service from 01.06.2007 onwards, considering the decision in the case of Larsen & Toubro Limited.

2. The appellant raised a defense on the grounds of time bar, stating that the show cause notice did not allege suppression of facts or intentional evasion of service tax. The Tribunal did not uphold this defense explicitly but remanded the matter for re-quantification, indicating a need for further examination on this issue.

3. The appellant relied on the decision in the case of CCE vs. Larsen & Toubro Ltd, arguing that no service tax can be demanded for construction activities before 01.06.2007 as they were in the nature of works contract. The Tribunal acknowledged this argument and directed the original authority to reevaluate the demand for service tax from 01.06.2007 onwards under Works Contract Service, considering the pronouncement of law by the Supreme Court on this matter.

In conclusion, the Tribunal remanded the case for re-quantification of the demand under Works Contract Service from 01.06.2007 onwards, emphasizing that no service tax can be levied for the period before that date. The decision highlighted the distinction between commercial construction services and works contract services, as well as the significance of the nature of construction activities in determining the applicability of service tax.