2018 (2) TMI 321 - AT - Service Tax

Short payment of service tax - Works Contract Services - demand for the period Oct, 2008 to June, 2012 - Held that - it is established from the records that the buildings are predominantly used for educational activities. Merely because some incidental activities of renting of space for Scientific or Technical Services or Man-power Recruitment services occurs, it cannot be said that the buildings are not primarily used for educational services - demand set aside. Penalties - for the period Apr. 13 to Jul. 13 - Held that - the appellant had discharged the tax liability on being pointed out by the department and much before the issuance of the SCN - the imposition of penalty for the period from Apr, 13 to July, 13 is not justified. Appeal allowed in part.

Summary

Issues:
1. Whether the appellant's Works Contract Services for educational institutions fall within the definition of Works Contract Services under section 65(105)(zzzza) of the Finance Act, 1994.
2. Whether the demand for service tax from Oct. '08 to Jun. '12 is sustainable.
3. Whether penalties imposed on the appellant are justified.

Analysis:

Issue 1:
The appellants argued that the buildings constructed for educational institutions do not fall within the definition of Works Contract Services as they are primarily used for educational purposes. The appellant's consultant highlighted the high revenue generated from educational activities compared to other taxable services. The Tribunal examined financial statements and a letter from one educational institution, concluding that the buildings were predominantly used for educational activities. The Tribunal found that incidental activities like renting space for other services did not change the primary educational use. Therefore, the demand for the period Oct. '08 to June '12 was set aside.

Issue 2:
The demand for service tax from Oct. '08 to Jun. '12 was challenged by the appellants. The Tribunal found in favor of the appellants, ruling that the demand was unsustainable due to the primary educational use of the buildings. The Circular issued by the Board regarding commercial or industrial construction was not applicable in this case, as the buildings were predominantly used for educational purposes.

Issue 3:
Regarding penalties imposed on the appellants, the Tribunal considered the appellant's admission of tax liability for the period Apr. '13 to Jul. '13. The Tribunal referenced a previous case law to determine that penalties were not justified as the tax liability was discharged before the show-cause notice was issued. Therefore, the penalties for the period from Apr. '13 to Jul. '13 were set aside, and the appeal was partly allowed with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand for service tax from Oct. '08 to Jun. '12 and the penalties imposed for the period from Apr. '13 to Jul. '13. The judgment highlighted the primary educational use of the buildings as the determining factor in deciding the applicability of Works Contract Services.