2018 (5) TMI 487 - AT - Service Tax

Commercial or industrial construction service - charitable trust - Whether the service provided for construction of hospital which is run by the trust is liable to service tax under commercial or industrial construction ? - Board circular dated 17/09/2004 - Held that - from the Circular, it is very clear that the building of civil construction which are fully used by charitable organisation for the purpose of providing treatment not taxable being non-commercial ventures - construction of a building for use as hospital by a charitable organization does not fall under the category of commercial or industrial construction . - demand set aside. Whether the GTA service provided for construction of building for Tata Consultancy Service located in SEZ is liable for service tax? - clause (e) of Section 26(1) of SEZ Act, 2005 - Held that - the taxable service provided to the developer or unit to carry on the authorised operation under the SEZ is exempted - In the present case the service of GTA is admittedly provided for construction of building in the SEZ. Therefore, the said service is exempted - demand set aside. Whether the GTA service availed in connection with the construction of hospital is liable to service tax? - time limitation - Held that - In the present case, the GTA service is used by the appellant and the appellant is the deemed service provider. Hence the GTA service is integral to construction of hospital building. Therefore, the GTA service relating to construction of hospital is taxable in the hands of the appellant - the appellant have not disclosed the transaction of GTA to the department as no ST-3 returns were filed declaring the value of GTA service to the department. Therefore, extended period in respect of show cause notice dated 31/12/2012 is rightly invoked - As regard the show cause notice dated 14/10/2013 we agree with the submissions of Learned Counsel that once the department came to know about the activity of the appellant and a show cause notice was issued then in the subsequent show cause notice invocation of extended period is not available to the department - demand relating to show cause notice dated 14/10/2013 for the extended period i.e. for April 2011 to September 2011 is time-barred. The penalty commensurate to the demand of GTA relating to the hospital is maintained along with interest. Appeal allowed in part.

Issues Involved:
1. Whether the service provided for the construction of a hospital run by a trust is liable to service tax under 'commercial or industrial construction'.
2. Whether the GTA service provided for the construction of a building for Tata Consultancy Service located in SEZ is liable for service tax.
3. Whether the GTA service availed in connection with the construction of a hospital is liable to service tax.
4. Whether the demand is hit by limitation.

Detailed Analysis:

1. Construction of Hospital by a Trust:
The primary issue was whether the construction of a hospital run by a charitable trust falls under 'commercial or industrial construction service' and is thus liable to service tax. The appellant argued that since the hospital is run by a charitable trust and not for profit, it does not fall under the definition of 'commercial or industrial construction service'. The appellant relied on CBEC Circulars No. 80/10/2004-ST and No. 86/4/2004-ST, which clarified that buildings used for charitable purposes are not taxable. The Tribunal agreed, referencing the Board’s Circular and various judgments, including the case of G Ramamoorthi Constructions (I) P Ltd v. Commissioner (Adj.), Coimbatore, which supported the non-taxability of such constructions. The Tribunal concluded that the construction of a hospital by a charitable organization does not fall under 'commercial or industrial construction', thus setting aside the demand.

2. GTA Service for SEZ Construction:
The second issue concerned the applicability of service tax on GTA services used for constructing a building in a Special Economic Zone (SEZ). The appellant argued that under Section 26(1)(e) of the SEZ Act, 2005, services provided to a developer or unit in an SEZ for authorized operations are exempt from service tax. The Tribunal agreed, noting that the GTA service was indeed provided for construction within the SEZ, making it exempt under the SEZ Act. Additionally, the appellant was entitled to CENVAT credit, making the exercise revenue neutral. The Tribunal set aside the demand for service tax on GTA services used for SEZ construction.

3. GTA Service for Hospital Construction:
The third issue was whether the GTA service availed for constructing a hospital is liable to service tax. The Tribunal noted that while the construction service for the hospital is exempt, the appellant, as a service provider, is not exempt from service tax on services availed by them, including GTA services. The Tribunal held that the GTA service used for hospital construction is taxable. However, regarding the time-bar issue, the Tribunal found that the appellant had not disclosed the GTA transactions, justifying the invocation of the extended period for the show cause notice dated 31/12/2012. For the subsequent show cause notice dated 14/10/2013, the Tribunal agreed with the appellant that the extended period could not be invoked again, citing the Supreme Court's decision in Nizam Sugar Factory v. Commissioner of Central Excise. Thus, the demand for the period April 2011 to September 2011 was time-barred, but the remaining demand was upheld.

4. Limitation and Penalty:
The appellant argued that the demand was time-barred and that there was no suppression of facts. The Tribunal partially agreed, stating that while the first show cause notice was valid under the extended period, the second notice could not invoke the extended period again. Regarding penalties, the Tribunal maintained the penalty commensurate with the sustainable demand of GTA services related to hospital construction, along with interest.

Conclusion:
The Tribunal partly allowed the appeals, setting aside the demand for service tax on the construction of the hospital and GTA services for SEZ construction, while upholding the demand for GTA services related to hospital construction within the permissible period. The penalty and interest were maintained accordingly.

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