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TMI Blog2024 (7) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... ature. The department itself has taken the view that the circular dt. 17.09.2004 is still in force and that the construction provided for educational institutions are exempted from levy of service tax. Needless to say, that the Board circulars are binding on the department. The Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE (APPEALS), BANGALORE VERSUS KVR CONSTRUCTION [ 2012 (7) TMI 22 - KARNATAKA HIGH COURT] had occasion to consider the issue of refund of service tax paid by an assessee on construction services provided for construction of educational institutions. The Hon ble High Court upheld the order passed by the Tribunal that construction of educational institutions is exempt from levy of service tax. In the case of GUJARAT ADANI INSTITUTE OF MEDICAL SCIENCES VERSUS C.C.E. S.T. -RAJKOT [ 2023 (6) TMI 1000 - CESTAT AHMEDABAD] , the Tribunal considered the very same issue as to whether the demand of service tax raised on construction of educational institutions is sustainable or not, and it was held that ' When the property in question is not used by Appellant for commercial purpose then it cannot be liable for payment of service tax as is ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational institutions is exempted from payment of service tax as per Board Circular No.80/10/2004-ST dt. 17.09.2004. That most of their customers are public charitable trusts having Section 12AA registration under Income Tax Act. On 12.12.2014, the appellant submitted records and relevant particulars for the period 01.10.2008 to 30.06.2012 and also furnished the same reply stating that they are not liable to pay service tax for construction of educational institutions. The department was of the view that for the period 01.10.2008 to 30.06.2012 the appellant has constructed educational institutions and such constructions are commercial in nature and therefore the appellant is liable to pay service tax. Show cause notice dt. 22.04.2014 was issued for the above period invoking the extended period proposing to demand service tax under WCS along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal. 2. The Ld. Counsel Ms. Radhika Chandrasekar appeared and argued for the appellant. It is submitted that the appellant is providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no exemption to educational institutions owned by charitable trust. This observation is made without appreciating the fact that the definition of works contract services specifically refers to primarily for the purpose of commerce or industry and educational institutions are non-commercial in nature. 2.5 The departments vide Circular No. 80/10/2004 dt. 17.09.2004 has clarified that constructions which are for use of organisations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes for profit are not taxable being non-commercial in nature. 2.6 It is submitted that the observation in the OIO that Circular dt. 17.09.2004 is withdrawn vide Master Circular No.96/7/2007-ST dated 23.08.2007 and therefore the same cannot be made applicable is not correct. The said circular is not withdrawn and the same is in force even as on 2013 which is clarified by the Department vide Reply dt. 25.07.2013 to the queries addressed by the Coimbatore Builders Contractors Association. 2.7 That the private educational institutions have obtained registration certificates u/s 12AA of the Income-tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18.10.2011 for the period April 2006 to September 2010 covering partly the period in dispute in the instant appeal. In the said Show Cause Notice also the department had invoked extended period alleging nonpayment of service tax with respect to free supply of materials and classification of service under Works Contract Services. Therefore extended period cannot be invoked again covering the same period. The Appellant relies upon the decisions in the case of Nizam Sugar Factory and ECE Industries. 4. Ld. Counsel submitted that the quantification is not correct for the reason that service tax has been demanded under works contract services @ 10% and 12% respectively without considering the fact that the Appellant opted for Composition Scheme under works contract services and the applicable rate would be 2% and 4% respectively. The Appellant had submitted letter dated 28.05.2007 to the Superintendent which clearly indicated that for all projects starting after 01.06.2007 the Appellant will pay service tax under Composition Scheme. Ld. Counsel prayed that the appeal may be allowed. 5.1 The Ld. A.R Shri N. Sathyanarayanan appeared and argued for the Department. The findings in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey failed to discharge service tax in respect of construction of educational institutions. This act of the appellant is suppression of facts with intent to evade payment of service tax and therefore the invocation of extended period is legal and proper. Ld. A.R prayed that the appeal may be dismissed. 6. Heard both sides. 7. The issue to be considered is whether the appellant is liable to pay service tax under Works Contract Service for the period 01.10.2008 to 30.06.2012 for construction of educational institutions. 8. It is not in dispute that the appellant has discharged service tax in respect of construction services provided for other than educational institutions. The issue in this appeal is only with regard to the demand raised in respect of construction service for educational institutions. The department is of the view that the appellant has to pay service tax for construction service provided to construct educational institutions. It is the case of the department that even though these educational institutions may be constructed and run by charitable organizations, since these educational institutions collect fees of different nature, they are to be treated as constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be subjected to service tax. 13.3 In case of multi-purpose buildings such as residential-cumcommercial construction, tax would be leviable in case such immovable property is treated as a commercial property under the local/municipal laws. 13.4 The definition of service specifically excludes construction of roads, airports, railway, transport terminals, bridge, tunnel, long distance pipelines and dams. In this regard it is clarified that any pipeline other than those running within an industrial and commercial establishment such as a factory, refinery and similar industrial establishments are long distance pipelines. Thus, construction of pipeline running within such an industrial and commercial establishment is within the scope of the levy. The Board in the above circular has explained that when the building is meant only for educational purpose, the levy of service tax is not attracted. The department does not have a case that the educational institutions constructed by appellant are not used principally and solely for providing education. 9. The Ld. A.R has attempted to counter the above circular by stating that the Board has withdrawn the said circular dt. 17.09.2004 pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. When the circular issued by the Board specifically clarified that construction services provided for construction of educational institutions are exempted from levy of service tax we find no reason to hold that these constructions are commercial in nature. 11. It also requires to be stated that the Coimbatore Builders and Contractors Association had addressed to the Chief Commissioner of Central Excise, Coimbatore vide letter dt. 19.06.2013 requesting for clarifications with regard to various construction services. One of the clarifications raised in the said letter was whether the Circular No.80/10/2004-ST dt. 17.09.2004 is to be treated as withdrawn or not. The said letter by the Coimbatore Builders and Contractors Association as well as the reply by the Coimbatore Commissionerate is as under : Query : 1. Whether the construction of schools, Colleges, Hospitals and Charitable institutions, was liable to Service Tax as the same were not primarily for Commerce or Industry. 2. If the Circular No.80/10/2004 dated 10.09.2004, which clarified what type of construction are not to be treated as Commercial, is to be treated as withdrawn, is there an alternate Circular mentioning that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m levy of service tax. Relevant para reads as under : 12. It is an undisputed fact that total amount of Rs. 1,24,38,991/- was paid as service tax under different TR-6 challans between February 2005 and February 2007. It is not in dispute the clarifications issued in the circular dated 17-9-2004 includes the building constructions which are for the use of organizations or institutions being established solely for the educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit, are not taxable being non-commercial in nature. It is also not in dispute that claim of the respondent before the concerned authority seeking refund of the above said amount was based on the above circular dated 17-9-2004 on the ground that the services are rendered for a non-profit organization. The department is also not denying that services rendered by the respondent by putting up constructions of several buildings stated above to the trust, which is a non-profit organization, hence, a non-profit service is not taxable. 14. In the case of Gujarat Adani Institute of Medical Sciences Vs CCE ST Rajkot vide Final Order No.A/11309-11310/2023 dated 22.06.202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen. We find that this argument is convincing as the similar issue has been considered by this Tribunal in the case of B.G. Shirke Construction Technology Pvt. Ltd. Vs. C.C.E. 2014 (33) S.T.R. 77 (Tribunal Mumbai), wherein it was held that merely because some amount is charged for using the facility of this stadium the same cannot be commercial construction. The said decision was upheld by the Hon‟ble Bombay High Court reported in 2019 (25) GSTL 8 (Bom). The similar issue has been considered in the case of Commissioner of Service Tax Vs. S.M. Sai Construction 2016 (42) STR 716 wherein the service recipient was charitable trust registered under the Bombay Public Trust Act, 1950.The Tribunal Held that the building constructed was not commercial construction and therefore, Service Tax paid by the recipient was refundable. In an another identical case of Institute of Banking Personal Selection Vs. Commissioner of Service Tax 2007 (8) STR 579,it was held that an organization does not declare dividend or distribute surplus/profits to its shareholders, trustees and /or members but ploughs back the surplus for the purpose of an object of the organization would be considered as char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose visiting the temple, we have to hold that the said services would fall under exclusion clause of works contract services and tax liability does not arise. For the period post 1-7-2012, Mega-exemption Notification No. 25/2012-S.T., dated 20-6-2012 at Sl. No. 13(c) exempts the tax liability on a building owned by an entity registered under Section 12AA of the Income-tax Act, 1961 and meant predominantly for religious use by general public. This exemption clearly covers the case of the appellant post 1-7-2012 as it is undisputed that appellant is registered with the income tax authorities under Section 12AA as a charitable institutions for the period pre and post 1-7-2012. The exemption granted by Notification No. 25/2012-S.T. (13)(c) would apply in full force. Accordingly, the demand of the service tax on the services rendered of works contract services to the religious institution does not survive and are liable to be set aside as we do so. 10. As regards demands raised on the buildings constructed for CDAC, NFC and APHMHIDC, we find from the hand-outs given today by the Learned Counsel as well as produced before the adjudicating authority, the APHMHIDC has been stated to be en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Vij Construction Pvt. Ltd. v. CCE, New Delhi [2018 (11) G.S.T.L. 169 (Tri. - Del.)] was considering the very same issue of taxability of the services for construction of buildings for ICFAI and in paragraph No. 6 has held that in regard to campus for ICFAI University Dehradun, the buildings are for use of a recognised university for education and the same cannot be considered as commercial buildings. ICFAI University is having pan India presence, operating in various campuses, it has to be considered as an educational institution, as per the ratio of the decision of the Tribunal in the case of Vij Construction Pvt. Ltd. (supra). Accordingly, the service tax liability on the construction of buildings for ICFAI Bangalore, Jaipur and Hyderabad for the period pre and post 1-7-2012 is unsustainable and liable to be set aside and we do so. 12. Learned AR has placed reliance on the judgment of the Hon ble High Court of A.P. and Hyderabad in the case of Tirumala Tirupathi Devasthanams v. Superintendent of Customs, Central Excise Service Tax, Tirupathi [2013 (30) S.T.R. 27 (A.P.)] to state that the guest houses which are constructed for religious institutions and charitable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uctions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax. 13. It is explained by the Board in the aforesaid circular that, when the building is solely used for educational purposes, the levy of service tax is not attracted. We, therefore, find that the building having been used for educational purpose and being non-commercial purpose, the said construction activity cannot be subject to levy of service tax during the disputed period. 17. In view of the above discussions, we find that the demand of service tax under WCS for the disputed period for construction of educational institutions cannot sustain. The issue on merits is answered in favour of the appellant and against the Revenue. 18. The Ld. Counsel has argued on the ground of limitation. From the records, it is seen that the entire figures and details for raising the demand is taken from the accounts maintained by the appellant. Further the appellant has discharged appropriate service tax in regard to all other construction services. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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