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TMI Blog2025 (3) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... e carried out for not-for-profit organization and constructed buildings were not primarily used for commerce or industry. Hence, the impugned services are not covered under 'Commercial or Industrial Construction Service' or 'Works Contract Service' - reliance placed in the decision in the case of Banna Ram Choudhary Vs. Commissioner of Central Excise, Jaipur, [2017 (9) TMI 86 - CESTAT NEW DELHI], wherein it was held that buildings used for educational purpose by recognized educational institutions cannot be categorized as 'commercial buildings', and the construction thereof is not leviable to Service tax under 'commercial or industrial construction service'. Similarly Delhi Development Authority (DDA) is observed to be a statutory body established under Delhi Development Act, 1957 (DDA Act) with the primary objective to promote and secure the development of Delhi as stated in Section 6 of the DDA Act. It is an autonomous body which reports directly to the Ministry of Urban Development, Government of India. Hence, construction of Indoor Stadium at Siri Fort Sport Complex was for being used by the Government for holding Commonwealth Games and not for generating any profit from the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice Tax, it is held that the impugned services are not covered under sub-clause (a) to Section 65(25b) and sub-clause (ii)(b) of the Explanation to Section 65(zzzza) of the Act, therefore, not taxable under 'Commercial or Industrial Construction Service' or 'Works Contract Service' - In the present case, the respondent had undertaken the construction of single residential unit for Shri Manish Arora and Shri Anuj Dandone, which cannot qualify as 'residential complex' as defined under Section 65(91a) for the purpose of sub-clause (a) of Section 65(30a) and sub-clause (ii) (c) of the Explanation to Section 65(zzzza) of the Act. Thus, impugned services are not covered under 'Construction of Complex Service' or 'Works Contract Service'. Construction services provided to Sweta Estates Private Limited, AVA Builders Pvt. Ltd. and Birla Edutech Limited - HELD THAT:- The issue is no longer res integra as the value of free of cost material is not includible in the value of gross amount charged for payment of service tax. The value of free of cost material supplied by M/s. Sweta Estates Private Limited (service recipient) to the Respondent (service provider) was not required to be include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalties are imposable.
Conclusion - i) IIM, CEAI, and DDA are not commercial concerns, and their construction services are not taxable. ii) Single residential unit constructions are not taxable under the relevant service categories. iii) FOC materials are not includible in the taxable value for service tax. iv) Advances related to non-taxable activities and miscellaneous income not linked to taxable services are not subject to service tax. v) There are no suppression of facts or intent of tax evasion by the respondent. Interest, penalt and extended period cannot be invoked.
Appeal of Revenue dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... Composition Scheme of Work Contract Service on account of services provided to M/s Sweta Estates Private Limited for Civil & structural works of three towers (tower 24-26) at Belgravia -II project at Central Park-II, Sector 48, Sohna Road, Gurgaon. Whereas, on scrutiny of Letter of Intent dated 13.06.2011 (RUD-13) assessee-repondant is found to have received free of cost material from the contractee for execution of the said contract. Whereas, on scrutiny of ST-3 returns as submitted by the assessee-respondent, during the course of investigation, it appears that they had not included the value of free supplies in gross amount for the purpose of computation of service tax under Composition Scheme of Works Contract Service. Whereas, despite of repeated requests, the assessee did not made available copies of agreement with BOQ, running account bill, invoices, etc. with reference to aforementioned project. (v) With respect to AVA Court commercial complex at Malibu towers Gurugram and school building at Birla Edutech Limited department observed that the services provided were taxable under Construction of Commercial or Industrial Complex' Service, "and or "Works Contract Service" as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al amount of service tax as was proposed in the impunged show cause notice. It is further submitted that IIM and CEAI are wrongly denied to be commercial concerns. The nature and working of these institutes has been absolutely ignored by the adjudicating authority. In case of M/s Sweta Estate Pvt Ltd. the value of free of cost material supplied by the service receipt has been wrongly included in the gross taxable value. In respect of M/s AVA Builders Pvt. Ltd. and M/s Birla Edutech Ltd. also the adjudicating authority has erred in dropping the demand on account of non-inclusion of the value of material used in the gross value for the purpose of service tax as per the legal provisions contained in the explanation to the Clause 3(1) of Notification No. 32/2007-ST dated 22.05.2007 read with Notification No. 23/2009-ST. Learned Authorized Representative also submitted that the demand of service tax on the amounts received as advance is wrongly dropped by observing that most of the said amounts were relating to the construction activities which were outside the scope of the construction of commercial complexes or of the residential complexes without discussing the nature of work as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depend primarily upon whether the building or civil structure is 'used, or is to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature." 4.5 In the present case, it is submitted that construction activities undertaken by the Respondent for IIM, DDA, CEAI are not taxable under 'Commercial or Industrial Construction Service' or 'Works Contract Service' for the reason that the said construction activities were carried out for not-for-profit organizations and constructed buildings were not primarily used for commerce or industry. The building for these institutes were otherwise used for educational purposes. 4.6 Reliance is also placed on the following decisions wherein it was held that construction activity with reference to noncommercial buildings is not susceptible to Service tax: * Jyoti Sarup Mittal vs. Commissioner of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative on the other hand has reiterated the findings of the impugned order and prayed for dismissal of appeal. 6. Having heard the submissions of both the parties, the rival contentions and perusing the record, we observe that the impugned show cause notice proposed the demand of service tax of Rs. 15,90,60,547/- along with interest and penalties on following issues: * Non-payment of Service tax on construction services provided to IIM, DDA, CEAI, Mr. Manoj Arora and Mr. Anuj Dandone; * Short payment of Service tax on construction services provided to Sweta Estates Private Limited, AVA Builders Pvt. Ltd. and Birla EduTech Limited. * Non-payment of Service tax on 'Advances' and 'Miscellaneous Income' shown in balance sheet; and * Non-payment of Service tax on 'Freight and Cartage Expenses' shown in balance sheet; 6.1 We further observe that the impunged order has held as follows: * IIM: In respect of Construction Services rendered to IIM, it has been observed that Certificate 80G was issued by Income Tax Authorities. Accordingly, it was held that IIM was a nonprofit organization, thereby not being in the nature of a commercial concerns. Therefore, constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bhayana Builders Pvt. Ltd. vs. Commissioner of Service Tax Delhi, 2013 (32) S.T.R. 49 (Tri.-LB). * Advances: In respect of the Advances shown in the balance sheet, it has been observed that out of the total amount received as advances by the Respondent from customers, certain advances were in respect of the construction activities which in itself outside the purview of Service tax, resultantly, it has been held that said advances were also not liable to Service tax. With respect to advances pertaining to taxable construction activities, it has been held that the service tax was paid at the time of adjustment of such advances towards construction services and not on the date of receipt of such advances, therefore, interest liability of Rs. 15,909/- accrues in respect of such payment. * Miscellaneous Income: In respect of the Miscellaneous Income shown in the balance sheet, it has been held that the said income was in the nature of the amount of the creditors which have not been claimed and security deposits received by the Respondent. Therefore, the said income was not related to any taxable activity and hence, no demand is sustainable on Miscellaneous Income. 6.2 We have per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public. Thus, it cannot be said that construction services were used by DDA primarily for commerce or industry. 6.6 Further consulting Engineering Association of India Limited (CEAI) is incorporated under Section 25 of the Companies Act, 1956 as a 'not-for-profit' company as stated in Preamble of Memorandum of Association (MOA) of CEAI. Clause 5.0 of MOA of CEAI stipulates that "all the income, earnings, movable, immovable properties of the Association shall be solely utilized and applied towards the promotion of its aims and objectives only as set forth in the Memorandum of Association. No profit thereof shall be paid or transferred directly or indirectly by way of dividends, bonus, profits or in any manner whatsoever to the present or past members of the Association who shall have no personal claim on any moveable or immoveable properties of the Association or make any profits whatsoever by virtue of his membership." 6.7 Thus, it is clear that CEAI also is a 'not-for-profit' organization and not in the nature of commercial concerns. It is submitted that construction services of Secretariat Building for CEAI were carried out for a not-for-profit organization and constructed buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 65(91a) for the purpose of sub-clause (a) of Section 65(30a) and sub-clause (ii) (c) of the Explanation to Section 65(zzzza) of the Act. Thus, impugned services are not covered under 'Construction of Complex Service' or 'Works Contract Service'. We rely upon the decision in the case of Macro Marvel Projects Ltd. Vs. Commissioner of Service Tax, Chennai reported as 2008 (12) S.T.R. 603 (Tri.-Chennai) affirmed by the Hon'ble Supreme Court in Commissioner Vs. Macro Marvel Projects Ltd. reported as 2012 (25) STR J154 (SC). 6.12 Coming to the issue of construction services provided to Sweta Estates Private Limited, AVA Builders Pvt. Ltd. and Birla Edutech Limited, we observe that the issue is no longer res integra as the value of free of cost material is not includible in the value of gross amount charged for payment of service tax. The value of free of cost material supplied by M/s. Sweta Estates Private Limited (service recipient) to the Respondent (service provider) was not required to be included in the assessable value for determination of service tax liability as it does not form part of the value charged by the service provider for rendering the services. The value of free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent's data shown in the balance sheet. Thus, suppression cannot be alleged. 6.16 Further it is submitted that the respondent was under the bona fide belief that it was not liable to pay service tax in the alleged manner. The respondent followed a reasonable and correct interpretation of law. Therefore, the respondent cannot be alleged to have suppressed fact with the malafide intention. We draw our support from the decision in the case of GD Goenka Private Limited Vs. Commissioner of Central Goods and Service Tax, Delhi South reported as 2023 (8) TMI 995 - CESTAT New Delhi and CCE & Customs Vs. Reliance Industries reported as 2023 (385) ELT 481 (SC). Also the department was fully aware of the activities of the respondent and had issued earlier show cause notices on 17.07.2012 and 23.10.2012. Thus, subsequent SCN for the same period could not be issued invoking extended period of limitation. In this regard, reliance is place on J.K. Enterprises Vs. Principal Commissioner of Central Excise, Alwar reported as 2023 (70) GSTL 297 (Tri.-Del.). Resultantly, no interest is recoverable and no penalties are imposable. 7. In view of the above observations, we uphold the order under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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