Appellant's Construction Services Exempt from Tax; Appeal Allowed with Stay Application Granted

The appellant's construction services for the Ordnance Factory were found not to fall under the 'Commercial or Industrial Construction Services' category under the Finance Act. Consequently, the tax demand, penalty, and interest were set aside, and the appeal was allowed with a stay application granted for consequential relief.

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Issues involved: Service Tax demand under Commercial & Industrial Services category, penalty under Section 11 of the Act, pre-deposit for appeal hearing, classification of construction services for Ordnance Factory.

Service Tax Demand and Penalty: The appellant, a service provider registered under Maintenance and Repair services, provided taxable services to Ordnance Factory, Nagpur. Despite being aware of the Departmental law, the appellant did not pay Service Tax on the amount received, leading to a show cause notice and confirmation of Service Tax demand of Rs. 96,191/- along with penalty under Section 78 of the Finance Act, 1994.

Appeal and Pre-deposit: The appellant did not file a reply to the show cause notice and offered to pay the proposed tax amount. The Assistant Commissioner confirmed the Service Tax demand and imposed a penalty. The appeal before the Commissioner (Appeals) required a pre-deposit of the disputed tax amount for hearing, which the appellant failed to deposit, resulting in dismissal of the appeal.

Classification of Construction Services: The construction activity carried out by the appellant for Ordnance Factory was deemed prima facie for industrial purpose and taxable. However, on further examination, it was found that the construction for a non-commercial organization manufacturing products for defense use did not qualify as taxable service under 'Commercial and Industrial Construction Services' u/s the Finance Act. The appellant's registration as a contractor for civil works with the Ordnance Factory and the purpose of the works executed for the Ministry of Defence supported this finding.

Judgment: The construction works by the appellant for Ordnance Factory were not classified as 'Commercial or Industrial Construction Services' under the Finance Act, 1994. Therefore, the demand of tax, penalty, and interest imposed were set aside, and the appeal was allowed along with stay application, granting consequential relief.

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