2013 (5) TMI 228 - AT - Service Tax

Appellate Tribunal grants relief in Service tax case, exempts pre-deposit for charitable construction

The Appellate Tribunal CESTAT, New Delhi granted relief to the appellant, dispensing with the pre-deposit condition of Service tax and penalties amounting ... Waiver of pre-deposit of Service tax/penalty – applicant have provided commercial or industrial construction service - charitable institution/no profit making organisation – Held that - After considering the MOA, which reveals that the organisation is working on no profit basis. we agree with the ld. Advocate that the construction activity would not be covered by the definition of commercial and industrial construction services. As such, at this prima stage, we are of the view that the appellant has been able to make out a good prima facie case in its favour on the above count. Appeal allowed. Issues:Prayer to dispense with the condition of pre-deposit of Service tax and penalty imposed under Section 78 of the Finance Act for providing commercial or industrial construction service to a charitable institution.Analysis:The appeal before the Appellate Tribunal CESTAT, New Delhi sought relief from the requirement of pre-depositing Service tax and penalties amounting to Rs. 2,81,118/- imposed under Section 78 of the Finance Act. The demand was confirmed against the appellant for undertaking construction activities for M/s. L.N.M. Institute of Technology, a charitable institution. The appellant argued that since M/s. L.N.M. was registered under the Rajasthan Societies Act and operated on a no-profit basis for educational purposes, the construction should not be considered commercial or industrial. The appellant relied on a Board's Circular stating that constructions for educational, religious, charitable, health, sanitation, or philanthropic purposes, without profit motives, are non-taxable. The Tribunal noted that the organization worked on a no-profit basis, thus agreeing that the construction activity did not fall under commercial and industrial construction services, granting relief from the pre-deposit condition.The Tribunal examined the memorandum of association of M/s. L.N.M., which outlined its objectives of providing education without profit motives. The respondent argued that despite the no-profit claim, imparting education is a commercial activity and falls under commercial or industrial construction. However, the Tribunal referred to the Board's Circular emphasizing that constructions for non-commercial purposes are not taxable. Considering the no-profit nature of the organization and the purpose of imparting education to poor students, the Tribunal found in favor of the appellant at the prima facie stage. Consequently, the Tribunal dispensed with the pre-deposit condition of Service tax and penalties, allowing the stay petition in favor of the appellant.In conclusion, the Tribunal's decision was based on the interpretation of the definition of commercial and industrial construction services in the context of construction activities for a charitable institution operating on a no-profit basis for educational purposes. By analyzing the organization's objectives and the nature of the construction activity, the Tribunal determined that the appellant had made a prima facie case in their favor, leading to the dispensation of the pre-deposit condition and granting relief from the imposed penalties.