2014 (7) TMI 288 - AT - Service Tax

Tax Tribunal Upholds Liability for Construction Services to Non-Profit; Emphasizes Evidence and Pre-Deposit

The Tribunal upheld the tax liability on construction services provided to a non-profit entity due to lack of evidence proving non-commercial use. ... Commercial or industrial construction service - construction of Bharat Ghar - Assessee claimed that the services were provided to a non-profit making entity and therefore there was no liability to tax - Revenue contends that Bharat Ghar used to provide space for civil amenities and since the appellant had produced no proof of the construction being used only for charitable purposes and without monetary consideration, the service provided fell outside the exclusionary clause of Section 65(25b) of the Act - Held that:- appellant has filed a copy of a communication dated 6.6.2013 of the service recipient M/s Greater Noida Authority which is to the effect that Bharat Ghar is intended to be used by the villagers; no service charges are levied; and the construction is for facility of the public of the area - Neither the primary Authority nor the appellate Authority were sensitized to this material. If there is sufficient evidence in support of the appellant's claim that Bharat Ghar was not used for commerce or for industrial purposes, the service provided by the appellant would be outside the ambit of the taxable service alleged. The material now produced requires to be considered by the primary fact finding Authority. It is the appellant's conduct of presenting a vague and breezy not unresponsive of constructing defence that has led to expenditure of scarce and valuable adjudicative resources by the State, resulting in the primary and the appellate Orders. We are of the view that letter issued by the Greater Noida Authority requires to be considered and appreciated, to adjudicate upon the claim of the appellant as to non-liability to service tax. - Matter remanded back - Decided conditionally in favour of assessee. Issues involved:1. Failure to remit service tax for construction services provided to a non-profit entity.2. Interpretation of exclusionary clause of Section 65(25b) of the Act.3. Lack of evidence regarding the non-commercial or non-industrial use of the constructed facility.4. Consideration of new evidence regarding the intended use of the facility by the service recipient.5. Requirement for primary Authority to consider new evidence and pass a fresh adjudication order.6. Imposition of pre-deposit due to unresponsive defense leading to unnecessary litigation expenses.Issue 1: Failure to remit service tax for construction services provided to a non-profit entity.The appellant, a registrant under the Finance Act, 1994, provided construction services for Bharat Ghar but failed to remit service tax despite receiving consideration from the service recipient, the Greater Noida Authority. The primary Authority concluded that the services fell outside the exclusionary clause of Section 65(25b) of the Act as the appellant failed to prove that the construction was used solely for charitable purposes without monetary consideration. The appellate Authority upheld this decision due to the lack of evidence provided by the appellant regarding the non-commercial or non-industrial nature of the services.Issue 2: Interpretation of exclusionary clause of Section 65(25b) of the Act.The primary and appellate Authorities found that the appellant's vague assertions and lack of proof regarding the non-profit nature of the construction services rendered them taxable under the Act. The appellant's defense was considered unresponsive and lacking in substance, leading to the expenditure of adjudicative resources and unnecessary litigation expenses.Issue 3: Lack of evidence regarding the non-commercial or non-industrial use of the constructed facility.Both the primary and appellate Authorities noted the absence of evidence proving that the construction of Bharat Ghar was not primarily intended for commercial or industrial purposes. The appellant's failure to provide substantial proof in this regard led to the confirmation of the tax liability.Issue 4: Consideration of new evidence regarding the intended use of the facility by the service recipient.During the appeal, the appellant submitted a communication from the service recipient, Greater Noida Authority, indicating that Bharat Ghar was meant for public use without levying service charges. This new evidence highlighted the potential non-commercial nature of the facility and was deemed crucial for the adjudication of the appellant's claim of non-liability to service tax.Issue 5: Requirement for primary Authority to consider new evidence and pass a fresh adjudication order.In light of the new evidence presented by the appellant, the Tribunal set aside the impugned order and remitted the matter to the primary Authority for a fresh adjudication. The Deputy Commissioner was directed to consider any evidence supporting the appellant's claim within a specified timeframe, emphasizing the importance of a thorough examination of the material provided.Issue 6: Imposition of pre-deposit due to unresponsive defense leading to unnecessary litigation expenses.Considering the appellant's unresponsive defense and the consequential expenditure incurred by the State, the Tribunal directed the appellant to remit a sum towards potential tax liability as a pre-deposit. This decision aimed to discourage vague and unsubstantiated defenses that prolong litigation and burden the public exchequer.In conclusion, the Tribunal's judgment highlighted the significance of providing concrete evidence to support claims of non-liability to service tax, emphasized the need for thorough adjudication based on factual material, and imposed consequences for unresponsive defenses causing unnecessary litigation expenses.