Construction Service Exempt from Tax for Charitable Foundation under Circular

The Tribunal held that the construction service provided to the charitable foundation was exempt from service tax as per Board Circular No. 80/10/2004-ST. Additionally, the appellant correctly paid more than 50% of the service tax for work contract services provided to corporate bodies post-01 July 2012. As a result, the Tribunal ruled in favor of the appellant, setting aside the order-in-appeal and allowing the appeal.

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Issues Involved:
1. Whether the service tax was wrongly demanded for the construction service provided to a charitable foundation.
2. Whether the appellant was liable to pay only 50% of the service tax for work contract services provided to corporate bodies post-01 July 2012.

Issue-wise Detailed Analysis:

1. Service Tax Demand on Construction Service to Charitable Foundation:
The appellant provided construction services for a college building under a contract with a charitable foundation. The officers observed a discrepancy between the gross receipt and the taxable value declared by the appellant. The appellant contended that the construction of the college building was exempt from service tax as per Board Circular No. 80/10/2004-ST dated 17 September 2004, which exempts services provided to charitable institutions from service tax. The Commissioner (Appeals) rejected this claim, citing the date on the completion certificate as post-01 July 2012, when the exemption was removed. However, the Tribunal found that the tax invoices were dated before 01 July 2012, making the Board’s Circular applicable. The Tribunal held that the construction service for the charitable educational institution was non-commercial and thus not taxable.

2. Liability of 50% Service Tax for Work Contract Services Post-01 July 2012:
The appellant argued that the services provided to the Central Warehousing Corporation were work contract services, involving both goods and labor. According to the Supreme Court judgment in Commissioner of Central Excise & Customs, Kerala vs. Larsen & Toubro, such services fall under the category of work contract services. As per Notification No. 30/2012-ST dated 20 June 2012, only 50% of the service tax liability is to be borne by the service provider, with the remaining 50% to be paid by the service recipient. The appellant claimed to have paid more than 50% of the service tax due. The Tribunal agreed, stating that the appellant's services were rightly classifiable as work contract services and that the service recipient, being a corporate body, was liable for 50% of the service tax.

Conclusion:
The Tribunal concluded that there was no service tax liability on the appellant for both issues. The construction service provided to the charitable foundation was exempt from service tax, and the appellant had correctly paid more than 50% of the service tax for work contract services provided to corporate bodies. Consequently, the order-in-appeal was set aside, and the appeal was allowed.

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