Hospital construction classified as 'Works contract Service' - Tribunal grants waiver of Service Tax

The Appellate Tribunal CESTAT CHANDIGARH held that the demand of Rs. 87,09,749/- under Commercial and Industrial Construction Services for constructing a hospital was not sustainable as the services provided under a composite contract were classified as 'Works contract Service.' Relying on legal precedents, the Tribunal granted a complete waiver of Service Tax, interest, and penalties, staying the recovery during the appeal process.

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Issues:
Demand of Rs. 87,09,749/- confirmed under Commercial and Industrial Construction Services for construction of a hospital. Classification of the services provided under a composite contract. Entitlement for waiver of pre-deposit based on the nature of services and applicable legal precedents.

Analysis:
The judgment by the Appellate Tribunal CESTAT CHANDIGARH addressed the demand of Rs. 87,09,749/- imposed on the applicant for construction services provided for a hospital. The appellant argued that the services rendered under a composite contract, involving the supply of material along with services, should be classified as a works contract. Citing the decision in the case of CCE & Cus., Kerala Vs. Larsen & Toubro Ltd., the appellant contended that the demand under Commercial and Industrial Construction Services was not sustainable. Additionally, it was argued that since the services were for the construction of a charitable hospital, a waiver of pre-deposit should be granted, referring to the decision in the case of Mankeshwar Enterprises Vs. CCE, Pune and Excel Engineering Vs. CCE, Meerut-II.

The Ld. AR representing the respondent reiterated the findings in the impugned order, opposing the appellant's contentions. After hearing both parties and considering the submissions, the Tribunal examined the issue of classification of services provided under the composite contract. Referring to the case of Excel Engineering Vs. CCE, Meerut-II, the Tribunal observed that the service rendered by the appellant should be classified as 'Works contract Service' as defined under Section 65 (105) (zzzza). Consequently, the Tribunal held that the demand under Commercial and Industrial Construction Services was not sustainable, as the activity undertaken by the applicant was deemed to fall under the category of works contract.

Based on the above observations and analysis, the Tribunal concluded that the applicant had made a case for a complete waiver of Service Tax, interest, and penalties. Therefore, the Tribunal waived the requirement of pre-deposit for the entire amount of Service Tax, interest, and penalties, staying the recovery thereof during the pendency of the appeal. The judgment was dictated and pronounced in open court by the Tribunal members, Mr. Ashok Jindal and Mr. Devender Singh.

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