2017 (8) TMI 313 - AT - Service Tax

Tribunal rules in favor of appellant, sets aside service tax demand

Shri Sanjeev K. Gaddamwar Versus Commissioner of Central Excise, Nagpur

The Tribunal set aside the demand for service tax imposed on the appellant under Sections 76, 77 & 78 of the Finance Act, 1994. It ruled in favor of ... Commercial and Industrial Construction Service - use of property, whether Commercial or Non-Commercial in nature? - CBEC Circular No.157/8/2012-ST dt. 27.4.2012 - Held that: - the appellants have pointed out that only farmers charges are collected for the maintenance of the property and the said property is not registered out or sold to anybody. In view of above, it is apparent that the use of the said property is of non-commercial nature for the facilitation of the farmers. When the property in question is not used by owner for commercial purpose then it cannot be liable for payment of service tax under commercial and industrial construction service as is apparent from Circular dt. 27.4.2012. It is apparent that CBEC circulars considered the use of the said property as non commercial in nature. In these circumstances service tax under the head of Commercial and Industrial Construction cannot be levied on such properties. Appeal allowed - decided in favor of appellant. Issues:Confirmation of demand of service tax and imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994.Analysis:The appellant, engaged in construction work for various entities, argued that most of the work done was for the Public Works Department (PWD) and thus exempted or non-commercial. The appellant received work orders from Krishi Utpanna Bazar Samiti and constructed shops and godowns for Agricultural Produce Marketing Committees (APMC). The appellant contended that the constructions were primarily for commerce or industry to help farmers sell their produce. The appellant cited CBEC Circulars to support their claim that the activities were not commercial. They also sought benefits of various notifications and exemptions, arguing against the imposition of penalties and interest due to the nature of the work being non-commercial.The Assistant Commissioner (A.R) relied on the impugned order, which confirmed the demand for service tax. The Tribunal analyzed the submissions and observed that the market constructed by APMC was for the benefit of agriculturists. Referring to CBEC Circulars, the Tribunal noted that services provided by APMC were not in the nature of outsourced business support services (BSS) but rather business auxiliary services (BAS). The services provided by APMC were considered to be BAS and covered by exemptions under relevant notifications. The Tribunal further emphasized that the use of the property was non-commercial, as highlighted in the Circulars, and therefore, service tax under Commercial and Industrial Construction could not be levied. Consequently, the demand for service tax was set aside, and the appeal was allowed.In conclusion, the Tribunal's judgment focused on the nature of the construction work carried out by the appellant for APMC and other entities, emphasizing the non-commercial aspect and the benefits provided to farmers. The analysis of CBEC Circulars played a crucial role in determining the classification of services provided by APMC and the applicability of service tax. The Tribunal's decision highlighted the importance of considering the purpose and use of the property in determining tax liability under relevant provisions of the Finance Act, 1994.