Tribunal rules building for educational/hospital purposes by Charitable Trust not taxable under service tax

The Tribunal ruled in favor of the appellant, holding that constructing buildings for educational and hospital purposes managed by Charitable Trusts did not constitute 'commercial construction services' subject to service tax. The definition of 'Commercial or Industrial Construction' under the Finance Act, 1994 clarified that service tax applies only when the building is used for commercial purposes. Citing precedent, the Tribunal found the demand for service tax unsustainable, setting aside the order and allowing the appeal with any necessary relief as per law.

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Issues:
1. Whether the demand of service tax under 'Commercial or Industrial Construction Service' for constructing buildings like hospitals and educational institutions is correct.

Analysis:
The case involved the appellants providing 'Commercial or Industrial Construction Services' for buildings like hospitals and educational institutions. The department contended that service tax was payable on these construction services. A show cause notice was issued for the period 2006-07 and 2008-09, demanding service tax, interest, and penalties. The original authority and the Commissioner (Appeals) upheld the demand, interest, and penalties, leading to the current appeal.

The appellant argued that constructing buildings for educational and hospital purposes, managed by Charitable Trusts, did not fall under 'commercial construction services' liable for service tax. The appellant cited Circular No.80/10/2004-ST and a Tribunal decision in Banna Ram Choudhary Vs CCE Jaipur, stating that if a building is not used for commercial purposes, the levy of service tax cannot be sustained.

The issue revolved around the interpretation of 'Commercial or Industrial Construction' as defined in the Finance Act, 1994. The definition clarified that service tax is applicable only when the building is used for commercial purposes. The Tribunal's decision in Banna Ram Choudhary Vs CCE Jaipur supported the appellant's argument that service tax cannot be levied if the construction is not for commercial use. Consequently, the Tribunal found the demand for service tax in this case to be unsustainable, setting aside the impugned order and allowing the appeal with any consequential relief as per law.

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