Tribunal rules police quarters construction exempt from service tax

The Tribunal allowed the appeals, setting aside the adjudication orders that upheld service tax liability for the construction of Police quarters. The Tribunal held that the construction fell within the exclusion category and was not subject to service tax, contrary to the Department's contention that it constituted Construction of Complex Service. The Tribunal relied on precedents and classified the works as Works Contract Service, granting relief to the appellants based on the nature of the contracts both before and after 1.6.2007.

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Issues:
Identical issue of service tax liability for construction of Police quarters.

Detailed Analysis:
The appeals involved a common issue where the appellants were engaged by Tamil Nadu Police Housing Corporation Ltd. for constructing Police quarters. The Department contended that the activity fell under Construction of Complex Service, making the value of taxable services subject to service tax liability. Three show cause notices were issued, leading to adjudication orders upholding the demands for service tax, interest, and penalties under sections 76 and 77 of the Finance Act, 1994. The appellants, aggrieved by the orders, filed appeals before the Commissioner (Appeals), who upheld the adjudication orders. The details of the demands for each appellant were presented during the proceedings.

During the hearing, the appellant's counsel referred to precedents to argue that the issue was settled. The counsel cited the judgment in Nithesh Estates Ltd., affirmed by the Hon'ble High Court of Karnataka, and the Tribunal's decision in Sima Engg. Constructions Vs. Commissioner of Central Excise, Trichy, which supported the appellant's position. The counsel contended that the works undertaken were composite in nature and should be categorized as Works Contract Service, relying on the judgment of the Hon'ble Supreme Court in Larsen & Toubro Ltd. and the Tribunal's decision in Real Value Promoters Ltd. Vs. CCE. The appellant's argument was based on the classification of composite contracts under Works Contract Service, both before and after 1.6.2007.

On the other hand, the Assistant Commissioner supported the impugned order during the hearing. After hearing both sides, the Tribunal found merit in the appellant's arguments. Referring to a previous judgment by the same Bench in Siva Engineering Constructions, the Tribunal concluded that the construction of quarters for Police personnel fell within the exclusion category and was not liable to service tax. Consequently, the impugned order was set aside, and the appeals were allowed with any consequential relief as per the law.

The judgment was dictated and pronounced in open court by the Bench comprising the Judicial Member, Ms. Sulekha Beevi C.S., and the Technical Member, Shri Madhu Mohan Damodhar.

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