Works contract tax applies only to construction primarily for commerce or industry; religious, public and educational projects were excluded.

Construction of buildings or civil structures under works contract service is taxable only when the work is primarily for commerce or industry. Construction for religious institutions registered under Section 12AA and used predominantly for religious purposes was treated as non-commercial and fell outside the taxable field, including under the post-01.07.2012 exemption for such entities. Construction for C-DAC, NFC and APHMHIDC was also held non-taxable because the record showed governmental or public functions in research, atomic energy and healthcare infrastructure, not commerce or industry. Construction for ICFAI was similarly treated as work for an educational institution rather than a commercial building, so service tax could not be sustained.

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Issues: (i) Whether construction of guest houses and temple complexes for religious institutions was taxable under works contract service; (ii) Whether construction for C-DAC, NFC and APHMHIDC was taxable as work primarily for commerce or industry; (iii) Whether construction for ICFAI was taxable as construction for commercial purposes.

Issue (i): Whether construction of guest houses and temple complexes for religious institutions was taxable under works contract service.

Analysis: Works contract service covered construction of a new building or civil structure only when it was primarily for the purposes of commerce or industry. The temples were registered under Section 12AA of the Income-tax Act, 1961 and were treated as charitable and religious institutions meant predominantly for religious use by the general public. The construction of guest houses and temple complexes for pilgrims was held to be for non-commercial and non-industrial purposes. For the period after 01.07.2012, the exemption under Notification No. 25/2012-ST also applied to buildings owned by entities registered under Section 12AA and meant predominantly for religious use.

Conclusion: The demand on constructions for religious institutions was not sustainable and was set aside.

Issue (ii): Whether construction for C-DAC, NFC and APHMHIDC was taxable as work primarily for commerce or industry.

Analysis: The entities were found to be government or public bodies engaged in research, atomic energy activities, and healthcare infrastructure, and not institutions primarily engaged in commerce or industry. The material on record showed that the constructions were for non-commercial and non-industrial purposes. The view that these entities were profit-making or commercial was not supported by the notice or the record. The exclusion recognised for non-commercial and non-industrial construction applied.

Conclusion: The demand on constructions for C-DAC, NFC and APHMHIDC was not sustainable and was set aside.

Issue (iii): Whether construction for ICFAI was taxable as construction for commercial purposes.

Analysis: Construction for ICFAI was treated as construction for an educational institution and not as construction of commercial buildings. The Tribunal applied the earlier ruling that buildings used by a recognised university or educational institution are not primarily for commerce or industry. Accordingly, the service tax levy on these constructions could not be sustained.

Conclusion: The demand on constructions for ICFAI was not sustainable and was set aside.

Final Conclusion: The impugned order was set aside in full and the appeal succeeded on merits.

Ratio Decidendi: Construction of a building or civil structure under works contract service is taxable only when it is primarily for commerce or industry, and constructions for registered religious institutions, government bodies engaged in non-commercial functions, or recognised educational institutions fall outside that taxable field or within the applicable exemption.

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