Service tax exemption for construction works to a statutory authority applies; extended limitation and penalty fail without suppression.

Construction services executed for Mandi Parishad were treated as works for a statutory authority under a State enactment, so the mega exemption notification applied and service tax could not be sustained on that activity. The dispute was also held to be interpretational, with regular books and returns showing no suppression or intent to evade; as a result, the extended limitation period and related penalties were not available. The Tribunal further rejected valuation based solely on Form 26AS, holding that demand must rest on actual records such as bills, invoices and bank evidence, not a mechanical adoption of Revenue data. The tax demand and penal consequences were therefore set aside.

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Issues: (i) Whether construction services rendered for Mandi Parishad were exempt from service tax under the mega exemption notification; (ii) Whether the extended period of limitation and consequential penalties were available in the facts of the case; (iii) Whether the demand could be sustained on the basis of Form 26AS and the value adopted by the Revenue.

Issue (i): Whether construction services rendered for Mandi Parishad were exempt from service tax under the mega exemption notification.

Analysis: The construction works executed for the Mandi Parishad were treated as works carried out for a statutory authority established under a State enactment. The relevant exemption framework, including the Education Guide and the Board circular, was read with the mega exemption notification to determine whether the activity fell within exempt construction for public/statutory purposes rather than taxable commercial activity. The objection that the body was commercial in nature was not accepted on the facts found by the Tribunal.

Conclusion: The exemption was available and the demand on this count could not be sustained.

Issue (ii): Whether the extended period of limitation and consequential penalties were available in the facts of the case.

Analysis: The controversy was treated as interpretational, and the appellant had maintained books of account and filed regular returns. In these circumstances, suppression or intent to evade was not established. Once the substantive tax demand failed on the exempt activities, the foundation for invoking the extended period and imposing penalties also disappeared.

Conclusion: The extended period of limitation was not available and the penalties were unsustainable.

Issue (iii): Whether the demand could be sustained on the basis of Form 26AS and the value adopted by the Revenue.

Analysis: The Revenue adopted turnover from Form 26AS without rejecting the books of account or returns and without establishing a reliable method of valuation on the record. The Tribunal held that tax had to be determined from the actual documents and evidence such as bills, invoices and bank records, not by mechanically relying on Form 26AS.

Conclusion: The valuation adopted by the Revenue was not sustainable.

Final Conclusion: The service tax demand and connected penal consequences were set aside, and the appellant obtained the full benefit of the decision in law.

Ratio Decidendi: Construction services for a statutory public body are not taxable where the exemption framework covers the activity, and limitation or penalty cannot survive absent suppression, especially when the Revenue relies on an unprescribed valuation basis without rejecting the assessee's records.

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