Non-commercial construction exemption applies where a local authority facility is built for public use, despite nominal fee collection.

Construction of a 'Hut Bazaar' for a local authority qualified for exemption where the structure was meant predominantly for public and welfare use rather than commerce, industry or business. The decisive factor was the intended use of the facility, and the record did not show any letting or auction of stalls as a commercial venture. Collection of only a nominal fee from farmers did not convert the activity into a commercial construction. Accordingly, the construction was treated as non-commercial and exempt from service tax, and the demand on this count was set aside.

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Issues: Whether construction of the 'Hut Bazaar' for a local authority, intended for use by farmers on nominal fee, was a commercial activity so as to attract service tax, or whether it was a non-commercial construction covered by the exemption notification.

Analysis: The exemption under Notification No. 25/2012-Service Tax dated 20.06.2012 extends to construction services provided to the Government, a local authority or a governmental authority where the works are meant predominantly for use other than commerce, industry or business. The deciding factor is the intended use of the structure, not merely the fact that some fee is collected. The record did not show that the stalls were let out or auctioned as a commercial venture; rather, the bazaar was meant to facilitate farmers in selling produce against a nominal charge. Such collection does not convert the activity into commerce and the construction therefore retained a welfare and public-use character.

Conclusion: The construction of 'Hut Bazaar' was held to be non-commercial and exempt from service tax. The demand confirmed on this count was set aside and the assessee succeeded on this issue.

Ratio Decidendi: For exemption purposes, construction for a local authority remains outside the tax net where the structure is meant predominantly for public or welfare use, and the mere collection of a nominal fee does not by itself make the activity commercial.

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