2023 (5) TMI 340 - AT - Service Tax

Construction Services for Non-Commercial Entities Exempt from Service Tax

Riddhi Siddhi Construction Versus C.C.E. & S.T. -VADODARA-II

The tribunal concluded that services provided to non-commercial and non-industrial organizations are not subject to service tax under the 'Commercial or ... Non-payment of service tax - Commercial or Industrial Construction Service - HELD THAT:- Most of the repair, renovation, construction work undertaken by the appellant is primarily for Vadodara Municipal Seva Sadan, M.S. University and for police department. These organisations are in no way concerned with any Commercial of Industrial activity and therefore, the activity undertaken by the appellant will fall under the exclusion clause of the definition for the Commercial or Industrial Construction Service. The tribunal in the case of KHURANA ENGINEERING LTD. VERSUS COMMR. OF C. EX., AHMEDABAD [2010 (11) TMI 81 - CESTAT, AHMEDABAD] where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition “Personal Use” in the explanation to definition of residential complex service. The service provided by the appellant are to establishments and organizations which are of non commercial or non industrial nature and therefore, the construction, renovation, repair work undertaken by them fall under the exclusion of the definition of ‘Commercial or Industrial Construction Service’ hence, we hold that the appellants are not liable to pay any service tax on such activity - it is found that they have also done some work for commercial organizations in some of the Financial years however, the value of such work is within the threshold limit of the exemption and therefore, the same also does not fall under the category of the service tax levy and therefore, it is held that no service tax is leviable. The impugned Order-In-Appeals are without any merit - appeal allowed. Issues Involved:1. Taxability of services under 'Commercial or Industrial Construction Service'.2. Applicability of service tax on construction activities for non-commercial/non-industrial organizations.3. Basis of taxable value determination.4. Applicability of previous tribunal decisions and board circulars.Summary:Issue 1: Taxability of Services under 'Commercial or Industrial Construction Service'The department contended that the appellant was engaged in providing taxable services under 'Commercial or Industrial Construction Service' as defined under Section 65(105)(zzq) of the Finance Act, 1994, but had not paid the service tax. The Orders-in-Original and the Commissioner (Appeals) confirmed the charges.Issue 2: Applicability of Service Tax on Construction Activities for Non-Commercial/Non-Industrial OrganizationsThe appellant argued that the services performed were primarily renovation, completion, or finishing of civil structures for Vadodara Mahanagar Seva Sadan, Maharaja Sayajirao University, and Gujarat State Police Housing Corporation Ltd., which are non-commercial and non-industrial entities. The tribunal agreed, stating that these organizations are not engaged in commercial or industrial activities, thus falling under the exclusion clause of the definition for 'Commercial or Industrial Construction Service'.Issue 3: Basis of Taxable Value DeterminationThe appellant contended that the taxable value was determined based on the balance sheet and Form 26AS of Income Tax without independent investigations or verification of their records. The tribunal did not specifically address this argument in the judgment.Issue 4: Applicability of Previous Tribunal Decisions and Board CircularsThe tribunal referred to several previous decisions and Circular No. 80/10/2004-ST dated 17.09.2004, which clarified that constructions for non-commercial purposes are not taxable. The tribunal cited cases such as Khurana Engineering Ltd., Anand Construction Co., and Raj Engineering Works, which supported the appellant's position that services provided to non-commercial entities are not subject to service tax.Conclusion:The tribunal concluded that the services provided by the appellant to non-commercial and non-industrial organizations are not liable for service tax. It was also noted that any work done for commercial organizations was within the threshold limit of exemption. Consequently, the Orders-in-Appeals were set aside, and the appeals were allowed.