2024 (7) TMI 1168 - AT - Service Tax

Educational institution construction services exempt from service tax per Board Circular dated 17.9.2004

M/s. RGP Construction Versus The Commissioner of CGST & Central Excise, Salem

CESTAT Chennai held that appellant was not liable to pay service tax under Commercial or Industrial Construction Services for constructing educational ... Liability to pay service tax - Commercial or Industrial Construction Services - main contention put forward by the appellant is that the buildings constructed by the appellant are educational institution buildings and not primarily used for commerce or industry - HELD THAT:- The Board vide its Circular dt. 17.9.2004 has clarified that the assessee is not liable to pay service tax for construction of educational institutions as educational institutions are not commercial in nature - In the present case, the construction services are provided to non-profit bodies (Trust) and constructions carried out are for educational institutions. The Tribunal in the case of M/s.R.R. Thulasi India Pvt.Ltd. [2024 (7) TMI 1067 - CESTAT CHENNAI] had occasion to analyse the very same issue in which the Board circular was taken into consideration. It is noted by the Tribunal that the said Board Circular dt. 17.9.2004 has not been withdrawn and was still in force during the disputed period. The Tribunal held that the demand under CICS cannot sustain in respect of construction services provided for construction of educational institutions. The demand cannot sustain - the impugned order is set aside - Appeal allowed. Issues Involved:1. Whether the appellant is liable to pay service tax for construction services provided to educational institutions under 'Commercial or Industrial Construction Services' (CICS).2. Whether the demand for service tax is time-barred due to the invocation of the extended period of limitation.Issue-Wise Detailed Analysis:1. Liability to Pay Service Tax under CICS:The primary issue is whether the construction services provided by the appellant to educational institutions fall under the category of 'Commercial or Industrial Construction Services' (CICS) as defined under Section 65(25b) of the Finance Act, 1994. The appellant argued that the construction works were for educational institutions, which are non-commercial in nature, and hence, should not attract service tax under CICS. The appellant relied on Circular No. 80/10/2004-ST dated 17.09.2004, which clarified that construction services for educational institutions are not taxable as they are non-commercial.The Tribunal noted that the definition of CICS includes construction primarily for commerce or industry, but excludes services provided for educational, religious, charitable, health, sanitation, or philanthropic purposes. The Tribunal also referred to the case of R.R. Thulasi Builders (I) Pvt. Ltd. Vs CGST & Central Excise, Salem, where it was held that construction services for educational institutions are not taxable under CICS. The Tribunal emphasized that the Board's Circular dated 17.09.2004 had not been withdrawn and was still in force during the disputed period.Furthermore, the Tribunal cited various precedents, including the Karnataka High Court's decision in Commissioner of C.Ex (Appeals), Bangalore Vs KVR Construction and the Tribunal's decisions in Gujarat Adani Institute of Medical Sciences Vs CCE & ST Rajkot and KMV Projects Ltd. Vs CCE & ST Hyderabad, which consistently held that construction services for educational institutions are exempt from service tax.Based on these findings, the Tribunal concluded that the demand for service tax under CICS for the construction of educational institutions cannot be sustained.2. Time-Barred Demand and Extended Period of Limitation:The appellant argued that the demand for service tax is time-barred as the show cause notice was issued on 19.03.2013 for the period from October 2007 to March 2012. The appellant contended that there was no suppression of facts or intent to evade tax, as all relevant documents were provided during an audit in July 2008, and no objections were raised at that time. The appellant also claimed a bona fide belief that service tax was not payable based on the Board's circular.The Tribunal observed that the entire figures and details for raising the demand were taken from the appellant's accounts, and the appellant had discharged service tax for other construction services. The Tribunal found that the appellant's belief that service tax was not applicable to educational institutions was bona fide and supported by the Board's circular. Moreover, the Tribunal noted that the issue was interpretational in nature with several pending litigations.Given these circumstances, the Tribunal held that there were no grounds for invoking the extended period of limitation, and the demand was time-barred.Conclusion:The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The Tribunal held that the demand for service tax under CICS for the construction of educational institutions cannot be sustained and that the demand was time-barred due to the absence of suppression or intent to evade tax.