2024 (12) TMI 944 - AT - Service Tax

CESTAT upholds service tax exemption for construction services to ICAI, Municipal Corporation, and GIDC under Notification 25/2012-ST

C.C.E. & S.T. Rajkot Versus Malani Construction Company

CESTAT Ahmedabad held that construction services provided to ICAI, Rajkot Municipal Corporation, and GIDC qualified for service tax exemption under ... Exemption from service tax - whether the construction service provided by the respondent to the following institution can be considered as service provided to the Government Authority and if yes whether the same is covered under Exemption N/N. 25/2012-ST and 02/2004-ST or otherwise? - Indian Chartered Accountant Institute (ICAI) - Rajkot Municipal Corporation - GIDC for construction of Engineering College at Navsari. Indian Chartered Accountant Institute (ICAI) - HELD THAT:- It is clear that any construction service provided to the Governmental Authority is exempted under Notification No. 25/2012-ST. The issue that whether the service recipients are Governmental Authority or not, it is found that in case of ICAI, it is established under Chartered Accountant Act, 1949 enacted by Parliament of India and Government of India, Ministry of Corporate Affairs and the same is under absolute control of the Government, therefore, the ICAI clearly falls under the term Governmental Authority. Rajkot Municipal Corporation - HELD THAT:- As regard the Rajkot Municipal Corporation, to whom the construction service was provided by the respondent, it is a local body of government and the Serial No. 12A clearly provides exemption to the Municipal Corporation which is a part of the Government. GIDC, i.e. Gujarat Industrial Development Corporation - HELD THAT:- GIDC, i.e. Gujarat Industrial Development Corporation, is a department of State Government for which the respondent has constructed an Engineering College, therefore, the service recipient M/s GIDC being a governmental authority thus, the construction service is exempted. Moreover, the nature of construction is for Engineering College which is education of this reason also, the same is not taxable. Thus, there is no doubt that the respondent have provided construction service to the Governmental Authority, therefore, the said construction service is exempted under Notification 25/2012-ST. The learned Commissioner has thoroughly examined the legal provision related to the Exemption Notification as well as the definition of Governmental Authority and came to the correct conclusion that the service by the respondent was provided to the Governmental Authority and therefore, allowing the exemption notification set aside the demand. The view taken by the learned Commissioner in adjudication order agreed upon - there is no infirmity in the said order - appeal of Revenue dismissed. Issues Involved:1. Whether the construction services provided to the Indian Chartered Accountant Institute (ICAI) are exempt under Notification No. 25/2012-ST.2. Whether the construction services provided to Rajkot Municipal Corporation for the construction of a community hall and auditorium are exempt from service tax.3. Whether the construction services provided to the Gujarat Industrial Development Corporation (GIDC) for the construction of an engineering college are eligible for exemption from service tax.4. Whether the services provided to the Tourism Corporation of Gujarat Ltd. for the construction of a fossil park are exempt from service tax.Issue-wise Detailed Analysis:1. Construction Services to ICAI:- The core issue is whether ICAI qualifies as a 'Governmental Authority' under Notification No. 25/2012-ST, thereby making the construction services provided to it exempt from service tax. The department argued that ICAI does not perform functions entrusted to a municipality under Article 243W of the Constitution, and thus, the exemption is not applicable. However, the respondent contended, and the adjudicating authority agreed, that ICAI is established under the Chartered Accountants Act, 1949, enacted by the Parliament, and is under the control of the Ministry of Corporate Affairs. Therefore, ICAI fits the definition of a 'Governmental Authority,' and the services provided to it are exempt from service tax under the said notification. This position was supported by precedents where similar institutions were considered governmental authorities.2. Construction Services to Rajkot Municipal Corporation:- The department contested the exemption granted for services provided to Rajkot Municipal Corporation, arguing that the community hall and auditorium might have commercial uses. However, the adjudicating authority found that the Rajkot Municipal Corporation is a local body, and the construction was for non-commercial purposes, aimed at the welfare of the citizens. The exemption under Notification No. 25/2012-ST applies as the construction was not for commerce, industry, or any other business profession. The adjudicating authority's decision was based on the certificate issued by the Dy. Municipal Commissioner, stating the non-profit nature of the auditorium's operations.3. Construction Services to GIDC:- The department argued that GIDC does not have a mandate for promoting education and thus should not be considered a governmental authority for the construction of an engineering college. However, the adjudicating authority concluded that GIDC, established under the Gujarat Industrial Development Act and controlled by the Government of Gujarat, qualifies as a governmental authority. The construction of the engineering college was for educational purposes, aligning with functions under Article 243W, and therefore, the services are exempt from service tax under Notification No. 25/2012-ST. The adjudicating authority supported this conclusion with various judicial precedents affirming the non-commercial nature of educational constructions.4. Services to Tourism Corporation of Gujarat Ltd.:- Although not a primary focus in the judgment, it was noted that services provided to the Tourism Corporation of Gujarat Ltd. for constructing a fossil park were exempt from service tax. The rationale was that the corporation, set up by the Government of Gujarat, promotes cultural heritage and tourism, qualifying it as a governmental authority under the exemption notification.Conclusion:The tribunal upheld the adjudicating authority's decision to exempt the respondent from service tax for the construction services provided to ICAI, Rajkot Municipal Corporation, and GIDC. The tribunal agreed with the adjudicating authority's interpretation of the term 'Governmental Authority' and the application of Notification No. 25/2012-ST, concluding that the services provided were indeed exempt from service tax. The tribunal dismissed the department's appeal, finding no infirmity in the adjudicating authority's order.