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<h1>Road Construction for Non-Commercial Use Exempt Under Notification 24/2009-ST; Penalties Applied for Tax Defaults</h1> <h3>Shri S.R. Karthik Versus Commissioner of GST and Central Excise, Tirunelveli</h3> Shri S.R. Karthik Versus Commissioner of GST and Central Excise, Tirunelveli - TMI 1. ISSUES:1.1 Whether activities carried out fall within taxable 'Works Contract Service' or other taxable services (including 'Site formation and clearance, excavation and earthmoving and demolition Service', 'Supply of Tangible Goods Service', 'Man Power Recruitment or Supply Agency Service' and 'Cleaning service') under the erstwhile Sec.66 / present Sec.66B of the Finance Act?1.2 Whether construction or maintenance of roads (public or private) is excluded from the levy of service tax and/or covered by Notification No.24/2009-ST and retrospective amendment (Section 97) such that demands cannot be sustained?1.3 Whether construction services rendered to educational institutions, hospitals and other charitable/non'profit entities are taxable where the recipients charge fees, and whether exemption applies irrespective of Section 12A/12AA registration?1.4 Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act is invokable where returns were not filed, service tax was collected from recipients but not deposited, and there is alleged suppression or mala fides?1.5 Whether Section 73A (obligation to pay amounts 'collected' as service tax) applies where tax is collected from recipients and not deposited, and whether penalties under Sections 76, 77 and 78 are imposable?1.6 Whether other specified activities (cleaning, manpower supply, supply of tangible goods, single residential units below threshold) are taxable or exempt under the statutory definitions and notifications.2. RULINGS / HOLDINGS:2.1 On classification of road works: The demand confirmed in respect of roads cannot sustain; 'Construction of roads whether for public or private use is exempted from payment of service tax.' The exclusion of roads from the statutory definition of commercial/industrial construction is dispositive.2.2 On industrial/commercial construction: Construction of buildings and civil structures for industrial establishments are chargeable to service tax under 'Works Contract Service' since there is transfer of property in goods involved and such works are 'primarily for the purposes of commerce or industry'.2.3 On construction for educational institutions and hospitals run by trusts/charities: Exemption is available; constructions 'used, or to be used' for educational, religious, charitable, health, sanitation or philanthropic purposes and not for purpose of profit are not taxable, and the exemption applies 'whether the trusts and charities are registered or not under Section 12A / 12AA of the Income Tax Act, 1961'.2.4 On maintenance/repair of roads: Management, maintenance or repair of roads is exempt under Notification No.24/2009'ST and the retrospective amendment (Section 97) is applicable, so the demand for such services is to be set aside.2.5 On other services not contested: Demands for cleaning service, manpower supply service, supply of tangible goods service and certain other works contract activities held in the impugned order are upheld as taxable and are not disturbed.2.6 On extended period and collected tax: Invocation of the proviso to Section 73(1) for the extended five'year period is justified where there is non'filing of returns, collection of service tax from recipients and retention without deposit, and Section 73A applies since amounts 'collected' must be paid 'forthwith' to the Government; such conduct supports extended period and penalties.2.7 On penalty quantification and remand: Penalty issues will be decided based on the quantum of service tax evaded, and the matter is remanded for determination of tax liability, interest and penalty after detailed verification of scope of works and amounts.3. RATIONALE:3.1 Statutory framework applied includes definitions and provisions in the Finance Act: the declared service concept (Section 66E(h)), the definitions of 'Works Contract' and 'Works contract service' (Section 65(105)(zzzza) / Section 65B), and the definition of 'commercial or industrial construction' (Section 65(25b)). The service definition (post'1 July 2012) under Section 65(44) and interpretation provisions were also considered.3.2 Exclusions and notifications relied upon include Notification No.24/2009'ST (exemption for management, maintenance or repair of roads) and the retrospective effect given by Section 97 (Finance Act, 2012) for periods from 16.06.2005; Notification No.17/2005'S.T. and circulars (CBIC Circular No. 80/10/2004 and Circular No.86/4/2006) informing the test of whether a structure is 'used, or to be used' for commerce or industry were applied.3.3 On roads: A 'bare reading of the statutory provisions' shows roads are specifically excluded from works contract/ commercial construction definitions, and the tribunal followed prior judicial determinations that this exclusion does not distinguish between public or private roads; therefore, road construction/repair falls outside levy.3.4 On educational/charitable recipients: The tribunal applied the test embodied in the circulars and statute that taxability depends on whether the building is 'used, or to be used' 'primarily for the purposes of commerce or industry'; mere collection of fees does not ipso facto render an institution a commercial concern unless surplus is diverted from charitable objectives.3.5 On industrial constructions: Where the contract involves transfer of property in goods and the purpose is 'primarily for the purposes of commerce or industry', such works are within the statutory definition of 'Works Contract Service' and attract service tax.3.6 On collection and deposit obligations: Section 73A imposes an immediate obligation to pay amounts collected as service tax 'forthwith' to Government; retention after collection constitutes conduct supporting invocation of the proviso to Section 73(1) and sustains penalties where wilful non'deposit, suppression or mala fide intent is established.3.7 On concurrent invocation of remedies: The tribunal held Section 73A and the proviso to Section 73(1) can be invoked simultaneously-Section 73A for collected amounts not deposited and the proviso to Section 73(1) where deliberate non'payment/non'filing and concealment justify extended limitation.3.8 On scope of remand and verification: Determination of taxability of individual bill items (e.g., retaining walls, ramps, culverts, lorry yards, site preparation, kiln maintenance, hire charges) requires detailed examination of scope of work, contractual terms and whether activity is repair/maintenance, supply of goods, or works contract; quantum, interest and penalties to be computed on remand in light of these legal conclusions.