2026 (4) TMI 66 - AT - Service Tax

Show cause notice scope and historical monument exemption defeat service tax demand on construction works at Coronation Park.

Service tax demand could not be sustained where the adjudicating authority confirmed liability under Works Contract Service after the show cause notice ... Show cause notice as foundation of demand - Works Contract Service though the show cause notice proposed a different taxable category - Exemption for construction relating to historical monument - exemption for services rendered in relation to a historical monument under Notification No. 25/2012-ST - construction activity relating to Coronation Park, including parking and connected structures. Show cause notice as foundation of demand - Change of taxable classification in adjudication - Works Contract Service - HELD THAT: - The Tribunal held that the adjudicating authority could not travel beyond the classification proposed in the show cause notice. Since the notice proposed the demand under Construction of Residential Complex Service, confirmation of the demand under Works Contract Service amounted to departure from the very foundation of the proceedings and offended principles of natural justice, because the assessee could not be called upon to meet a case not put to it in the notice. On that settled principle alone, the confirmed demand was held to be unsustainable. [Paras 5] The demand confirmed under Works Contract Service was set aside. Exemption for construction relating to historical monument - Public utility parking not commercial activity - HELD THAT:- The Tribunal found that Coronation Park was a historical site of national importance and therefore construction relating to it was covered by the exemption under serial no. 12 of Notification No. 25/2012-ST. It further held that parking provided adjacent to such a historical site was a public utility for visitors, and the levy of nominal charges did not impart a commercial character to the activity. The Revenue's objection based on alleged commercial nature was therefore rejected. The Tribunal additionally observed that, even otherwise, no demand on the construction of the International Centre and Restaurant could be sustained when the adjudication had proceeded under a different taxable head from that proposed in the notice. [Paras 6] The exemption was held applicable and the Revenue's cross-appeal was rejected. Final Conclusion: The Tribunal allowed the assessee's appeal by holding that the service tax demand could not be sustained under a taxable category different from the one proposed in the show cause notice. The Revenue's cross-appeal was rejected, the works relating to Coronation Park and its parking facility having been held exempt and non-commercial in character. Issues: (i) whether service tax demand could be sustained when the adjudicating authority confirmed it under Works Contract Service though the show cause notice proposed a different taxable category; (ii) whether the construction activity relating to Coronation Park, including parking and connected structures, was covered by the exemption for services rendered in relation to a historical monument under Notification No. 25/2012-ST.Issue (i): whether service tax demand could be sustained when the adjudicating authority confirmed it under Works Contract Service though the show cause notice proposed a different taxable category.Analysis: The show cause notice was the foundation of the demand and proceeded on the basis of one taxable category, while the adjudication order confirmed liability under a different head. A demand cannot be sustained on a classification not put to the assessee in the notice, because the assessee must be able to meet the precise charge. The change in classification from the notice to the order amounted to travelling beyond the notice and offended natural justice.Conclusion: The demand confirmed under Works Contract Service was unsustainable and was set aside in favour of the assessee.Issue (ii): whether the construction activity relating to Coronation Park, including parking and connected structures, was covered by the exemption for services rendered in relation to a historical monument under Notification No. 25/2012-ST.Analysis: Coronation Park was treated as a historical site of national importance, and the exemption under Sl. No. 12 of Notification No. 25/2012-ST extended to services by way of construction and allied works for a historical monument. The parking facility associated with the park was found to be for public utility and not commercial in nature. The department's attempt to sustain demand on parts such as the International Centre and Restaurant also failed because the confirmed demand had been made under a different head than the one proposed in the show cause notice.Conclusion: The exemption was held applicable and the revenue's challenge was rejected.Final Conclusion: The assessee succeeded on the principal demand, while the revenue's cross appeal failed, resulting in complete relief to the assessee on the disputed levy.Ratio Decidendi: A service tax demand cannot be confirmed under a taxable category different from the one proposed in the show cause notice, and exemption for services connected with a historical monument extends to non-commercial public utility works falling within the notified entry.