Service tax applicability on Construction of college Building

[ROHIT GOEL]

Our clients had received certain amounts from a private college (Registered u/s 12AA) for construction of building in 2016. The primary contract was signed in 2012 and till July 2014, the client was utilising service tax exemption under SNo 9 of NN 25/2012 (auxiliary education services) and not paying any service tax.

However, such line item was deleted from the notification on 11.7.2014 but client did not discharge tax on receipts in 2016 also. The matter is currently under appeal after being decided against the client in adjudication.

Can now it be claimed that service is exempt under SNo 13 of NN 25/2012 which grants exemption for construction of building owned by entity registered u/s 12AA and meant predominantly for religious use. I recently came across Principal Bench Delhi decision in Service Tax Appeal No. 50770 of 2022-SM in case of M/s. S. Kumar Builders - 2022 (11) TMI 47 - CESTAT NEW DELHI, where it was held that even education would be deemed to be covered under serial no. 13 and thus construction of school for a 12AA trust was held to be exempt.

Would like the views of the experts?

[Amit Agrawal]

I see no harm using the judgement of M/S. S. KUMAR BUILDERS VERSUS COMMISSIONER OF CENTRAL GOODS & SERVICETAX & CENTRAL EXCISE, JABALPUR (MADHYA PRADESH) (as reported in - CESTAT NEW DELHI) while defending your client BOTH on merits as well as limitation (i.e. bonafide belief, not having any intention to evade payment of taxes etc. so as to avoid exempted period to issue SCN, to avoid penalty u/s 78).

I am presuming here that 'factual aspects' in order to claim such exemption is on your client's case-records (in you reply to SCN, relied upon documents etc) and you need not present any new evidence to support factual aspects to claim exemption - while preferring your appeal - to claim similar exemption as done in this case-law.

However, I am not that sure - at this stage - if your client was entitled to exemption from service tax till 10.07.2014 under S. No. 9 of NN 25/2012 (auxiliary education services).

Depending upon submissions at first stage (during investigation / scrutiny, while replying to SCN, during PH before original adjudicating authority etc.) and considering various factual aspects, contents of SCN and findings of OIO, you may need to finetune your legal strategy going forward.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Amit Agrawal]

*Please read relevant Para from above post as follows: However, I am not that sure - as of now - if your client was entitled to exemption from service tax till 10.07.2014 under S. No. 9 of NN 25/2012 (auxiliary education services). If this point is relevant for your client's case, one needs to be reasonably sure about availability of this exemption.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

(i) As per EXCUS (R.K.Jain's Electronic Library), the judgement of S.Kumar Builders has NOT been challenged by the department so far. So this case law can be relied upon.

(ii) The definition of education services has to be taken care of.

AI Summary

Client Appeals Service Tax Decision, Cites Exemption for Educational Buildings Under SNo 13 of NN 25/2012 A client received payments from a registered private college for building construction in 2016. Initially, they claimed a service tax exemption under auxiliary education services until July 2014, when the exemption was removed. The client did not pay service tax on 2016 receipts and is appealing a decision against them. They seek to claim an exemption under SNo 13 of NN 25/2012 for buildings owned by entities registered under section 12AA. A recent case supports this exemption for educational buildings. Experts suggest using this precedent but advise careful consideration of the client's entitlement to previous exemptions.