TaxTMI 
TaxTMI 
2024 (7) TMI 1067
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....ction of educational institutions is exempted from payment of service tax as per Board Circular No.80/10/2004-ST dt. 17.09.2004. That most of their customers are public charitable trusts having Section 12AA registration under Income Tax Act. On 12.12.2014, the appellant submitted records and relevant particulars for the period 01.10.2008 to 30.06.2012 and also furnished the same reply stating that they are not liable to pay service tax for construction of educational institutions. The department was of the view that for the period 01.10.2008 to 30.06.2012 the appellant has constructed educational institutions and such constructions are commercial in nature and therefore the appellant is liable to pay service tax. Show cause notice dt. 22.04.2014 was issued for the above period invoking the extended period proposing to demand service tax under WCS along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal. 2. The Ld. Counsel Ms. Radhika Chandrasekar appeared and argued for the appellant. It is submitted that the appella....
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....he benefit on the ground that there is no exemption to educational institutions owned by charitable trust. This observation is made without appreciating the fact that the definition of works contract services specifically refers to 'primarily for the purpose of commerce or industry' and educational institutions are non-commercial in nature. 2.5 The departments vide Circular No. 80/10/2004 dt. 17.09.2004 has clarified that constructions which are for use of organisations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes for profit are not taxable being non-commercial in nature. 2.6 It is submitted that the observation in the OIO that Circular dt. 17.09.2004 is withdrawn vide Master Circular No.96/7/2007-ST dated 23.08.2007 and therefore the same cannot be made applicable is not correct. The said circular is not withdrawn and the same is in force even as on 2013 which is clarified by the Department vide Reply dt. 25.07.2013 to the queries addressed by the Coimbatore Builders & Contractors Association. 2.7 That the private educational institutions have obtained registration ce....
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....oo under the caption exempted receipts. 3.2 It is submitted that the department had issued Show Cause Notice No.111/2011 dated 18.10.2011 for the period April 2006 to September 2010 covering partly the period in dispute in the instant appeal. In the said Show Cause Notice also the department had invoked extended period alleging nonpayment of service tax with respect to free supply of materials and classification of service under Works Contract Services. Therefore extended period cannot be invoked again covering the same period. The Appellant relies upon the decisions in the case of Nizam Sugar Factory and ECE Industries. 4. Ld. Counsel submitted that the quantification is not correct for the reason that service tax has been demanded under works contract services @ 10% and 12% respectively without considering the fact that the Appellant opted for Composition Scheme under works contract services and the applicable rate would be 2% and 4% respectively. The Appellant had submitted letter dated 28.05.2007 to the Superintendent which clearly indicated that for all projects starting after 01.06.2007 the Appellant will pay service tax under Composition Scheme. Ld. Counsel prayed that....
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....ot have come to light but for the investigation conducted by the Department. Though the appellant was discharging service tax under WCS they failed to discharge service tax in respect of construction of educational institutions. This act of the appellant is suppression of facts with intent to evade payment of service tax and therefore the invocation of extended period is legal and proper. Ld. A.R prayed that the appeal may be dismissed. 6. Heard both sides. 7. The issue to be considered is whether the appellant is liable to pay service tax under "Works Contract Service" for the period 01.10.2008 to 30.06.2012 for construction of educational institutions. 8. It is not in dispute that the appellant has discharged service tax in respect of construction services provided for other than educational institutions. The issue in this appeal is only with regard to the demand raised in respect of construction service for educational institutions. The department is of the view that the appellant has to pay service tax for construction service provided to construct educational institutions. It is the case of the department that even though these educational institutions may be construc....
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....f such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax. 13.3 In case of multi-purpose buildings such as residential-cumcommercial construction, tax would be leviable in case such immovable property is treated as a commercial property under the local/municipal laws. 13.4 The definition of service specifically excludes construction of roads, airports, railway, transport terminals, bridge, tunnel, long distance pipelines and dams. In this regard it is clarified that any pipeline other than those running within an industrial and commercial establishment such as a factory, refinery and similar industrial establishments are long distance pipelines. Thus, construction of pipeline running within such an industrial and commercial establishment is within the scope of the levy." The Board in the above circular has explained that when the building is meant only for educational purpose, the levy of service tax is not attracted. The department does not have a case that the educational institutions constructed by appella....
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.... 54/3/2003-ST 21-4-2003 36 55/4/2003-ST 24-4-2003 37 56/5/2003-ST 25-4-2003 38 57/6/2003-ST 20-5-2003 39 64/13/2003-ST 28-10-2003 40 65/14/2003-ST 5-11-2003 41 70/19/2003-ST 17-12-2003 42 73/3/2004-ST 5-1-2004 43 74/4/2004-ST 23-1-2004 44 77/07/2004-ST 10-3-2004 45 78/8/2004-ST 23-3-2004 46 79/9/2004-ST 13-5-2004 47 F.No. 341/20/2005-TRU 12-5-2005 48 F.No./354/106/2005-TRU 8-8-2005 The above list in Master Circular No.93/04/2007-ST dated 10.05.2007 shows that the Circular No.80/10/2004-ST dt. 17.09.2004 has not been withdrawn by the Department. 10. When the circular issued by the Board specifically clarified that construction services provided for construction of educational institutions are exempted from levy of service tax we find no reason to hold that these constructions are commercial in nature. 11. It also requires to be stated that the Coimbatore Builders and Contractors Association had addressed to the Chief Commissioner of Central Excise, Coimbatore vide letter dt. 19.06.2013 requesting for clarifications with regard to variou....
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.... is in force at present." (emphasis supplied) 12. From the above, it can be seen that the department itself has taken the view that the circular dt. 17.09.2004 is still in force and that the construction provided for educational institutions are exempted from levy of service tax. Needless to say, that the Board circulars are binding on the department. 13. The Hon'ble High Court of Karnataka in the case of Commissioner of C.Ex (Appeals), Bangalore Vs KVR Construction - 2012 (26) S.T.R. 195 (Kar.) had occasion to consider the issue of refund of service tax paid by an assessee on construction services provided for construction of educational institutions. The Hon'ble High Court upheld the order passed by the Tribunal that construction of educational institutions is exempt from levy of service tax. Relevant para reads as under : "12. It is an undisputed fact that total amount of Rs. 1,24,38,991/- was paid as service tax under different TR-6 challans between February 2005 and February 2007. It is not in dispute the clarifications issued in the circular dated 17-9-2004 includes the building constructions which are for the use of organizations or institutions....
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....oes not fall under the category of taxable services, as the same is not used for commercial and industry but it is used for providing education. We also noticed that the Appellant have been granted registration of Trust under Section 12AA of the Income Tax Act which shows that Appellant have been registered for non-commercial purpose. Since the organization of the appellant itself is non-profit purpose, it cannot be said that the building is used for commercial activity. Therefore we do not agree with the finding of the Ld. Commissioner that the activity of running medical college is nothing but a commercial one and same cannot be construed as non-commercial activity/ organization. 5.4 The appellant also argued that, whether, the building is for commercial or otherwise the primary use of such building is required to be seen. We find that this argument is convincing as the similar issue has been considered by this Tribunal in the case of B.G. Shirke Construction Technology Pvt. Ltd. Vs. C.C.E. 2014 (33) S.T.R. 77 (Tribunal - Mumbai), wherein it was held that merely because some amount is charged for using the facility of this stadium the same cannot be commercial constructi....
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.... G.S.T.L. 388 (Tri.-Hyd.), the issue considered by the Tribunal was whether construction of guest house for temples at Srisailam, Kanipakam and also educational institutions would be subject to levy of service tax. Relevant paras of said Tribunal's decision that the demand of service tax cannot sustain are as under : "10. The ratio laid down after thorough analysis by the Larger Bench of the definition of the works contract service (WCS) hereinabove would mean that any construction which is for non-commercial or nonindustrial purposes, service tax liability under WCS will not arise. In our view, the construction of guest houses and temple complex (multistoried complex) for the purpose of public use in a religious institution, in the absence of any further evidence to show that these guest houses are allotted to non-pilgrims as a hotel accommodation services, for those visiting the temple, we have to hold that the said services would fall under exclusion clause of works contract services and tax liability does not arise. For the period post 1-7-2012, Mega-exemption Notification No. 25/2012-S.T., dated 20-6-2012 at Sl. No. 13(c) exempts the tax liability on a building owned ....
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....ed also. We find that the Tribunal in the case of Ratan Das Gupta & Co v. CCE, Jaipur [2017 (3) G.S.T.L. 247 (Tri. - Del.)] and Commissioner of Service Tax v. S.M. Sai Construction [2016 (42) S.T.R. 716 (Tri. - Mum.)] following the Larger Bench decision in the case of Lanco Infratech has categorically recorded that the buildings constructed for non-commercial and non-industrial purposes are not taxable under works contract services. The said ratio squarely applies in favour of appellant for the demand of service tax in the case of buildings constructed for C-DAC, NFC and APHMHIDC, and it has to be held that these buildings constructed by the appellant and the services rendered under works contract services are not taxable pre or post 1-7-2012. 11. As regards the service tax liability on the buildings constructed for ICFAI, we find that the issue is no more res integra as the Tribunal in the case of Vij Construction Pvt. Ltd. v. CCE, New Delhi [2018 (11) G.S.T.L. 169 (Tri. - Del.)] was considering the very same issue of taxability of the services for construction of buildings for ICFAI and in paragraph No. 6 has held that in regard to campus for ICFAI University Dehradun, t....
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....ilding has been used solely for the purpose of Engineering College. So also, the said college is recognized by the AICTE. The appellant has relied upon CBEC Circular No.80/10/2004- ST dt. 17.09.2010 wherein the Board has clarified in para 13.2 as under : "13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is 'used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to servic....