TaxTMI 
TaxTMI 
2025 (8) TMI 88
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....on in July 2014.Pursuant to intelligence gathered that the Appellant was engaged in providing taxable construction services without obtaining the requisite registration or discharging the applicable service tax liabilities under the Finance Act, 1994, the Department issued a letter dated 03.07.2014, followed by a reminder on 21.08.2014, calling for all relevant documents. In response, Shri N. Viswanathan, authorized Tax Consultant for the Appellant, appeared before the Superintendent and submitted documents such as Income Tax Returns, Profit & Loss Accounts (FY 2009-10 to 2012-13), Form 26AS for 2013-14, and construction agreements with clients like M/s. SCAD Group Trust, Tirunelveli, and M/s. Sree Daksha Property Developers, Coimbatore.In his statement dated 21.08.2014, Shri Viswanathan deposed that the appellant started operations in 2007 and undertook works contract services inclusive of cost of construction materials, mainly for schools, colleges and charitable institutions; that no service tax was collected from clients nor paid to the Government as the Appellant believed that construction for educational/charitable institutions being not commercial/Industrial buildings as wel....
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....x was collected from clients and the Appellant operated under a bona fide belief that their activities were not taxable. vi. The demand must be treated as cum-tax under Section 67(2). vii. The invocation of extended limitation and imposition of penalties was unjustified, as the issue involved complex provisions of law and was highly debatable, relying on decisions such as Hindustan Steel Ltd and Motor World. 5. After due process of law, the Adjudicating Authority, vide the impugned order in original confirmed the demand, interest, and penalties vide the impugned Order in Original. Being aggrieved by the impugned order, the Appellant has preferred the present appeal challenging the legality, propriety, and correctness of the adjudication order. 6. Shri. S. Rajagopal, Advocate along with Shri. R. Balachandar, Advocate, appeared for the appellant and submissions were made as under: i. The Appellant contends that they genuinely believed their activities were not liable for service tax and therefore did not charge or collect it from clients. As such, there was no need to mention service tax in their agreements. The turnover details relied upon by the Dep....
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....pellate Tribunal decision involving a different party to characterize the institutions as profit-making was misplaced and not applicable. The Appellant emphasized that institutions like churches and non-profit colleges neither maintained statutory records required for commercial entities nor were subjected to income tax, further disproving any commercial character. vi. That reliance is placed on judicial precedents such as Queen's Educational Society v. CIT and MCSARA Constructions v. CCE, Madurai to argue that institutions primarily engaged in education do not lose their exempt status merely because they generate incidental surplus. Moreover, they cited recent CESTAT decisions-R.R. Thulasi Builders and URC Constructions upheld the continued validity of CBIC Circular No. 80/10/2004-ST and exempted similar construction services from service tax. vii. Given the absence of any proof of tax evasion, the availability of exemptions, and the bona fide nature of their belief supported by legal precedents and circulars, the Appellant submitted that the majority of the demand was unjust and time-barred. It was submitted that the recalculated actual liability is Rs.15,79,517....
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....e execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. -For the purposes of this sub-clause, "works contract" means a contract wherein,- (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out,- (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) construction of a new residential complex or a part thereof; or (d) complet....
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....tion to works contract for execution of original works and have received consolidated payments from their clients towards provision of service and transfer of materials involved in the construction activity, service tax has been worked out on 40% of the total amount charged for the works contract in terms of Rule 2A of Service Tax (Determination of Value) Rules, 2006. The SCN also states that while working out the above service tax liability, the gross amounts received by the appellant for construction of single residential units and construction of building for religious purpose have been excluded. The SCN further states that the appellant is entitled to pay 50% of the service tax payable under partial charge method with effect from 01-07-2012 for services rendered to a body corporate as per notification No.30/2012 ST dated 20-06-2012 and in case of service receivers other than "Body Corporate", the appellant has to discharge 100% service tax liability as the service provider. 4) The adjudicating authority has found that the Honourable Supreme Court has in BWSSB v R. Rajappa & Others, reported in 1978 AIR 548 has held that education can be and is in its institutional form....
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....in the classification of excisable goods or with respect to levy of duties. In CCE v Parle Exports (P) Ltd, 1988 (38) ELT 741 (SC), the Apex Court has held that it is a well-settled principle of interpretation that courts in construing a statute or notification will give much weight to the interpretation put up on it at the time of enactment or issue, by those who have to construe, execute and apply the said enactments. They are in the nature of contemporanea expositio, furnishing legitimate aid the construction to the relevant provisions. 15. Therefore, unlike an exemption notification with conditions stipulated therein to claim the exemption, the benefit of which when claimed puts the burden of proof on the claimant to satisfy firstly that it comes within the ambit of the exemption notification and then to satisfy that it had fulfilled the conditions stipulated therein to secure the benefits, there are no such requirements when the appellant contests taxability, on a belief stemming from the contents of Board Circular. On issues of taxability, to bring the prospective assessee within the ambit of the levy, the burden of proof is always on the revenue and that cannot be shifted....
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....buildings, civil structures or parts thereof which are used, occupied or engaged for the purposes of commerce and industry are covered under this new levy. In this case the service is essentially provided to a person who gets such constructions etc. done, by a building or civil contractor. Estate builders who construct buildings/civil structures for themselves (for their own use, renting it out or for selling it subsequently) are not taxable service providers. However, if such real estate owners hire contractor/contractors, the payment made to such contractor would be subjected to service tax under this head. The tax is limited only in case the service is provided by a commercial concern. Thus service provided by a labourer engaged directly by the property owner or a contractor who does not have a business establishment would not be subject to service tax. 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 o....
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.... in the instant case while the appellant has discharged its burden of proof as regards its contention of non-taxability, the Revenue has not been able to adduce an iota of evidence that the buildings the construction of which the appellant has undertaken for these educational institutions are primarily for the purposes of commerce or industry, which burden was on it so to discharge. Thus, we find that the confirmation of demand on the works contract of construction services rendered by the appellant with respect to educational institutions for the period upto 01-07-2012 cannot sustain and is liable to be set aside. 18. We note that the Ld. A.R has emphasised on the reliance placed by the adjudicating authority on the decision of the Honourable Supreme Court in the Bangalore Water Supply & Sewerage Board case, wherein on the issue of whether charitable institutions are industries, while interpreting provisions of Industrial Disputes Act, 1947, it was held that noble objectives, pious purposes, spiritual foundation and developmental projects are no reason not to implicate these institutions as industries. However, we find that in the Judgement of the Honourable Supreme Court rende....
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....ision relied upon by the Appellant in M/s. Queens Educational Society v CIT, the Honourable Apex Court has noted that the Apex Court has considered the aforesaid decision in Sole Trustee, Lok shikshana Trust as well as the decision in Indian Chamber of Commerce case (1976) 1 SCC 324 in it subsequent decision in CIT v Surat Art Silk Cloth Manufacturer's Asn, (1980) 121 ITR 1 and has held as under : " Now we entirely agree with the learned Judges who decided these two cases that activity involved in carrying out the charitable purpose must not be motivated by a profit motive but it must be undertaken for the purpose of advancement or carrying out of the charitable purpose. But we find it difficult to accept their thesis that whenever an activity is carried on which yields profit, the inference must necessarily be drawn, in absence of some indication to the contrary, that the activity is for profit and the charitable purpose involves the carrying on of an activity for profit. We do no think the Court would be justified in drawing any such inference merely because the activity results in profit. It is in our opinion, not all necessary that there must be a provision in the cons....
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....oard's Circular No. 80/10/2004-S.T., dated 17-9-2004 was issued explaining the scope of the changes brought about consequent to the enactment of the Finance (No. 2) Bill, 2004 on 10-09-2004 and thus primarily providing instructions/guidance to the officers. It is also pertinent that the Board's circular continued to be in existence during the relevant period and was applicable upto 01-07-2012, the date with effect from which the provisions of Section 65 of the said Act ceased to apply by virtue of Notification 20/2012-ST dated 05-06-2012 and thus the definition of works contract as defined under Section 65(105)(zzzza) ceased to be applicable. 22. Therefore, in view of our discussions supra, we hold that the demand of service tax on the works contract services rendered by the appellant to educational institutions upto 01-07-2012, which is part of the demand on works contract services rendered by the appellant that has been upheld in the impugned OIO, cannot sustain. The decisions in Harsh Constructions Pvt Ltd, Vishnu Sharan & Co, R.R. Thulsi Builders and URC Constructions relied upon by the appellant, as well as the reliance placed on the CBEC Circular No. 80/10/2004-S.T., dated....
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....above, it is not possible to accept the contention of the Learned Counsel for the Respondent that a sub-contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the sub-contractor. All decisions, including those referred to in this order, taking a contrary view stand overruled. 31. The reference is, accordingly, answered in the following terms : "A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract." We further note that the decisions in NBCC Ltd relied on by the appellant, is thus overruled by the aforesaid decision in Melange Developers. The reliance placed by the appellant on the decisions in Essar Projects Ltd and Chandresh C Shah, 2014 (36) STR Guj HC, is misconceived as the facts and circumstances of the said case are different from the instant case. We also note that in the decision in Jay Yushin Ltd v CCE, New Delhi, 2000 (119) E.L.T. 718 (Tribunal - LB), the Larger Bench of this Tribunal has held that it has to be shown that the revenue ....