Service tax is not leviable on buildings constructed as hostel for educational institution.

PJ/Case Laws/2012-13/1444

Case:-M/S ANAND CONSTRUCTION COMPANY V/S COMMISSIONER OF CENTRAL EXCISE, KOLHAPUR

Citation:- 2013-TIOL-238-CESTAT-MUM

Brief Facts: - The appellant has been filed this appeal along with stay application against the order wherein demand of Service Tax for the period October 2008 to September 2010 has been confirmed against them under the category of ‘Commercial or Industrial Construction Services’/’Works Contract Services’. The appellant have constructed a Boys and Girls Hostel, who are getting education from one of the educational institution. The appellant got registered themselves with the revenue authorities and paid service tax on the said activity under works contract services for the period April 2008 to September 2008. Thereafter they realize that they are not constructing any building which is being used for commercial purpose therefore they are not liable for service tax they stopped paying service tax but continuing to file their service tax return. The appellant also filed refund claim of the service tax paid by them for the period April 2008 to September 2008. Later on two show cause notices were issued on 18.10.2010 for the impugned period for demand of service tax of Rs. 5,51,923/- along with interest and various penalties under the Finance Act, on the premise that the appellant has not produced any evidence with regard to the building constructed by them is not to be used in commercial or industrial purpose. The adjudication was done and demand mentioned herein above was confirmed, the first appellate authority also confirmed the adjudication order. By aggrieving from the said order, the appellant filed this appeal.

Appellant’s Contention: - The appellant submits that the fact is not in dispute that they have constructed hostel for residence of boys and girls who are studying in a medical institute and the hostel is being used by boys and girls which is not an activity of commercial and industrial in nature. Therefore they are not liable to pay service tax under the category of works contract service as clarified by the CBEC Board Circular No. 80/10/2004-ST dated 10.9.2004. Therefore impugned order is to be set aside.

Respondent’s Contention: - The respondent argues that the appellant could not produce any evidence with regard the use of construction made by them. Therefore they are liable to pay service tax under the category of Works Contract Service.

Reasoning of Judgment: - The Hon’ble High Tribunal held that the building is constructed as hostel for the residence of students studying in medical institute and there is no allegation that the building is being used for any other purpose. In that set of facts, Board Circular No. 80/10/2004-ST dated 10.9.2004 is applicable to the facts of this case which clarified that the leviability of service tax would depend primarily upon whether the building or civil structure is used or to be used for commerce 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 organisations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes of profit are not taxable being, non-commercial in nature. Generally, government buildings or civil constructions are use 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 service tax. From this circular it was found that the appellant are not liable to pay service tax.

Decision: - The appeal was allowed.

Comment:-The substance of this case is that service tax is not leviable under the Works Contract service if the construction of building is not for commercial or industrial purpose and rather is for educational purpose which is not taxable.

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PJ/Case Laws/2012-13/1444

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