Body Corporate which is not a Business Entity are not liable to pay Service Tax as a Service Recipient under Revenue Cycle Management: CESTAT [Read Order]

The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the body corporate which was not a business entity is not liable to pay service tax as a service recipient under Revenue Cycle Management (RCM). 

Managing Director of Andhra Pradesh Medical Services and Infrastructure Development Corporation (APMSIDC), the appellant assessee was primarily an implementing agency, which was a corporation registered under Andhra Pradesh Public Societies Act (APPSA), intending to construct and maintain hospital buildings, procure and distribute drugs, surgical, consumables and equipment as entrusted by the State Government to Corporation. 

The assessee appealed against the order passed by the Commissioner (Appeals), confirming the demand for service tax of Rs.5,73,422/- and imposition of a penalty of an equal amount under Sec 78 of the Finance Act, 1994. 

Siva Prasad Annavarapu, the counsel for the assessee contended that when taxable service by way of service portion in execution of works contract is provided by, inter alia, partnership firm to a “business entity” registered as a body corporate, both service provider and service recipient would be liable to pay service tax in proportion of 50% - 50%. 

V. Srikant Rao, the counsel for the department relied on the decisions made by the lower authorities and contended that the APMSIDC after analyzing the contracts involved during the period, wherein, they had received the services of Works Contract service (WCS) from Satya Sai Constructions, a proprietor/ partnership firm, he concluded that the nature of the service was that of WCS. 

The Bench observed that the assessee are not a business entity and are working with an objective of no profit and no loss. Thus, even though they are a “corporate entity”, they are not a business entity. Therefore, the assessee is not liable to pay service tax as a service recipient under RCM in terms of Notification 30/2012-ST. 

A single-member bench comprising A K Jyotishi (Technical) held that the department had not been able to adduce, except to one example discussed supra, to support that APMSIDC was a business entity, thus the assessee was not liable to service tax demand. 

To Read the full text of the Order CLICK HERE

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