CESTAT Holds Construction Services for DDA Not Taxable Under CCIS as Projects Serve Public Purpose [Read Order]

The Delhi Bench of Customs,Excise and Service Tax Appellate Tribunal (CESTAT ) held that construction services provided to the Delhi Development Authority (DDA) for Commonwealth Games 2010 projects are not taxable under Commercial or Industrial Construction Services (CCIS) as these works served a public purpose.

Vats Builders & Suppliers ,appellant-assessee, was registered for providing manpower recruitment, construction, and works contract services. Based on information received, the Service Tax Commissionerate, Delhi, initiated an investigation and found that the appellant-assessee had provided construction services to the DDA for Commonwealth Games 2010 projects but had not paid service tax on the payments received.

The assessee submitted agreements, bills, and payment details in response. On scrutiny, it was found that services were provided for refurbishment and construction works at various sports complexes, for which ₹1.59 crore was received from DDA.

A Show Cause Notice dated 22.04.2014 was issued, demanding ₹16.41 lakh in service tax under Section 73(1), along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. The demand was confirmed through Order-in-Original dated 28.02.2017.

The assessee challenged the order before the Commissioner (Appeals), who upheld it on 14.06.2018. The present appeal was then filed before the tribunal.

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The two member bench comprising Binu Tamta (Judicial Member) and Hemambika R.Priya (Technical Member) heard both sides and considered whether the services provided to the DDA were taxable under the category of CCIS. As defined under Section 65(25b) of the Finance Act, CCIS covers construction and related services meant primarily for commercial or industrial use, excluding services related to roads, airports, railways, and similar public infrastructure.

Read More: Services Provided to Government Authorities and Public Sector Undertakings Not Liable for Service Tax: CESTAT

The tribunal noted that the assessee had carried out work such as refurbishment of sports venues at Siri Fort and Saket Sports Complex, laying of water supply lines, and construction of temporary parking at Vivek Vihar. The assessee argued that these were non-commercial public utility works carried out in government-owned sports facilities, and any fees collected for usage did not change the nature of these facilities.

The appellate tribunal referred to a Rajasthan High Court judgment, which held that charging fees for public services did not make them commercial. Based on this and decisions in B.G. Shirke Construction Technology Pvt. Ltd. and Shiv Naresh Sports Pvt. Ltd., it held that services provided for sports facilities owned by the State were not taxable under CCIS.

Regarding the water supply line at Saket Sports Complex, although the assessee denied having executed the work, the tribunal noted that this claim was made by counsel before the adjudicating authority. Still, it held that such work fell outside the scope of taxable commercial construction, as supported by earlier decisions in Hyundai Heavy Industries, Nagarjuna Construction Co., and Indian Hume Pipe Co. Ltd.

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As for the temporary parking facility at Vivek Vihar, the bench viewed it as a public utility service provided to a government body and held it was not liable for service tax.

Accordingly, the tribunal concluded that all the activities in question were not taxable under CCIS and allowed the appeal.

To Read the full text of the Order CLICK HERE

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