CESTAT Quashes Service Tax Demand under Work Contract Service on ground of Non-inclusion of Body Corporate into Business Entity [Read Order]

The Hyderabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed the service tax demand under the work contract service on the grounds of the non-inclusion of a body corporate into a business entity. 

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 as per Sec 18 of the Andhra Pradesh Societies Registration Act, 2001, the registration of a society shall render it a “body corporate” having perpetual succession and a common seal and therefore, as APMSIDC was registered, it would be deemed to be a body corporate and extended the benefit of Notification No.25/2012-ST, which exempts services provided to the Government of local authority or a “governmental authority” by way of construction, erection, commissioning, etc. 

V. Srikant Rao, the counsel for the department contended that the nature of service involved i.e. work contract service had not been disputed by the assessee and had not even challenged that aspect in his Appeal. Thus the demand raised by the department was as per the law and liable to be sustained. 

The Bench observed that APMSIDC was a body corporate in terms of provision under Sec 18 of the Andhra Pradesh Societies Registration Act which they were registered but he had not made any observation about whether they were a business entity. Further, what is to be noted is that APMSIDC was deemed to be a corporate and not a corporate or corporation under the Companies Act and the Revenue Cycle Management would be applicable only when the service was provided to a ‘business entity registered as a body corporate’. 

A single-member bench comprising A K Jyotishi (Technical) quashed the service tax demand imposed against the assessee while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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