Construction Activities not proven as Non-Commercial; CESTAT dismisses Service Tax Refund Appeal [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has dismissed the service tax refund appeal filed by M/s. ASK Engineers Company. The decision stressed the requirements for proving non-commercial use of construction projects to qualify for service tax exemptions.

The appellant, M/s. ASK Engineers Company, based in Jodhpur, Rajasthan, had sought a refund of Rs.2,11,625 under Section 11B of the Central Excise Act, 1944, read with Section 83 of the Finance Act, 1994. The refund claim was based on two construction projects undertaken for the Rajasthan Housing Board. The first project involved the construction of an administrative building for a swimming pool at Samrat Ashok Udyan, and the second was the construction of a boundary wall for a vacant colony.

The Assistant Commissioner rejected the refund application citing the appellant’s failure to explain the non-commercial nature of the administrative building for the swimming pool and the boundary wall for the vacant colony. Additionally, the appellant did not provide contract-wise details of the agreements, which was also noted in the show cause notice (SCN).

The Commissioner (Appeals) upheld this decision, further elaborating that Samrat Ashok Udyan was a multi-facility project comprising commercial elements like shopping areas, a swimming stadium for international competitions, and future plans for an indoor stadium, restaurants, food courts, and a technology park. The Commissioner concluded that the administrative building for the swimming pool and the boundary wall could not be classified as non-commercial constructions.

The appellant, represented by Shri Om P. Agarwal argued that these projects were non-commercial and thus exempt from service tax under Entry No. 12(a) of the exemption notification dated June 20, 2012, effective from July 1, 2012. The Rajasthan Housing Board had deposited the service tax under the reverse charge mechanism (RCM) and deducted the amount from the running bills of the appellant, prompting the refund application.

The respondent revenue, Commissioner of Central Excise, represented by Shri S.K. Meena contended that the constructions were part of a commercial multi-facility project, including commercial activities like shopping and international competitions, making them taxable. Additionally, it was argued that the appellant failed to provide detailed contract-wise information, and the refund claim lacked evidence of non-commercial use of the projects.

The two-member bench of the CESTAT comprising Mr. Justice Dilip Gupta (President) and Ms. Hemambika R. Priya (Technical Member) noted that the appellant could not present evidence to prove the non-commercial nature of the construction activities.

The bench stated that for an exemption under the notification, the appellant must substantiate the non-commercial use of the projects. The appellant failed to provide convincing evidence to this effect. Consequently, the Tribunal found no reason to interfere with the order of the Commissioner (Appeals), thereby dismissing the appeal.

This ruling highlights the importance of concrete evidence when claiming tax exemptions based on the non-commercial nature of activities. It indicated that mere assertions without substantial proof will not suffice in tax refund claims.

In result, the appeal filed by M/s. ASK Engineers Company was dismissed on the finding that the construction projects were not proven to be non-commercial.

To Read the full text of the Order CLICK HERE

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