The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) observed that construction is not taxable under Section 65(105)(zzzza) of the Finance Act, 1994 for building not used for commerce or industry.
The appeal sought the quashing of the order passed by the Commissioner classifying the service rendered by the appellant for development of a market at Biocholim and Ponda for the Goa State Urban Development Agency under the category of ‘works contract service’ made taxable under section 65(105)(zzzza) of the Finance Act, 1994 and confirming part of the demand with interest and penalty.
A show cause notice was issued to the appellant alleging therein that the shops/space in the market complex had been allotted to various business entities by Ponda and Biocholim Municipal Council for a consideration to be used by them for commercial purpose.
Thus, it appeared to the department that the said activity of renovation/restoration of old market complex at Ponda and Biocholim Municipal Council by the appellant to build new market complexes, which were further meant to be used for commercial purpose would be a taxable service under section 65(105)(zzzza) of the Finance Act.
The counsel for the appellant submitted that in the absence of any finding recorded by the Commissioner in the impugned order that the activity undertaken by the appellant involved any element of ‘commerce or industry’, the demand could not have been confirmed under section 65(105)(zzzza) of the Finance Act.
The authorised representative appearing for the department, however, supported the impugned order and submitted that there can be no doubts that an element of commerce was involved in the nature of the activity undertaken by the appellant and so there is no error in the order passed by the Commissioner.
A Two-Member Bench comprising Justice Dilip Gupta, President and CJ Mathew, Technical Member observed that “It is not possible to accept this finding recorded by the Commissioner as the words ‘primarily for commerce or industry’ obviously mean that the renovation or restoration has to be mainly for the purpose of commerce or industry. If the building is not used primarily for commerce or industry, the construction would not be taxable under section 65(105)(zzzza) of the Finance Act.”
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