Construction Services provided to Charitable Trust are Exempted from Service Tax: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observed that construction services provided to charitable trusts are exempted from service tax.

The appellant contested a service tax demand of Rs. 21, 87,939 for services rendered to entities such as the District Welfare Office and World Vision. They argued that the demand was time-barred, relying on proceedings based on Form 26AS. Asserting that these figures were part of the publicly available Balance Sheet, the appellant claimed no suppression. They emphasized the lack of evidence for malicious intent, challenging the sustainability of the demand under Section 73(1) and citing a Supreme Court precedent

The appellant counsel Akshat Agarwal and Anand Pasari, argued against the imposition of service tax solely based on the variance between the Income Tax Return and the 26AS Statement. It was pointed out that in this case, the Service Tax Department exclusively relied on data from the Income Tax Department, which represented the gross value received by the appellant. The appellant contended that the department could not unilaterally consider the ITR amount for charging and demanding service tax without scrutinizing the nature of the received amount and determining the applicability of service tax.

 Counsel for the Appellant emphasized that revenue authorities could not levy a demand solely based on differences between income figures without scrutinizing the reasons behind such discrepancies. The tribunal had held that establishing the entire amount received by the appellant, as reflected in Form 26AS, as consideration for services provided was essential.

The counsel for the appellant further contended that the services they provided are exempt from service tax. The exemption is claimed based on specific contractual details, such as the agreement with the District Welfare Office, Dumka. Under this agreement, the appellant was tasked with constructing staff quarters in Eklavya Model Residential School. Given that the payment was received from the District Welfare Office, Dumka—an entity under the State Government Department—the appellant argues that the services provided to the State Government Department are exempt from service tax under Serial No. 12A of Mega Exemption Notification No. 25/2012 – ST dated 20.06.2012.

A Single bench of the tribunal comprising K.Anpazhakan member (Technical) concluded that the service tax demand affirmed in the contested order lacks merit and exceeds the prescribed limitation. Given the inherent unsustainability of the demand, the imposition of interest and penalty becomes irrelevant. Consequently, the impugned order was set aside and granted appellant in their appeal.

The bench observed that Construction services for this Trust were exempt under Serial 13(c) of Notification No. 25/2012 – ST dated 20.06.2012. The Appellate Authority initially denied the exemption on a technicality—the appellant provided details for "World Vision of India," while claiming it for "World Vision India." The appellant clarified their identity with supporting evidence. Recognizing their equivalence, held that the appellant qualifies for the Serial 13(c) exemption, rendering the service tax demand in the contested order unsustainable.

Accordingly, allowed the appeal filed by the Appellant

To Read the full text of the Order CLICK HERE

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