The Chennai bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has quashed a demand order issued by the revenue department for service tax on construction services provided to educational institutions.
The case was filed by M/s. Sri Mookambigai Constructions India Pvt. Ltd. against the Commissioner of GST & C. Ex, Coimbatore. The appellant had challenged two orders-in-appeal issued by the Commissioner of Customs, Central Excise and Service Tax (Appeals) Coimbatore.
The appellant, represented by J. Shankararaman, relied on the Board’s Circular No.80/10/2004-ST dated 17.09.2004, which clarified that constructions for educational institutions are not taxable.
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The department, represented by M. Selvakumar and Harendra Singh Pal, argued that the Board’s Circular had been withdrawn and hence the appellant was liable to pay service tax on the construction services provided to educational institutions.
The decision passed by the Tribunal in the case of RR Tulasi Constructions was relied on by the counsel to argue that the constructions provided to educational institutions would not come within the levy of service tax for the period prior to 01.07.2012.
The bench, comprising Sulekha Beevi.C.S ( Judicial Member ) and Vasa Seshagiri Rao ( Technical Member ), held in favour of the appellant. The tribunal referred to the Board’s Circular No.80/10/2004-ST, which clarified that such constructions are not taxable. In the said circular, the board has clarified that when constructions for the use of organizations or institutions established solely for educational, religious, or charitable purposes are provided, they cannot be considered as construction services of commercial nature.
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The tribunal also relied on several previous decisions of the CESTAT and High Courts, which held that the primary use of the building determines its taxability.
The tribunal concluded that the demand for service tax of the department on construction services for educational institutions was unsustainable and allowed the appeal filed by the appellant.
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