No Service Tax Payable on Construction Projects of Business School and Hostel for NIT Calicut: CESTAT Delhi [Read Order]

The CESTAT, Delhi bench held that the appellant, M/s Era Infra Engg. Pvt. Ltd, is not liable to pay service tax for construction projects of Era business school and hostel for NIT Calicut. While giving partial relief to the appellant-Company, the bench however, said that service tax is payable for the projects of construction of building of National Automative Testing and R&D Infrastructure Projects and office building for Naya Raipur Development Authority.

In the instant case, the department took a view that the appellants are liable to pay service tax under the category of “Commercial or Industrial Construciton Services” in respect of the following construction projects, (a) Era Business School, (b) National Automotive Testing and R& D Infrastructure Projects, (c) Office Building for Naya Raipur Development Authority and (d) Hostel for NIT Calicut.

With regard to the school project, the bench found that Era Business School is an educational institution recognized by AICTE and awarding degrees/diploma recognized by law. Quashing the demand, the bench noted that “Era Education School is imparting only education and the same cannot be considered as a commercial activity. Therefore, for the project carried for construction of Era Business School cannot be taxed under “Commercial or Industrial Construction Service”.”

Confirming the tax demand for project for National Automotive Testing and R& D Infrastructure Projects, the bench observed that the said centre has been registered with the Government but the said centre is not recognized as a centre for testing the vehicles for homologation by the Government of India and it is charging money for testing and giving its reports. Therefore, the said activity is commercial in nature, and service tax can be levied on the appellant.

Regarding the levy on project relating to Naya Raipur Development Authority, the bench confirmed the levy on the ground that the authority is involved in commercial activity of sale and purchase of land qualifies to be taxed under the category of “Commercial and Industrial Construction Service”.

“Although the said authority is Governmental Organisation but the same is involved in the development of land and engaged in the activities of purchase/sale of land. The said activity has been reflected in their business model and shown Profit and Loss Account in their books of accounts. As per the definition for service tax levy, it is sufficient if building is meant/occupied primarily for commerce or industry or for work intended for commerce or industry is liable to service tax,” the bench said.

The bench further quashed the demand in respect of construction project of NIT Hostel finding that it is for residential purpose of the student, who are getting education from the NIT Calicut, therefore, the construction of the said hostel cannot be considered as construction of building which is used for business commerce or commercial building.

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