Service Tax is Applicable to the Construction of Office Buildings, Erection of Cell Phone Towers and other Civil Structures under 'Works Contract': CESTAT

The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the demand of Service Tax under ‘construction service’ and ‘commercial or industrial construction service’ and ruled to pay the service tax under ‘Work Contract’.

The appellant, K. Villaudam is engaged in the activity of construction of office buildings, erection of cell phone towers and other connected civil structures and civil work relating to maintenance of office buildings without taking Service Tax registration and without payment of Service Tax, without filing ST-3 returns, during the period from April 2005 to March 2009.

The appellant's counsel fervently claimed that beginning on June 1, 2007, the services provided would fall under works contract service rather than construction service or commercial or industrial construction service.

Further submitted that from the returns filed before the Sales Tax Department, it could be seen that the appellant had rendered activity in the nature of the works contract and so, they are taxable only from 01.06.2007 since the activity falls under the definition of ‘works contract service’ as defined under Section 65(105)(zzzza) of the Finance Act, 1994.

The counsel of the revenue submitted that the appellant had not taken Service Tax registration, had neither paid any Service Tax nor filed their Service Tax returns till the time investigation was taken up by the Department.

Thus, the services rendered by the appellant would be taxable under ‘construction service’ under Section 65(30a) of the Finance Act with effect from 10.09.2004, under ‘commercial or industrial construction service’ under Section 65(25b) with effect from 16.06.2005 and under ‘works contract service’ under Section 65(105)(zzzza) with effect from 01.06.2007.

The appellant has conceded that their services are taxed under "works contract service" as of 01.06.2007 in the grounds of appeal and also before the lower authority, the Vasa Seshagiri Rao and P. Dinesha bench noted.

It was further emphasised that the claims made under construction service and commercial or industrial construction service till 31.05.2007 are unsustainable because the operations conducted by the appellant were in the nature of works contracts.

The two-member panel determined that the appellant must pay service tax in the amount of Rs. 7,94,122 for work contract services rendered between June 1 2007, and March 31, 2009.

To Read the full text of the Order CLICK HERE

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