CESTAT denies Service Tax Exemption for Mandi Constructions as Market Structures Fall Under 'Business or Commerce' [Read Order]

The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) denied the service tax exemption for mandi constructions, as market structures fall under 'business or commerce'

It is to noted that in this case, the assessee, the Rajasthan State Agriculture Marketing Board, had appealed before the CESTAT against the order passed by the Commissioner (Appeals) for confirming the demand of Rs. 14.23 lakhs under Section 73(2) of the Finance Act,1994, along with interests and penalties.

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Coming to the facts of the case, the appellant had issued 3 work orders to M/s. Laxmi Narayan Agarwal, the service provider. It was observed by the department that neither the service provider nor the appellant paid any service tax on these services.

During the investigation conducted by the department, it was observed that as per Notification No. 30/2012-ST (entry 9), in works contracts, service tax was to be shared equally between the service provider and recipient. Since the appellant, as service recipient, failed to pay their 50% share, a Show Cause Notice dated 02.02.2018 was issued, and later on, the demand was confirmed by the Assistant Commissioner and upheld by the Commissioner (Appeals).

It is vital to note that several grounds were raised by the assessee in the appeal, and one of them was that the services in question were exempted by Notification No.25/2012-ST [S.No. 12 (a)].

The relevant portion of the notification reads as follows: “12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of – (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession;”

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The revenue’s counsel strongly supported the impugned order.

The bench observed that the above notification exempts construction services mainly meant for non-commercial use, and in this case, the auction platforms and roofs over internal roads were built in mandis, which are used for business activities.

The tribunal noted that since mandis are commercial spaces, these structures don't qualify for the exemption. The bench concluded that the services received by the appellant are not covered by S.No. 12(a) of Notification No. 25/2012-ST.

Delhi CESTAT, comprising Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member), dismissed the assessee’s appeal.

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