Construction of Residential Quarters for Staff Not Taxable as 'Commercial Construction': CESTAT [read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad Regional Bench, has allowed the appeal by setting aside the demand of Rs. 1.67 Crores raised by the Revenue. The Tribunal held that the construction of residential quarters for staff does not fall under the definition of 'Commercial Construction' and that the extended period of limitation could not be invoked solely based on Form 26AS statements.

The Revenue had issued a Show Cause Notice demanding Service Tax of Rs. 4.74 Crores for the period from 2009 to 2014, alleging suppression of facts. The demand was primarily based on discrepancies found in the assessee's Balance Sheet and Form 26AS. Following a remand by the Tribunal, the Adjudicating Authority confirmed a demand of Rs. 1.67 Crores, classifying the services as 'Construction of Complex' and 'Supply of Tangible Goods'.

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M/s Ashish Enterprises, the Appellant, represented by Shri Dharmendra Srivastava, Chartered Accountant, contended that the services provided, such as the construction of residential colonies for UPRVUNL and civil works for railways, were not taxable as 'Commercial Construction'.

They relied on the Tribunal’s decision in M/s Nitesh Estates Ltd. vs. Commissioner of Central Excise, Bangalore to argue that residential quarters for staff do not qualify as commercial or industrial construction. It was also submitted that tax had already been paid by principal contractors in several instances and that the Revenue violated settled legal principles by initiating proceedings solely based on Form 26AS.

The Coram of P. K. Choudhary (Member Judicial) and P. Anjani Kumar (Member Technical) observed that the Adjudicating Authority had failed to appreciate the ratio of the Nitesh Estates judgment. The Bench noted that the crux of the matter was whether the construction was for residential use, not whether the appellant was a main contractor or sub-contractor. Consequently, it was held that the construction of residential colonies for staff was outside the ambit of 'Commercial or Industrial Construction'.

Regarding the limitation, the Tribunal found that the Revenue had failed to provide any evidence of a positive act or omission by the Appellant with the intent to evade duty. It was observed that the case was built entirely on Form 26AS and Balance Sheet statements, which cannot constitute material evidence to allege suppression of facts.

The Tribunal observed:

“There is nothing on record to allege that there was any positive act of commission or omission by the Appellants with intent to evade payment of duty... We find that in the cases relied upon by the Appellant it has been categorically held that when the Show Cause Notice has been issued on the basis of Form 26AS statement extended period cannot be invoked.”

The Tribunal allowed the appeal partly on merits and in full on limitation. While the demand for most of the period was set aside, the Appellant was directed to pay the applicable Service Tax on a specific admitted amount of Rs. 3,79,794/- received during 2013-14.

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