No Service Tax Leviable on Construction Service Provided to Semi-Govt Firm: CESTAT [Read Order]

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable on construction services done for semi-government firms.

Gyarsilal Mohanlal, the appellant is a contractor and registered as service tax assessee for rendition of “Commercial or Industrial Construction Service”. The appellant was awarded work for construction of residential complex by Rajasthan Housing Board (RHB) at Pratap Apartments and construction of Office building at Panchsheel, Ajmer by Ajmer Vidyut Vitran Nigam Limited (AVVNL). The present dispute arises as a consequence of the department seeking payment of service tax for the said activities undertaken.

The appellants vide request from the department vide letters dated 28.03.2011 and 20.09.2011 forwarded certain documents relating to RHB, balance sheet copy, work orders and calculation chart for the amounts received during 2009-10 and 2010-11 (relating to AVVNL). On the basis of the scrutiny of the said documents, two show cause notices dated 01.07.2011 and 12.10.2011 for the period 200910 and 2010-11 were issued to the appellant demanding service tax for an amount of Rs.1,04,91,715/- and Rs.69,12,709/-.

Following due process, the adjudicating authority however confirmed the two show cause notices vide common order-in-original No.52-53/2012-13 (ST)-COM dated 27.12.2012. It is against this order that the appellants are aggrieved with and have filed the present appeal.

The appellant submitted that the two show cause notices in the first instance do not survive on grounds of limitation, since on an identical issue show cause notice dated 02.07.2010 for the period 2005-06 to 2008-09 was already issued and therefore any subsequent show cause notice incorporating extended period of limitation would not survive as no ground for willful suppression can thereafter be fastened.

A two member bench of Binu Tamta, Member ( Judicial ) and Rajeev Tandon, Member (Technical) observed that there could be no levy of service tax for construction of the said residential building, as it would squarely fall within the ambit of the clarification issued by the department; as independent buildings having twelve or less than twelve residential units would not be covered by the definition of “residential complex”.

The appellant has constructed independent buildings having G+3 residential units that are separate and independent of each other. It was observed that Tax is leviable on a commercial nature of the building constructed. AVVNL being a semi-government body engaged in the provisioning of civil amenities for the citizens and this project of theirs not venturing into commercial space would not be chargeable to service tax.

In view of Board’s Notification No.11/2010-ST and 45/2010ST dated 27.02.2010 and 20.07.2010 respectively, services provided for transmission and distribution of electricity are exempt from levy of Service Tax under Section 66 of the Finance Act, 1944. For the aforesaid reasons too the appellant is entitled for exemption from payment of service tax for services provided to AVVNL who are engaged in the distribution of electricity.

The tribunal held that the service rendered was not liable to tax and was exempted. We find no infirmity, warranting any consequential action in law, in the appellant’s act of non-filing of the ST-3 Returns. The order of the lower authority being not in accordance with law, is not maintainable both on merits as well as limitation. The same is therefore liable to be set aside and thus quashed.

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