Service Tax not Leviable on Construction Services to TN Police Housing Corporation and Tsunami Implementation Unit: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that service tax is not leviable on the construction services rendered to Tamil Nadu Police Housing Corporation (TNHPCL), Tsunami District Implementation Unit, Pudukkotai (TDIU) and for Peoples Development Association (PDA).

During the course of an investigation into the activities of Pal Promoters Private Limited, it was found that the appellant, in his individual capacity, had undertaken the construction of a commercial building for Devadoss Multi Specialty Hospital, Madurai, residential complexes for World Vision India Limited, and had also provided renting of immovable property services to Pal Promoters Private Limited.

A Show Cause Notice dated 19.10.2012 was issued alleging that the appellant had rendered taxable services during the period from 01.04.2007 to 31.03.2012 without discharging the applicable service tax liability.

Sivalinga Kesavan, the Advocate appearing for both the appellants, argued with respect to the activities of PPPL that TNPHCL is a Government Organisation and the construction was for the personal use of the police personnel and would be exempted in terms of Sl. No.12 of Mega Exemption Notification No.25/2012-ST dated 20.06.2012.

It was further contended that the houses constructed for the Tsunami District Implementation Unit (TDIU), Pudukkottai, Peoples Development Association (PDA), and World Vision India were not intended for sale, which is a prerequisite for the applicability of Section 65(105)(zzzh).

Since the houses were constructed free of cost for tsunami-affected and homeless persons, the activity falls within the exclusion for personal use under Section 65(91a) and is also exempt under Sl. No. 12 of Notification No. 20/2012-ST dated 20.06.2012.

O.M. Reena, Authorised Representative, appearing on behalf of the Respondent, reiterated the findings in the impugned orders of the respective adjudicating and appellate authority.

The Bench of M. Ajit Kumar, Member (Technical) and Ajayan T.V., Member (Judicial) observed that

“We find that the very same issue had arisen for consideration of the Chennai bench of the Tribunal in the case of M/s. K.B. & Co. v The Commissioner of GST & Central Excise, Tirunelveli, whereby such construction of individual houses in the Tsunami affected areas by Tsunami District Implementation Unit, Pudukkotai (TDIU) were held to be not exigible to service tax. Therefore, respectfully following the aforesaid decisions, we hold that the appellant is not liable to pay service tax on the construction services rendered to Tamil Nadu Police Housing Corporation (TNHPCL), Tsunami District Implementation Unit, Pudukkotai (TDIU) and for Peoples Development Association (PDA) and the demand confirmed and upheld in the impugned orders to that extent are liable to be set aside.”

Considering that the Revenue has not demonstrated that the cited decisions have attained finality and the facts therein are similar to the present case, the Tribunal also held that the construction services rendered by the appellant to TNHPCL are not exigible to service tax, and the contrary findings in the impugned order are liable to be set aside.

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