Warehouse construction classified as commercial service since facilities permitted rental and non-agricultural use: CESTAT [Read Order]

In a recent ruling The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench, has dismissed the appeal, ruling that the construction of warehouses for the Haryana State Warehousing Corporation (HSWC) amounted to taxable commercial construction services.

The matter arises from a demand of over ₹1.02 crore for the period 2009–10 to 2013–14, later confirmed in part by the Commissioner of Central Excise & Service Tax, in November 2016. The Commissioner imposed a penalty equal to the confirmed demand under Section 78 of the Finance Act, 1994, and an additional penalty of ₹10,000 under Section 77.

The appellant, V R Construction Co, submitted that the godowns were built for agricultural storage and not for commercial purposes, and the show cause notice does not clearly bring out the taxable event.

They also said that Certificates from HSWC and other agencies were cited to show that the structures were not used for industrial or commercial activity. Also relies on the decision of this Bench in the case of Suresh Kumar Gupta (2025).

The revenue, represented by Shri Yashpal Singh, argued that the Commissioner had already considered the appellant’s submissions and correctly dropped the demand only for the period after 1 July 2012, when an exemption notification applied.

Also included that no exemption existed before that date. He further pointed out that under the Government’s PEG Scheme, the warehouses built could be rented out to private parties for storing goods, including imports and exports, which made them commercial in nature.

After hearing both sides, the tribunal noted that the appellant claimed the warehouses were not for commercial use, the PEG Scheme allowed them to be rented out for non‑agricultural and commercial purposes, including import/export.

It is also noted that the Haryana State Warehousing Corporation (HSWC) was found to be a commercial concern, since it stored not only agricultural produce but also seeds, fertilizers, implements, and could rent godowns to private parties.

The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar(Technical Member) held that construction services provided by the appellant were taxable up to 30 June 2012, with no exemption available before that date. The Commissioner had already allowed abatement under Notification No. 01/2006.

Accordingly, the appeal was dismissed.

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