By TIOL News Service

MUMBAI, FEB 07, 2013: THE appellants have constructed a Boys and Girls Hostel for students of an educational institution. They got registered themselves with the Revenue authorities and paid service tax on the said activity under ‘Works Contract services' for the period April 2008 to September 2008.

After educating themselves, the appellants realized that as they are not constructing any building which is being used for commercial purpose they are not liable for service tax. They stopped paying service tax but continued to file their service tax return. Consequently, they filed refund claim of the service tax paid by them for the period April 2008 to September 2008. The fate of those claims is not known.

Anyways, show cause notices were issued for the period of October, 2008 to September, 2010 demanding service tax aggregating to Rs.5,51,923/- along with interest and various penalties on the premise that the appellant had not produced any evidence with regard to the building constructed by them inasmuch as that it is not to be used for commercial or industrial purpose.

The lower authorities confirmed the demand and so the matter is before the CESTAT.

The appellant submitted that the fact that they have constructed the hostel for residence of boys and girls who are studying in a medical institute and the hostel is being used by boys and girls is not being disputed by the Revenue. Since this activity is not of commercial or industrial in nature they are not liable to pay service tax under the category of Works Contract Services as clarified by the Board Circular No. 80/10/2004-ST dated 10.9.2004.

The Revenue representative submitted that there is no evidence produced by the appellant with regard to use to which the building constructed has been put to and, therefore, service tax has been correctly demanded under the category of Works Contract Service.

The Bench waived the requirement of pre-deposit and took up the appeal for final disposal.

It was observed -

"6. Considering the fact that building is constructed as hostel for the residence of students studying in medical institute and there is no allegation that the building is being used for any other purpose. In that set of facts, the Board Circular No. 80/10/2004-ST, dated 10.9.2004 is applicable to the facts of this case which clarified as under:-

"The leviability of service tax would depend primarily upon whether the building or civil structure is used or to be used for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable being, non-commercial in nature. Generally, government buildings or civil constructions are use for residential, office purposes or for providing civic amenities. Thus, normally Government constructions would not be taxable. However, if such constructions are for commercial purposes like local Government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax".

From the above circular, we find that appellant are not liable to pay service tax. Accordingly, we set aside the impugned order and allow the appeal with consequential relief if any."

Pass class: To accuse others for one's own misfortunes is a sign of want of education. To accuse oneself shows that one's education has begun. To accuse neither oneself nor others shows that one's education is complete - Epictetus.

(See 2013-TIOL-238-CESTAT-MUM )