By TIOL News Service

MUMBAI, SEPT 26, 2013: THE appellant constructed a Sports Stadium Complex for Government of Maharashtra at Mahalunge, Balewadi, Pune and this Stadium is known as Shree Shiv Chhatrapati Sports Complex. This stadium was constructed on tender invited by the Government of Maharashtra.

The question involved is whether this construction undertaken by the appellant amounts to 'Commercial or Industrial Construction' as defined under Section 65(25b) of the Finance Act, 1994. The said section defines the terms 'Commercial or Industrial Construction Service' as construction of a new building or a civil structure or a part thereof which is used or occupied or engaged, primarily, for commerce and industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

The CCE, Pune-II observed that the facility constructed by the appellant for the State Government of Maharashtra is to be used by the public and others for a consideration for use of the facility and, therefore, the entire building structure is commercial construction and accordingly he confirmed the Service Tax demand of Rs.10,21,11,459/- u/s 73 and also imposed an equivalent amount of penalty u/s 78 of the FA, 1994.

Aggrieved with the impugned order, the appellant is before the CESTAT.

It is submitted that as per the certificate dated 13.3.2008 procured from the Grampanchayat, Mahalunge, the plot of land on which Shree Shiv Chhatrapati Sports Complex is constructed, is not registered in their records either as for residential or commercial purpose. However, the said plot of land owned by Government of Maharashtra is for the public welfare use. They have further certified that according to their records, the buildings constructed in the said plot of land are not used for commercial purpose.

The appellant also submitted that the Director, Directorate of Sports & Youth Services, Pune vide Affidavit dated 9.9.2008 has deposed that the project of building/upgrading of Shiv Chhatrapati Stadium at village Mahalunge was undertaken for holding 3 rd Commonwealth Youth Games, 2008 in the month of October, 2008 and the project was financed and funded by the Government and the Stadium is fully controlled by the Department of Youth Affairs and Sports, Govt. of Maharashtra and the said stadium has been built as a non-commercial and non-industrial project. He has further declared that stadium will be continued to be used for non-commercial purpose even after the finish of the Commonwealth Youth Games.

Reliance is also placed on the Board Circular No. 80/10/2004-ST dated 17.9.2004 and Circular No. 151/2/2012- Service Tax dated 10.2.2012 in this regard.

It is further submitted that the only ground/basis on which the demand has been confirmed is a letter dated 5.9.2008 written by CBE&C to the Director of Sports & Youth Services, State Government of Maharashtra wherein it has been stated that "'Commercial or industrial construction service' and 'works contract service' for construction of stadium are leviable to service tax provided that such services are primarily for the purposes of commerce or industry. It was further directed in the said letter in para 5 that in case any further clarification is needed on the issue, the jurisdictional Commissioner may kindly be approached."

The Revenue representative reiterated the findings given by the adjudicating authority.

The Bench had while granting Stay - (2013-TIOL-219-CESTAT-MUM) observed -

"5.1 The question involved herein is whether the Sports Complex Stadium constructed for the purpose of holding games can be considered as a commercial or industrial construction, merely on the ground that the stadium is used by the public and others later on, on payment of user charges. In our view, the Sports Stadia is a public facility for the recreation of the public and it does not come under the category of commercial or industrial construction.

7.2 In the case of B.B. Nirman Sahakari Samiti Vs. State of Rajasthan - AIR 1979 Raj. 2009, a question arose as to what is a Public Utility? The Hon'ble High Court held that 'public utility' means any work, project which is going to be useful to the members of the public at large. The public benefit aided at or intended to be secured need not be to the whole community but to a considerable number of people. In American Law, the word 'Public facility' has been defined as under:-

'Public facility' means the following facilities owned by a State or local government, such as:-

(a) Any flood control, navigation, irrigation, reclamation, public power, sewage treatment and collection, water supply and distribution, watershed development, or airport facility

(b) Any other Federal and street road or highway

(c) Any other public building, structure, or system, including those used for educational, recreational, or cultural purposes.

(d) Any park.

5.3 The Sports Stadia is used for public purpose. Merely because some amount is charged for using the facility, it cannot become a commercial or industrial construction. Even in a Children Pak, entry fee is levied for maintenance of the Park. Merely because some amount is charged for using the Park, it cannot be said that it is a commercial or industrial construction. Adopting the same logic, the Sports Stadia in the present case is also a non-commercial construction for use by the public. Therefore, we are prima facie of the view that the Sports Stadium constructed for conducting Commonwealth Games, is a non-commercial construction.

6. Thus we are of the view that the appellant has made out a strong case for complete waiver of pre-deposit of dues adjudged. Accordingly, we grant unconditional waiver of the pre-deposit of dues adjudged and stay recovery thereof during the pendency of the appeal."

When the appeal was heard recently, by the same Bench, the appellant reiterated the submissions made at the time of the hearing of the Stay application.

The Revenue representative reiterated the findings given in the adjudication order and, in particular, drew the attention of the Bench to the rates for the use of the stadium prepared by the sports complex. In the rates given, there is a column for usage for commercial purposes which pointed to the fact that the stadium is being allowed to be used for commercial purposes and separate rates have been fixed for such usage. He also invited attention to para 2 of the Government Resolution dt.24/02/2003 which provides that the Committee shall be competent to use the area to the extent of 1 / 3 rd of the total area for commercial purposes, that is to say, for private purposes. Inasmuch as the construction is to be considered as a commercial construction and not as a non-commercial construction.

The appellant in his rejoinder submitted the rate-list is for rates for organizing sports competitions. In that category, different rates have been prescribed, a lower rate for schools, slightly higher rates for sports associations, another higher rate for institutions and clubs and the higher rates for sports associations, another higher rate for institutions and clubs and the highest rate for usage for commercial purpose; Merely, because a higher rate has been prescribed for the corporate, it does not mean the use is other than organizing sports competitions and conducting of sports activities cannot be held to be a commercial activity. It is further submitted that it is not the purpose for which the stadium has been put to use that is relevant for classification purpose and it is how, under the local municipal corporations/municipalities and other local authorities, the construction has been treated. Since as per the certificate issued by the Gram Panchayat of Mahalunge, the construction has not been treated as a residential construction or for commercial purposes and the plot of land is owned by Government of Maharashtra and its use is for public purpose, the classification of construction remains non-commercial. Accordingly, it is pleadedthat the appeal be allowed.

The Bench, incidentally, made the same observations as made during the passing of the Stay order and concluded that the Sports Stadium constructed for conducting Commonwealth Games, is a non-commercial construction.

In fine, it was held that Shiv Chhatrapati Sports Complex constructed by the appellant is a non-commercial construction and, therefore, it is not liable to service tax under the category of ‘Commercial or Industrial Construction Service'.

The appeal was allowed.

In passing: The game isn't over till it's over - Lawrence Peter "Yogi" Berra, remark in 1973.

(See 2013-TIOL-1424-CESTAT-MUM)