By TIOL News Service

MUMBAI, JULY 27, 2017: THE appellant provided service related to construction of residential complex to MHADA, Aurangabad during the period Oct 2008 to March 2010.

They did not pay service tax under the belief that the same is exempt from service tax, being services provided to Government.

Nonetheless, pursuant to the proceedings initiated by the jurisdictional authorities, a service tax demand was confirmed along with penalty and interest.

As the said order was upheld by the Commissioner(A), the appellant is before the CESTAT and submits that the appellant had not charged any service tax to MHADA as MHADA had convinced the appellant that the scheme is for philanthropic cause. Reliance is also placed on the Board Circular 80/2004 dated 17/09/2004 wherein it has been clarified that construction which are for the use of the organizations of institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit are not taxable being non-commercial nature. And so, by taking the plea of bonafide belief, the appellant emphasized that the extended period of limitation cannot be invoked.

The AR supported the impugned order.

The Bench inter alia observed –

" 4. … It is seen that the definition of construction of complex service does not use the word "commercial" anywhere. The said definition reads as follows:

(i) "Construction of Complex" means-

a) Construction of a new residential complex or a part thereof; or

b) Completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or

c) Repair, alteration, renovation or restoration of, or similar services in relation to residential complex."

4.1 The clarification relied upon by the appellant in Circular dated 10/09/2004 is a clarification issued with reference to commercial and industrial construction service. The demand has, however, been issued under construction of complex service as defined under Section 65 (30 a) of the Finance Act, 1994 in respect of construction of residential complex, commercial or otherwise nature of the construction is irrelevant.

4.2 In view of the above, we do not find any merit in the appeal filed by the appellant. The so-called bonafide belief of the appellant was based on the non-commercial nature of MHADA. It can be seen from the definition above that the word "commercial" itself does not figure in the said definition ."

Holding that there was no basis for the appellant to form any bonafide belief, the appeal was dismissed as being bereft of any merits.

(See 2017-TIOL-2623-CESTAT-MUM)