By TIOL News Service

MUMBAI, AUG 22, 2017: THE appellants are engaged in activity of construction for APMC and for CWC Warehouse located in Railway side.

The lower authorities demanded service tax from the appellant on the ground that they are engaged in providing 'Commercial and Industrial Construction Service'.

Before the CESTAT, the appellant submits that insofar as APMC is concerned, the same is a statutory body established to assist the farmers in sale and purchase of their produce and, therefore, since APMC is a charitable organization no service tax could be levied. The appellant rely on the decision of High Court in Income Tax Appeal No. 4/2006 and the order dt. 28.3.2007. It is further submitted that the contracts with APMC are inclusive of material and, therefore,are Works Contracts and no service tax could levied on the work done for APMC for the period prior to 1.6.2007.

In the matter of construction activity done for CWC, the appellant pleads that since the activity is conducted within the Railway premises, therefore, not covered by the definition of 'Commercial or Industrial Construction Service' as Railways is specifically excluded from the said service; that such warehouses constructed can be deemed to be a Transport Terminal and which are specifically excluded from the ambit of Commercial and Industrial Construction service. So also, the contract is inclusive of material and, therefore, are Works Contracts and no tax can be levied till 1.6.2007 when the works contract was made a taxable service.

The AR argued that CWC is paying fee to the Railways for the land allotted to them; that CWC is commercial organization; that the definition of charitable organization under the Income Tax Act cannot be applied to Central Excise Act.

The Bench observed that in appellants' own case the High Court had held that APMC is constituted for charitable purposes.

Extracting portions from the Board Circular No. 157/8/2012-ST dt. 27.4.2012 and Circular No. 80/10/2004-ST dt. 17.9.2004, the CESTAT concluded that the activities of APMC are not commercial in nature and, therefore, the contracts are not covered under the purview of commercial and industrial construction service.

As for the construction rendered for CWC, the Bench observed -

"5. It is seen that the definition of term Railways is very wide it covers not only all the rail lines, sidings and yards but also warehouses as is apparent from the definition under Railways Act, 1989. The part of the said definition is reproduced below:

"(31) "railway" means a railway, or any portion of a railway, for the public carriage of passengers or goods, and includes-

(a) all lands within the fences or other boundary marks indicating the limits of the land appurtenant to a railway;

(b) ……..

(c) ……..

(d) all rolling stock, stations, offices, warehouses, wharves, workshops, manufactories, fixed plant and machinery, road and streets, running rooms, rest housed, institutes, hospitals, water works and water supply installations staff dwellings and any other works constructed for the purpose of, or in connection with, railway;"

As can be seen that warehouses are specifically covered under the term Railways and they need not necessarily belong to railways. In these circumstances, it is immaterial if the said warehouses are used commercial or otherwise, as the same are not covered within the purview of commercial and industrial construction service the appeal on this count is also allowed…"

Both the appeals were allowed.

(See 2017-TIOL-3031-CESTAT-MUM)