The appellants were engaged in providing construction services for constructing building for hospitals and educational institutions managed by charitable trusts, since said construction was non-commercial, same did not fall under category ‘Commercial or Industrial Construction Services’. The department was of the view that the appellants are liable to pay service tax on the construction services for constructing the buildings for educational institutions, hospitals etc. Show cause notice was issued for the period 2006-07 and 2008-09 demanding service tax along with interest and also for imposing penalties.
The appellant has provided services to organizations such as hospitals, educational institutions etc. And such hospitals and educational institutions are managed by Charitable Trusts collecting various fees. The definition of ‘commercial construction services’ would show that the activity of constructing buildings for the use of educational purposes and hospital etc. will be out of levy of service tax for the reason that these are not used for commercial purpose. The Board has also clarified the same vide Circular No.80/10/2004-ST dt. 17.09.2004. Further the Tribunal in the case of Banna Ram Choudhary v. CCE (Tri. -Del.) has observed that even if some fees are collected by the owner of the building, if the use of the building is not of commercial in nature, the levy of service tax cannot sustain.
The Tribunal’s decision relied upon by the Ld. Consultant in Banna Ram Choudhary (supra) has analysed the very same issue holding in favour of assessee that when the construction of buildings is not used for any commercial purpose, the levy of service tax cannot sustain. Following the same, we are of the considered opinion that the demand in this case is unsustainable. In the result, impugned order is set aside, and the appeal is allowed, with consequential relief.
Citation: [2018] 96 taxmann.com 382 (Chennai – CESTAT)