Custom, Excise & Service Tax Tribunal
Katira Construction Ltd vs Kutch (Gandhidham) on 7 November, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
SERVICE TAX Appeal No. 10269 of 2018 - DB
(Arising out of OIA-KCH-EXCUS-000-APP-139-2017-18 dated 18/12/2017 passed by
Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax-
RAJKOT)
Katira Construction Ltd ........Appellant
Kcl House, 1st Floor, C-wing,
Katira Shopper City,
Rto Relocation Site,
Bhuj-Kutch, Gujarat
VERSUS
Commissioner of C.E.-Kutch (Gandhidham) ......Respondent
Central Excise & Service Tax Commissionerate, Centeral Excise Bhavan Plot No. 82, Sector 8, Gandhidham(Kutch) Gandhidham(Kutch),Gujarat APPEARANCE:
Shri Amal Dave, Advocate for the Appellant Shri Himanshu P Shrimali, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No. 12613/2024 DATE OF HEARING: 20.09.2024 DATE OF DECISION: 07.11.2024 RAMESH NAIR The issues involved in the present case are as under:-
i) Whether the Hostel Building constructed for GAIMS (Gujarat Adani Institute of Medical Science) being an educational institute can be taxed under category of 'Commercial or Industrial Construction Service'.
ii) Whether the extended period of limitation can be invoked in the facts of the present case.
2. Shri Amal Dave Learned Counsel appearing on behalf of the appellant at the outset submits that this issue is no longer res-integra, as this Tribunal held in number of cases that any construction provided for a
2|Page ST/10269/2018-DB building which is for the purpose of educational intuition is not a commercial construction, therefore, the same is not taxable.
2.1 He further submits that appellant was under a bona fide belief that the term 'commercial or industrial construction service' would only cover construction of new building or civil structure for the purpose of commercial or industrial. The construction of hostel building for educational institutions cannot be considered as construction for the purpose of commercial or industrial. Hence, the term 'commercial or industrial construction service' would not cover the construction undertaken for educational institution for non-commercial purpose. This view of the appellant is also supported by the decisions of the Hon'ble Tribunal and also by the decision of the Hon'ble High Court of Madras in the case of M/s G. Ramamoorthi Construction India Pvt. Ltd.- 2015 (40) STR 632 hence, there is no suppression of facts with intent to evade the payment of tax, therefore, the extended period of limitation cannot be invoked. He placed reliance on the following judgments:-
M/s. Harsh Construction Pvt. Ltd.- 2014 (35) STR 617 Jyoti Sarup Mittal - 2017 (3) GSTL 478 Era Infra Engineering Pvt. Ltd.- 2018 (19) GSTL 52 Final order No.12227/2023 dated 06.10.2023 passed by Hon'ble CESTAT, Ahmedabad in case of M/s. N.J. Devani Builders P. Ltd. Maulana Azad National Institute of Technology V/s. CCE, Bhopal 2019(27) GSTL 383 (Tri.-Del.) Commr. Of CGST, Jaipur V/s. Jatan Construction Pvt.Ltd. 2019(24) GSTL 552 (Raj.) Era Infra Engg. P.Ltd. V/s. CST, Delhi-l 2018(9) GSTL 52 (Tri.-Del.) Jyoti Sarup Mittal V/s. CCE, Delhi- I 2017(3) GSTL 478 (Tri.-Del.)
3. Shri H P Shrimali, Learned Superintendent (AR) appearing for the Revenue reiterates the findings of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the records. We find that there is no dispute that the hostel building construction by the appellant is for Gujarat Adani Institute of Medical Science which is admittedly an educational institution. This Tribunal time and again held that construction of new building which is for the
3|Page ST/10269/2018-DB purpose of educational institution cannot be considered as 'commercial or industrial construction service' some of the judgments are cited below:-
a) In the case of N J Devani Builders (Supra) this Tribunal has passed the following order:-
"The issue involved in the present appeal is that the appellant has provided services of construction of hostel building for IIM, Ahmedabad and for Pandit Deendayal Petroleum University, Gandhinagar. The department in the impugned order is of the view that such service is covered under Works Contract service therefore the claim of Commercial and Industrial Construction Services by the appellant as well as exemption under various sub-headings of the service was untenable. As against this, the learned advocate for the appellant takes us through various judgments to point out that the issue is no longer res-integra and has been decided in various matters. He seeks to rely upon the following judgments:-
(a) Harsh Construction Pvt. Limited vs. CCE, Nasik -
2014(35) STR 617 (Tri.-Mumbai)
(b) Jyoti Sarup Mittal vs. CCE, Delhi-l - 2017(3) GSTL 478 (Tri.-Del.)
(c) Era Infra Engg. Pvt. Limited vs. CST, Delhi-l - 2018(19) GSTL 52 (Tri.-Del.)
(d) G. Ramamoorthi Construction (1) P. Limited vs. Comm (Adj.), Coimbatore - 2015(40) STR 632 (Mad.)
b) In the case of Maulana Azad National Institute of Technology (Supra) this Tribunal has passed the following order:-
"6. After hearing both the parties, we are of the opinion that the question for being adjudicated are as follows :-
(A) As to whether the appellant is a business entity.
(B) As to whether the services as received by appellant from CPWD, a Govt. Department is a support service.
(C) As to whether the demand as confirmed is sustainable.
7. The respective findings are as follows :-
(A) The term 'business entity' is defined under Section 65B(17) of the Finance Act, 1994 to mean;
"Any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession."
4|Page ST/10269/2018-DB The adjudicating authority below has held that the appellant is covered under 'any other business' in the said definition and as such is a business entity. But we are of the opinion that term 'any other business' has to be confined to the general meaning of any activity which is profit motivated. Hon'ble Supreme Court in the case of Assistant Collector of Excise v. Ramdev Tobacco Co. - 1991 (51) E.L.T. 631 (S.C.) has held that when a general word in a statute follow certain specific words (which had some common characteristics and constitute a genus) and giving natural wide meaning there to leads to absurdity, the given word takes colour from the neighbouring words and is read as ejusdem generis the accompanying word in a restricted sense. It was clarified that the word 'business' and 'business entity' in Section 65B(17) and Section 66D(1)(a)(iv) of the Finance Act had therefore to be read ejusdem generis to industry and commerce. Resultantly, both these terms referred to profit oriented commercial business entities only. In another adjudication in the case of Senairam Doongamall v. Commissioner of Income Tax - AIR 1961 S.C. 1579, the Hon'ble Supreme Court has held that word business denote an activity with the object of earning profit. The appellant herein has been referred in show cause notice as is a unit of Maulana Azad National Institute of Technology, Bhopal. The said Institute is one of the National Institutes of Technology established by Central Government under an Act of Parliament i.e. National Institute of Technology Act, 2007. Thus, once the purpose of parent Institute is to be engaged in education and in creating and disseminating knowledge through different mode as that of teaching, seminars, workshop, publications and even technical consultancy, the Unit thereof assisting in the said work becomes the part of the parent institute and stands clothed with the same status. The adjudicating authority below though has relied upon the provisions of negative list i.e. 66D(a)(iv) while confirming the demand but the above discussion makes it clear that since the object of appellant is to impart education the same cannot be held to be a business entity. The findings of order under challenge are therefore, opined not sustainable. Further Notification No. 25/2012, dated 20th June, 2012, as brought to our notice by the appellant is also perused. It reads as follows :-
Notification No. 25/2012-S.T., dated 20 Jun., 2012 Exemptions from Service tax - Mega Notifications - Notification No. 12/2012-S.T. Superseded In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of Notification number 12/2012-Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide number G.S.R. 210(E), dated the 17th March, 2012, the Central Government, being
5|Page ST/10269/2018-DB satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under Section 66B of the said Act, namely :-
xx xx xx
12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
a civil structure or any other original works meant (a) predominantly for use other than for commerce, industry, or any other business or profession;
xx xx xx
2. Definitions. - For the purpose of this notification, unless the context otherwise requires, -
xx xx xx
(s) "governmental authority" means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under Article 243W of the Constitution;
xx xx xx "original works" has the meaning assigned to it in Rule 2A(y) of the Service Tax (Determination of Value) Rules, 2006;
This Notification was redefined vide another Notification No. 2/2014, dated 30th January, 2014 which reads as follows :-
Notification No. 2/2014-S.T., dated 30 Jan., 2014 Mega Exemption Notification - Governmental Authorities - Redefined In exercise of the powers conferred by sub-section (1) of Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 25/2012-Service Tax, dated the 20th June, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i) vide GSR 467(E), dated the 20th June, 2012, namely :-
6|Page ST/10269/2018-DB In the said notification, in the paragraph 2, for clause (s), the following shall be substituted, namely :-
(s) "governmental authority" means an authority or a board or any other body;
(ii) set up by an Act of Parliament or a State Legislature; or
(iii) established by Government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under Article 243W of the Constitution;
xx xx xx The perusal of both these Notifications shows that any authority, which is set up by an Act of Parliament or is established by a Government is a Governmental authority and any services provided to a Governmental authority by way of construction, erection, commissioning, installation, even repair, maintenance, renovation or alteration of any civil structure are exempted from the purview of taxable services.
(B) Now coming to the issue of the services herein to be classified as support service or not. The definition thereof is relevant as mentioned in Section 65B(49) which read as follows :-
Section 65B(49) "support services" means infrastructural, operational, administrative, logistic, marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of immovable property, security, testing and analysis;
The bare perusal of this definition makes it clear that for any services received to be called as support service, the important ingredient is that the support should have comprised of such functions that the recipient is able to carry out in ordinary course of operations themselves. However, they have outsourced the same to someone else. In the present case, as discussed above, the appellant is carrying out the function of imparting education and the technical knowhow/consultancy but the service received from CPWD is that of construction of various civil structures. It becomes absolutely clear that the services received are not otherwise the activity of the appellant themselves. Outsourcing thereof will not bring the service received under the category of support service. Therefore, we hold that the adjudicating authority below has formed a wrong interpretation of the definition while holding the impugned services
7|Page ST/10269/2018-DB received as the support services. We accordingly are of the opinion that order to that extent is not sustainable.
(C) Coming to the last point of adjudication i.e. the tax liability of the appellant, we are of the opinion that since impugned period is the post negative list period, Section 67D is relevant. This provision excludes the services provided by a Government or a local authority from the ambit of taxability. Apparently the service provider herein is a Govt. authority. The services are not taxable. Though the adjudicating authority has relied upon 66D(a)(iv) but as discussed above the finding are erroneous. The Notification No. 25 Clause (c) thereof excludes any structure meant predominantly for use as an educational Institute from the ambit of tax liability. Though the said provision as on date stands omitted, but it was omitted vide Notification No. 6/2015, dated 1st March, 2015 that is after the period of demand involved herein which means that said notification was very much applicable upon the appellants. The adjudicating authority is held to have committed a mistake while ignoring the said notification. Also there has been another C.B.E. & C. Circular No. 80/10/2004-S.T., dated 17th September, 2004 which reads as follows :-
"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 used 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."
In view of this circular impugned services received by the appellant from Governmental body are the services received by an Institute established solely for educational purposes and not for the purposes of profit, the same was out of the ambit of taxability. Confirmation of demand is therefore, an apparent mistake on the part of the adjudicating authority below.
Once the demand is not sustainable, as discussed above, question of accruing interest and of imposition of penalty does not at all arise.
8. As a result of entire above discussion, the order under challenge is hereby set aside. Appeal is accordingly, allowed."
8|Page ST/10269/2018-DB
c) In the case of Jatan Construction Pvt Ltd, (Supra) Hon'ble Rajasthan High Court has passed the following order:-
"3.5 Counsel for the appellant has also taken us through the finding of the first authority observing as under :
9. Result of Investigation :
9.1 Investigation conducted by DGCEL, Ahmedabad against M/s. Jatan Construction P. Ltd., Ajmer as discussed in the foregoing paras, reveals that M/s. Jatan Construction P. Ltd. has been engaged in the business of execution of civil construction projects, under works contract. During the course of the search, it was found that in the financial year 2008-09 to 2011-12. M/s. Jatan Construction P. Ltd., Ajmer was allotted the contracts for civil construction work of Hostel Building for Post Graduation Girls, at Sardar Patel National Institute of Technology at Surat and a Hospital Building at Jaipur, by M/s. NBCC, M/s. Jatan constructions carried out the above-mentioned works allotted to them under the two contracts in the time period from 2008-09 to 2011-12, after issuance of Letter of awards to them by M/s. NBCC. During the course of search conducted at the premises of M/s. Jatan Constuction P. Ltd. on 18-7-2011, it was found that M/s. Jatan Constructions P. Ltd., had not paid the applicable amount of Service Tax on the taxable value received by them from M/s. NBCC, in respect of the above two civil construction works. Therefore, M/s. Jatan Construction P. Ltd. was required to pay Service Tax on the payments received by them for the two works carried out by them at Surat and Jaipur, for M/s. NBCC.
17.1 I have carefully gone through the case records, including defense reply and submissions made during personal hearings.
The issues before me to decide is (I) whether assessee is sub-contractor of M/s. National Building Construction Corporation Ltd. (NBCC)? (II) whether construction activity of P.G. Hostel at SVNIT Surat and ESIC Hospital at Jaipur falls under the category of Works Contract Service? (III) whether service provided by assessee to NBCC is liable to service tax or not? (VI) whether demand is hit by limitation?
17.2 Before deciding the issues, it is necessary to go into the background of the case. As stated in the brief facts, the officers of the DGCEI Zonal Unit, Ahmedabad, acting on the intelligence, searched the office premises of the assessee at Ajmer and Ahmedabad on 18-7-2011 and resumed certain documents/records. Investigation conducted in the matter revealed that assessee has not paid service tax on two projects. The investigating team observed that two projects being constructed on behalf of NBCC i.e. construction of P.G. Hostel at SVNIT Surat and ESIC Hospital at Jaipur, are liable for payment of service tax. Accordingly SCN, dated 10-9-2012 for demand of service tax of Rs. 5,45,77,175/- was issued by ADG O/O the DGCEI Zonal Unit, Ahmedabad.
17.3 Now I proceed to decide the case on merit. First of all I take up the issue of whether the assessee is sub-contractor of NBCC or [not]. Reliance is placed on letter No. NBCC/AGM/LOA/2009/1208, dated 15-1-2009, written by M/s. NBCC to the assessee, wherein cost of the project, period of construction and other terms and conditions of the agreement were mentioned. The assessee was directed to furnish bank guarantee, insurance coverage and obtaining statutory licenses. The letter written by Sh. A.K. Gupta AGM of NBCC, specifically mentioned that "This letter of award shall form part of the contract agreement. This letter of award is being issued in duplicate. The duplicate copy is to be signed and stamped by the authorized signatory of your company and is to be returned to this office in token of your confirmation and acceptance in full". In this letter the contract was for construction of P.G. Hostel at SVNIT, Surat. The cost of the said project was
9|Page ST/10269/2018-DB revised vide letter, dated 12-3-2010. Similar Letter No. NBCC/GM-RBG (E&I) ESIC/Jaipur/2009/1110, dated 3-3-2009 was for contract for construction of Hospital Building including internal services, External electrical, Fire Fighting, at Jaipur.
17.4 From the above letters, it is evident that assessee made contracts for construction of above two projects with M/s. NBCC and raised running account bills to M/s. NBCC, who made payments. I find that assessee acted as per terms and conditions specified in their letter of agreement and provided specific services as required by M/s. NBCC. I find that assessee acted as sub-contractor of M/s. NBCC.
17.5 Now the question would arise as to under which service the construction activity undertaken by the assessee for two projects will be classified. Whether it is commercial and industrial construction or works contract. I find that assessee vide their letter, dated 23-8-2011, in their reply to show cause notice and during personal hearings have contested that their construction activity do not fall under the category of works contract service & it exclusively falls under 65(105)(zzq) i.e. construction service. Since the projects, pertained to hospital and hostel, belonging to government department, the same are neither commercial nor industrial, but are for general public utility and charitable in nature. Therefore, they are exempted from levy of service tax. I find that criteria to classify the service under any specific category will depend upon the terms and conditions of the contract, dated 15-1-2009 and 3-3-2009 wherein it is specifically mentioned that "with reference to your tender for the above mentioned work, we are pleased to accept your tender for the amount, worked out on the basis of rates quoted by you on the Bill of Quantities of the tender documents on terms and conditions referred. It is also requested to mobilize immediately your site personnel plant and equipments and other resources so that work can be started as per schedule." I find that nature of contract, their terms and conditions, the running account bills raised by the assessee for payments of the work done, the annual payment details with cheque numbers, which shows the amount for VAT on work contract, all these facts leads to the conclusion that the activity undertaken by them fall under works contract service. I draw my inferences from the definition of service given under section 65(105) (zzzza) of the Finance Act 1994 for works contract which reads as "to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.
17.6 Explanation. - For the purpose of this sub-clause, "works contract"
means a contract wherein (I) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for carrying out -
(a) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise. Installation of electrical and electronic devices, plumbing drain laying or other installations for transport of fluids, Heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water, proofing, lift and escalator, fire escape staircases or elevators; or
(b) Construction of new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry;
or -
(c) Construction of a new residential complex or a part thereof; or 10 | P a g e ST/10269/2018-DB
(d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation of (d) and (e) above; or
(e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects.
4. He contended that the Tribunal has seriously committed an error in taking a view inspite of the decision of Banglore Tribunal in Ramky Infrastructure Ltd. v Commr. of Service Tax, Hyderabad, reported in 2013 (29) S.T.R. 33 (Tri. Bang.) wherein it has been held as under :-
10.1 Whether, in the case of each of the two JVs, the service provided to the Government of Andhra Pradesh is classifiable as "WCS" has to be determined from the nature of the relevant contracts as understood by the parties thereto as also from the scope of the works executed under the contracts. Of-course, this exercise has to be undertaken with reference to the definition of "works contract" embodied in Explanation to Section 65(105)(zzzza) of the Finance Act, 1994.
10.12 The definition of "commercial or industrial construction service"
excludes services provided in respect of certain specified items including "dams" Similarly the definition of "site formation and clearance, excavation and earth moving and demolition" excludes services provided in relation to certain specified items including "irrigation". Therefore, according to the counsel for the appellants, any service provided in relation to "dams" and "irrigation" should be deemed to have been excluded from the purview of "works contract service" as well. There is no warrant for deeming so inasmuch as every taxable entry needs to be understood with reference to the language used in such entry and, accordingly, a given service has to be classified, which is the mandate of sub-section (1) of Section 65A of the Finance Act, 1994. We have not found anything in the text of the definition of "works contract" to indicate that turnkey/EPC projects for irrigation are excluded from the ambit of taxable service of works contract. With regard to "dams", we have already expressed our views in para (10.6) of this order. As rightly submitted by the learned Special Consultant for the Department, there is no room for any intendment or assumption or presumption and, where the words of the statute are plain and clear, there is no room for applying any of the principles of interpretation. In this context, the reliance placed by the Special Consultant on the decision of the Apex Court in Grasim Industries case is found to be apposite.
10.13 Clause (e) of the definition of works contract--turnkey projects including engineering, procurement and construction or commissioning (EPC) projects--clearly conveys the legislative intent underlying the definition of "works contract" in relation to turnkey projects. It does not exclude EPC projects for irrigation, nor does it discriminate between EPC projects for commercial/industrial purposes and those for non-
commercial/non-industrial purposes, nor between EPC projects of Government departments/agencies and private entities. What does not figure in the plain language of the entry cannot be read into it by this Tribunal.
4.1 He contended that the judgment which has been sought to be relied upon is subject matter of SLP before the Supreme Court.
5. However, in our considered opinion, the Tribunal clearly observed as under :
7. Admittedly, in the present case the construction activity of the appellant is with reference to student's hostel and the public hospital. These are non- 11 | P a g e ST/10269/2018-DB commercial buildings. Accordingly, these are excluded from tax liability under works contract service.
6. It is thus clear that the hostel which was constructed was a girls hostel and hospital which was need of the Jaipur was constructed. In that view of the matter, it was not commercial building as per the language used and the activities neither fall under commercial activities nor industrial activities, it is purely a social activity where the girls hostel is constructed for girls students in city of Surat and hospital in Jaipur.
7. Thus, we are in complete agreement with the view taken by the Tribunal. No substantial question of law arises in the appeal.
8. The appeal stands dismissed."
From the above decisions of Tribunal As well as Hon'ble Rajasthan High court in the case of Jatan Constuction Pvt. Ltd. the issue in hand stand settled as the construction building of educational institute cannot be termed as 'commercial or industrial construction service'.
5. Accordingly, the service in question is not taxable under the said head. Hence the demand in the present case is not sustainable. The impugned order is set aside. The appeal is allowed.
(Pronounced in the open court on 07.11.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Raksha