Custom, Excise & Service Tax Tribunal
M/S R.B. Chy Ruchi Ram Khattar & Sons vs C.S.T. New Delhi on 29 September, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Appeal No.ST/56911/2013-ST(SM)
(Arising out of Order-in-Appeal No.395-Appeal/S-Tax/Div-I/Delhi-2011 dated 31.10.2011, passed by the Commissioner (Appeals) Central Excise, New Delhi)
M/s R.B. Chy Ruchi Ram Khattar & Sons Appellant
Vs.
C.S.T. New Delhi Respondent
Appearance Shri S.K. Sarwal - for the appellant Shri B.B. Sharma - DR for the respondent CORAM:
HONBLE SHRI MANMOHAN SINGH, MEMBER (TECHNICAL) Date of Hearing: 29.9.2014 FINAL ORDER NO.54936/2014 Per: Manmohan Singh:
Appellant have come in appeal against the Order-in-Appeal No. 349/ST/DLH/2012 dated 13.12.2012 wherein their appeal was rejected and Order-in-Original No. 227/ST/SI/REFUND/2011 passed by the Assistant Commissioner Service Tax Division-I, New Delhi was upheld. Appellants contended that their appeal was rejected on the ground that M/s HPL was a contractor and they were a sub-contractor. They have signed agreement of work of contract with M/s HPL for and on behalf of Delhi Police and President of India. Attention was invited to the agreement. Appellant also referred to the judgment of Tribunal in the case of Khurana Engineering Ltd. Vs. CCE, Ahmedabad, reported in 2011 (21) STR-115 (Tri. Ahmd.) where benefit of exemption from service tax was granted to C.P.W.D. as they were working for the Government of India. He submitted that no service tax liability could be fastened on Government of India. It was also pleaded that M/s HPL was only a Executive Agency which were working for and on behalf of Delhi Police as per terms and conditions of the agreement. It was further submitted that sub contractor and service provider of construction of staff quarter of police were covered under the category of Work Contract Service and these fell in the exclusive part of non-commercial projects.
2. On the other hand, Ld. DR pointed out to the order of Commissioner (Appeals) wherein distinction has been made between Government Department and Public Department by referring to the Board Circular File No. 332/16/2010-TRU dated 24.05.2010. The Ministry of Urban Development (GOI) has directly engaged the NBCC for constructing residential complex for central government officers. Further, the residential complexes so built were intended for personal use of he GOI which included promoting the use of complex as residency by other persons (i.e. the Government officers or the Ministers). As such the GOI was the service receiver and NBCC was providing services directly to the GOI for its personal use. Therefore, as for the instant arrangement between Ministry of Urban Development and NBCC was concerned, the service tax was not leviable. It may, however, be pointed that it the NBCC, being a party to a direct contract with GOI, engages a sub-contractor for carrying out the whole or part of the construction, then the sub-contractor would be liable to pay service tax as in that case, NBCC would be the service receiver and the construction would not be for the personal use.
3. Heard both the sides and perused the record.
4. I have gone through the submissions made by both the sides and find that the only issue involved for consideration whether sub-contractors engaged for building residential complexes for Delhi Police could be considered for receiving services on behalf Govt. of India and no service tax liability could be fastened on them. I find the Commissioner (Appeals) has distinguished that Govt. of India enterprise cannot be equated with any Govt. Department which were on behalf of Government of India or President of India. He also come to conclusion that appellant had entered into contract of service with M/s HPL and referred the construction service with M/s HPL and not to Delhi Police rightly and being a sub-contractor they were liable to pay the service tax.
5. On the examination of whole issue, it is seen that major beneficiary of contractor or residential complex is the Delhi Police (Govt. of India) and M/s HPL is only the contractor executing agency who have provided the service to the Delhi Police through sub- contractor. They have further got the work done from the appellants who were connected as a sub-contractor. I find that intention of the Government is not to levy service tax on the service received by the Government of India through contractor or sub-contractor. I have also examined the exemption. If sub-contractor is directed to pay the service tax which have ultimately to be utilizes by the Delhi Police (Govt. of India) only on technicality that a sub-contractor is involved in the construction of building, will ipso facto take away the exemption granted to the Government of India. Further use of housing complex for non-commercial use and will not come under the service leviable to service tax. In this regard definition of the service of commercial and industrial construction service became taxable as per the Section 65 (25b) in 2004. However, the definition and scope of service was changed by Finance Act, 2005 and revised definition is reproduced for appreciation
(a) Construction of new building or a civil structure or a part thereof; or
(b) Construction of pipeline or conduit; or
(c) Completion and finishing services such as glazing, plastering, painting, floor and wall tiling, was 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, in relation to building or civil structure; or
(d) Repair, alteration renovation or restoration of, or similar services in relation to building or civil structure, pipeline or conduit, which is:-
(i) Used, or to be used, primarily for; or
(ii) Occupied, or to be occupied, primarily with; or engaged, or to be engaged, primarily in,
(iii) Commerce or industry, or work intended for commerce or industry,
(iv) But does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams Definition was further changed by Finance Act, 2010 section 65 (25b) wherein terms service was omitted and word commercial and Industrial Construction Service was substituted by the Commercial and Industrial Construction, the same is as below:
Construction for commercial purpose:-
Service tax is limited to the building/civil structure is used or to be used for commercial activities. If such construction is for educational, religious, charitable, health, sanitation or philanthropic purposes, the same is not taxable.
Construction of Govt. building Normally construction by Govt. is not taxable. However, if such construction is for commercial activities such as civic body construction complex, the same is taxable.
6. Since in the present case, building has been got constructed by the Government of India for their own use as residential complexes for Delhi Police, it does not result in construction for commercial purposes. Further, construction by Government for non-commercial purpose was not taxable, however construction by the Government for commercial activities such as civil body construction for shops or commercial complexes laying in the nature of commercial activity were taxable.
7. Viewing the above facts in totality, it is observed that merely because the construction has been get done from the contractor/sub-contractor, it will not change the nature or the activity from non-commercial to commercial. Once it comes out that Government has undertaken a project which is non-commercial in nature and not taxable, service received on this account by the Government would not come under the taxability. In above context, judgment quoted by the Commissioner (appeals) and subsequent reference to the Ministry circular will not convert the activity from non-commercial to commercial.
8. In view of the above, I am of the firm view that even sub-contractor cannot be directed to pay service tax when the taxability of the construction is non commercial in nature being not taxable.
9. In view of above, appeal is allowed subject to provisions of law.
(Dictated and pronounced in the open Court)
(MANMOHAN SINGH) MEMBER (TECHNICAL)
K. Gupta
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