Sabari Builders Vs Commissioner of GST & CE (CESTAT Chennai)
The CESTAT Chennai partly allowed the appeal challenging the confirmation of service tax, interest, and penalties on works contract services provided during the period from 1 April 2009 to 31 March 2014. The appellant, engaged in construction of residential, commercial, and industrial buildings, was issued a demand after the Department concluded that it had rendered taxable works contract services without registration, payment of service tax, or filing ST-3 returns. The appellant contended that construction undertaken for educational institutions, charitable trusts, religious institutions, and single residential units was not taxable, relying on CBEC Circular No. 80/10/2004-ST and judicial precedents, and also disputed the invocation of the extended limitation period.
The Tribunal framed three issues: whether construction of educational institutions was taxable as works contract service, whether service tax was payable on works executed as a sub-contractor, and whether the extended period of limitation had been validly invoked. On the first issue, the Tribunal held that for the period up to 30 June 2012, the Department failed to establish that the buildings constructed for educational institutions were primarily for the purposes of commerce or industry. It observed that the CBEC Circular clarified that constructions for organizations established solely for educational, religious, charitable, health, sanitation, or philanthropic purposes and not for profit were non-commercial in nature. The Tribunal held that the burden of proving taxability rested on the Revenue, whereas the appellant had reasonably relied on the Board Circular to believe that its activities were not taxable. As the Department produced no evidence to show that the educational institutions were primarily commercial or industrial, the service tax demand relating to such construction for the period up to 30 June 2012 was set aside. However, for the period from 1 July 2012, the Tribunal held that the amended definition of “works contract” under Section 65B(54) no longer depended on whether the construction was for commerce or industry. Consequently, construction services provided to educational institutions after that date remained taxable.
