No Service Tax on Non-Commercial Educational Building Construction: CESTAT Chennai

R. R. Thulasi Builders (I) Pvt. Ltd. Vs Commissioner of CGST & Central Excise (CESTAT Chennai)

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal allowed the appeal filed by R. R. Thulasi Builders (I) Pvt. Ltd. against a service tax demand relating to construction of buildings for educational institutions. The disputed period was 1 October 2008 to 30 June 2012. The appellant was registered under works contract service and maintained that construction for educational and charitable institutions was outside the scope of construction primarily intended for commerce or industry. The Department alleged that private educational institutions collecting tuition, hostel and transport fees operated commercially and that their construction attracted service tax. It also argued that Circular No. 80/10/2004-ST dated 17 September 2004 had ceased to be relevant following later master circulars. The appellant relied on the original circular, Section 65(105)(zzzza), the educational institutions’ charitable status and prior decisions concerning non-commercial construction.

The Tribunal examined paragraph 13.2 of Circular No. 80/10/2004-ST, which distinguished construction for educational, religious, charitable, health, sanitation and philanthropic purposes from commercial construction when undertaken without a profit purpose. It considered the list of circulars withdrawn by Master Circular No. 93/04/2007-ST dated 10 May 2007 and noted that the 2004 circular was not included. It also referred to a departmental clarification to the Coimbatore Builders and Contractors Association confirming that the circular remained in force. On merits, the Tribunal relied onKVR Construction Gujarat Adani Institute of Medical Sciences, KMV Projects and Vijayadeepa Constructions, among other decisions. It found that the buildings were used principally for educational purposes and that the mere collection of fees did not establish that the construction was commercial. Accordingly, the service tax demand under works contract service was held unsustainable for the disputed period.

On limitation, the Tribunal noted that the demand figures were drawn from the appellant’s own accounts, that tax had been discharged on other construction services and that the appellant had relied on the Board circular in good faith. It found no positive act of suppression and rejected invocation of the extended limitation period. The impugned order was set aside and the appeal allowed with consequential relief, if any.

Cases Discussed

• Commissioner of Central Excise (Appeals) v. KVR Construction — 2012 (26) S.T.R. 195 (Kar.)
• Gujarat Adani Institute of Medical Sciences v. CCE & ST, Rajkot — Final Order Nos. A/11309–11310/2023, dated 22 June 2023
• Ratan Das Gupta & Co. v. CCE — 2017 (3) G.S.T.L. 247 (CESTAT Delhi)
• KMV Projects Ltd. v. CCE & ST, Hyderabad — 2019 (27) G.S.T.L. 388 (CESTAT Hyderabad)
• Vij Construction Pvt. Ltd. v. CCE — 2018 (11) G.S.T.L. 169 (CESTAT Delhi)
• Nizam Sugar Factory — cited regarding successive extended-period notices
• ECE Industries — cited regarding successive extended-period notices
• B.G. Shirke Construction Technology Pvt. Ltd. v. CCE — 2014 (33) S.T.R. 77 (CESTAT Mumbai); affirmed at 2019 (25) G.S.T.L. 8 (Bom.)
• Commissioner of Service Tax v. S.M. Sai Construction — 2016 (42) S.T.R. 716
• Institute of Banking Personnel Selection v. CST — 2007 (8) S.T.R. 579
• Lanco Infratech — Larger Bench decision cited in quoted precedent
• Tirumala Tirupathi Devasthanams v. Superintendent of Customs, Central Excise & Service Tax — 2013 (30) S.T.R. 27 (A.P.)
• Vijayadeepa Constructions Pvt. Ltd. v. CGST & Central Excise, Coimbatore — Final Order No. 40536/2024, dated 8 May 2024

FULL TEXT OF THE CESTAT CHENNAI ORDER

Brief facts are that the appellant is rendering construction services and is registered with the Service Tax Commissionerate under ‘Works Contract Service’ (WCS). On intelligence gathered by the department, the accounts of the appellant were scrutinized and it was seen that they were paying service tax under WCS after deducting the amounts received for providing construction services such as road works, pipeline work etc. and also had not discharged service tax on consideration received for construction of educational institutions. On enquiry, the appellant replied that the construction of educational institutions is exempted from payment of service tax as per Board Circular No.80/10/2004-ST dt. 17.09.2004. That most of their customers are public charitable trusts having Section 12AA registration under Income Tax Act. On 12.12.2014, the appellant submitted records and relevant particulars for the period 01.10.2008 to 30.06.2012 and also furnished the same reply stating that they are not liable to pay service tax for construction of educational institutions. The department was of the view that for the period 01.10.2008 to 30.06.2012 the appellant has constructed educational institutions and such constructions are commercial in nature and therefore the appellant is liable to pay service tax. Show cause notice dt. 22.04.2014 was issued for the above period invoking the extended period proposing to demand service tax under WCS along with interest and also for imposing penalties. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved by such order, the appellant is now before the Tribunal.

2. The Ld. Counsel Ms. Radhika Chandrasekar appeared and argued for the appellant. It is submitted that the appellant is providing ‘Works Contract Service’ and has discharged the service tax wherever applicable. They had constructed buildings for educational institutions and had not discharged service tax on the amounts received by them as these buildings are primarily meant for education and not for commerce or industry. The appellant is not liable to pay service tax for construction of educational institutions as clarified by the Board in Circular No.80/10/2004-ST dt. 17.09.2004. Though the said circular was pointed out to the Department much before issuance of the show cause notice, the Department has not considered the said circular and has issued the SCN proposing the demand. The Ld. Counsel also made the following submissions :

2.1 The definition of “Works Contract Service” in terms of Section 65(105)(zzzza) specifically refers to constructions primarily for the purpose of commerce or industry. The Construction activities for educational institutions which are non-commercial in nature and for non-profit bodies are not liable to be taxed as the same is not for commerce or industry.

2.2 It is submitted that the appellant has carried out construction activity for educational institutions which are non-commercial in nature and for non-profit bodies. The analysis of the customers for the relevant period as set out in the annexure to the Show Cause Notice indicates that customers are education and charitable trusts, foundations, institutions and colleges run by the trust. The fact that appellant has constructed buildings for an educational institution is undisputed by the department.

2.3 That having accepted that the appellant has constructed buildings for Private Educational Institutions, the adjudicating authority erred in denying the benefit on the ground that the commercial nature of the educational institutions who receives the taxable service is determined on the basis of collection of fees by whatever name called or whatever reasons attributed to such collection. It is submitted that this observation is without appreciating that the Government Institutions also generate funds to meet their expenditure. Merely because the private institution generates funds through fees for their own operation, it does not become commercial in nature. 2.4 The impugned Order-in-Original accepts that the education institutions are run by charitable trust, however denies the benefit on the ground that there is no exemption to educational institutions owned by charitable trust. This observation is made without appreciating the fact that the definition of works contract services specifically refers to ‘primarily for the purpose of commerce or industry’ and educational institutions are non-commercial in nature. 2.5 The departments vide Circular No. 80/10/2004 dt. 17.09.2004 has clarified that constructions which are for use of organisations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes for profit are not taxable being non-commercial in nature.

2.6 It is submitted that the observation in the OIO that Circular dt. 17.09.2004 is withdrawn vide Master Circular No.96/7/2007-ST dated 23.08.2007 and therefore the same cannot be made applicable is not correct. The said circular is not withdrawn and the same is in force even as on 2013 which is clarified by the Department vide Reply dt. 25.07.2013 to the queries addressed by the Coimbatore Builders & Contractors Association. 2.7 That the private educational institutions have obtained registration certificates u/s 12AA of the Income-tax Act, 1961. The educational institutions had the registration under Section 12AA during the disputed period. The educational institutions are affiliated to various universities.

2.8 That the OIO has confirmed the demand on the ground that the commercial nature of the educational institutions who receive the taxable service is determined on the basis of collection of charges for education by whatever name called or whatever reasons attributed to such collection. It is submitted that charging fees does not make entity a commercial entity. There is no finding in the order that the surplus has not been used for the objective of the institution. So long as there is no finding to the effect that the surplus is used for any other purpose other than the objective of the institution, the observation that the institutions are commercial in nature is erroneous.

2.9 The Appellant places reliance on the following decisions of the Tribunal as well as Hon’ble High Court wherein it has been held that construction for institutions solely established for education, charitable purposes are not subject to service tax :

Commissioner of Central Excise (Appeals) Vs KVR

•  Construction – 2012 (26) STR 195 (Kar.) Gujarat Adani Institute of Medical Science – Final
•  Order No. A/11309-11310/2023 Ratan Das Gupta & Co. Vs Commissioner of Central
• Excise – 2017 (3) GSTL 247 (Tri.-Del.) KMV Projects ltd. Vs Commissioner of CEX & ST,
•  Hyderabad – 2019 (27) GSTL 388 (Tri.-Hyderabad) Vij Construction Pvt Ltd. Vs CCE – 2008 (11) GSTL 169
• (Tri.-Del.) 3. The Ld. Counsel also argued on the ground of limitation.

It is submitted that the SCN is barred by limitation as none of the ingredients for invoking the extended period is present. The Appellant had filed return regularly discharging service tax under the category of ‘Works Contract’ service. The allegation in the Show Cause Notice that the appellant has not disclosed the turnover pertaining to the construction of building for educational institutions is factually incorrect. The Appellant has disclosed the turnover pertaining to educational institutions under the exempted services. The appellant had relied on the Board circular for doing so. 3.1 Therefore, the question of suppression does not arise when there is disclosure under ST-3 returns that too under the caption exempted receipts.

3.2 It is submitted that the department had issued Show Cause Notice No.111/2011 dated 18.10.2011 for the period April 2006 to

September 2010 covering partly the period in dispute in the instant appeal. In the said Show Cause Notice also the department had invoked extended period alleging nonpayment of service tax with respect to free supply of materials and classification of service under Works Contract Services. Therefore extended period cannot be invoked again covering the same period. The Appellant relies upon the decisions in the case of Nizam Sugar Factory and ECE Industries.

4. Ld. Counsel submitted that the quantification is not correct for the reason that service tax has been demanded under works contract services @ 10% and 12% respectively without considering the fact that the Appellant opted for Composition Scheme under works contract services and the applicable rate would be 2% and 4% respectively. The Appellant had submitted letter dated 28.05.2007 to the Superintendent which clearly indicated that for all projects starting after 01.06.2007 the Appellant will pay service tax under Composition Scheme. Ld. Counsel prayed that the appeal may be allowed.

5.1 The Ld. A.R Shri N. Sathyanarayanan appeared and argued for the Department. The findings in the impugned order were reiterated. The discussions of the adjudicating authority in para 16.1 were adverted to by the Ld. A.R. It is submitted that on perusal of the works sheet with regard to services provided for construction of educational institutions, it can be seen that the appellant has undertaken construction services for both Government as well as for private institutions. Though the construction of educational buildings for the Government is not taxable, however, the construction of private educational institutions is taxable for the reason that the private educational institutions collect substantial amount of tuition fees and other fees. They also collected hefty fees towards hostel facilities provided to the students. So also, these institutions provide transport facilities for the benefit of students for which also huge amounts are collected in advance. The commercial nature of these educational institutions is clear from these aspects of collection of fees in the nature of tuition fees, transport facilities, hostel facilities. Private educational institutions have to generate their own funds for running their institutions and also they earn profits from such collection of fees. The mode of operation of the private educational institutions consists of all elements of commercial business establishment. It is a common practice that private educational institutions are constructed and run by charitable trusts which enjoy certain exemptions under the Income Tax Act. However, such exemptions are not available under the Service Tax law. In the absence of any specific exemption from payment of service tax, the construction of educational institutions owned by charitable trusts is subject to levy of service tax being commercial in nature. Such construction falls under the category of ‘Commercial or Industrial Construction Services’ (CICS) / WCS.

5.2 The Ld. A.R submitted that though the department had issued Circular No.80/10/2004-ST dt. 17.09.2004, the said circular has lost its relevance after the Master Circular No.96/7/2007-ST dt. 23.08.2007 was issued by the Board. The appellant therefore cannot take shelter under the circular dt. 17.09.2004.

5.3 It is submitted by the Ld. A.R that non-payment of service tax would not have come to light but for the investigation conducted by the Department. Though the appellant was discharging service tax under WCS they failed to discharge service tax in respect of construction of educational institutions. This act of the appellant is suppression of facts with intent to evade payment of service tax and therefore the invocation of extended period is legal and proper. Ld. A.R prayed that the appeal may be dismissed. 6. Heard both sides. 7. The issue to be considered is whether the appellant is liable to pay service tax under “Works Contract Service” for the period 01.10.2008 to 30.06.2012 for construction of educational institutions.

8. It is not in dispute that the appellant has discharged service tax in respect of construction services provided for other than educational institutions. The issue in this appeal is only with regard to the demand raised in respect of construction service for educational institutions. The department is of the view that the appellant has to pay service tax for construction service provided to construct educational institutions. It is the case of the department that even though these educational institutions may be constructed and run by charitable organizations, since these educational institutions collect fees of different nature, they are to be treated as constructions of commercial nature. The Department vide Circular No.80/10/2004-ST dt. 17.09.2004 has clarified that the constructions which are for the use being established for institutions of or organizations solely educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit are not taxable being non- commercial in nature. Relevant part of the circular reads as under :

“13. Construction services (commercial and industrial buildings or civil structures) :

13.1 Services provided by a commercial concern in relation to construction, repairs, alteration or restoration of such buildings, civil structures or parts thereof which are used, occupied or engaged for the purposes of commerce and industry are covered under this new levy. In this case the service is essentially provided to a person who gets such constructions etc. done, by a building or civil contractor. Estate builders who construct buildings/civil structures for themselves (for their own use, renting it out or for selling it subsequently) are not taxable service providers. However, if such real estate owners hire contractor/contractors, the payment made to such contractor would be subjected to service tax under this head. The tax is limited only in case the service is provided by a commercial concern. Thus service provided by a labourer engaged directly by the property owner or a contractor who does not have a business establishment would not be subject to service tax.

13.2 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.

13.3 In case of multi-purpose buildings such as residential-cum- commercial construction, tax would be leviable in case such immovable property is treated as a commercial property under the local/municipal laws.

13.4 The definition of service specifically excludes construction of roads, airports, railway, transport terminals, bridge, tunnel, long distance pipelines and dams. In this regard it is clarified that any pipeline other than those running within an industrial and commercial establishment such as a factory, refinery and similar industrial establishments are long distance pipelines. Thus, construction of pipeline running within such an industrial and commercial establishment is within the scope of the levy.” The Board in the above circular has explained that when the building is meant only for educational purpose, the levy of service tax is not attracted. The department does not have a case that the educational institutions constructed by appellant are not used principally and solely for providing education. 9. The Ld. A.R has attempted to counter the above circular by stating that the Board has withdrawn the said circular dt. 17.09.2004 pursuant to the issuance of Master Circular No.96/7/2007-ST dt. 23.08.2007. The Ld. Counsel has submitted that as per the Master Circular dt. 10.05.2007, though several circulars were withdrawn, the circular dt. 17.09.2004 was not withdrawn by the Department and is in force during the disputed period. The relevant part of the Master Circular is reproduced as under :

“3. Taking into account the recommendations made in the report submitted by Shri T.R. Rustagi, views/comments/suggestions received from the trade and industry associations, the departmental officers and all material facts, it has been decided that certain service tax circulars/clarifications/instructions which were previously issued with some objectives, but which have since then lost their relevance or have become anachronistic due to changes in law, procedures, etc., should be withdrawn. Accordingly, the following circulars/clarifications/instructions stand withdrawn with immediate effect, –

The above list in Master Circular No.93/04/2007-ST dated 10.05.2007 shows that the Circular No.80/10/2004-ST dt. 17.09.2004 has not been withdrawn by the Department. 10. When the circular issued by the Board specifically clarified that construction services provided for construction of educational institutions are exempted from levy of service tax we find no reason to hold that these constructions are commercial in nature. 11. It also requires to be stated that the Coimbatore Builders and Contractors Association had addressed to the Chief Commissioner of Central Excise, Coimbatore vide letter dt. 19.06.2013 requesting for

clarifications with regard to various construction services. One of the clarifications raised in the said letter was whether the Circular No.80/10/2004-ST dt. 17.09.2004 is to be treated as withdrawn or not. The said letter by the Coimbatore Builders and Contractors Association as well as the reply by the Coimbatore Commissionerate is as under :

Query :

1. Whether the construction of schools, Colleges, Hospitals and Charitable institutions, was liable to Service Tax as the same were not primarily for Commerce or Industry.

2. If the Circular No.80/10/2004 dated 10.09.2004, which clarified what type of construction are not to be treated as Commercial, is to be treated as withdrawn, is there an alternate Circular mentioning that construction of Schools, Colleges, Hospitals and Charitable Institutions are not exempted.

3. Having informed the trade in 2008 vide Circular 98/1/2008 dated 04/01/2008 that existing pattern of payment of Service Tax for ongoing projects as on 01.06.2007 should only be under abatement method under Notn.01/2006 and not under works contract, can the Department now demand differential Service tax even for the ongoing projects on 01/06/2007 under Works Contract.

4. When Service tax has been discharged by the builders availing Notification 1/2006 and tax paid on the abated portion wherever material is used, is it correct for the Department to state that even in these cases the classification should be under Works Contract and demand differential Service tax for the past Five Years.

5. When the Builders have filed their ST3 returns disclosing all the details and their units subjected to frequent audit by the Department in which all the above aspects have been thoroughly examined and no objection raised, can Service Tax now be demanded on the above two issues for the past five years invoking the provisions of Section 73 (10 of the Finance Act, 1994.

Reply to Query :

1. As per Board’s Circular No.80/10/2004-ST dated 17.09.2004, the 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 purpose of profit are not taxable, being non-commercial in nature.

2. The said Board’s Circular dated 17.09.2004 (not 10.09.2004 as you have mentioned), has not been withdrawn and is in force at present.” (emphasis supplied)

Source page 14 contains the association’s queries and the Commissionerate’s reply; the text is reproduced above in reading order.

12. From the above, it can be seen that the department itself has taken the view that the circular dt. 17.09.2004 is still in force and that the construction provided for educational institutions are exempted from levy of service tax. Needless to say, that the Board circulars are binding on the department. 13. The Hon’ble High Court of Karnataka in the case of Commissioner of C.Ex (Appeals), Bangalore Vs KVR Construction – 2012 (26) S.T.R. 195 (Kar.) had occasion to consider the issue of refund of service tax paid by an assessee on construction services provided for construction of educational institutions. The Hon’ble High Court upheld the order passed by the Tribunal that construction of educational institutions is exempt from levy of service tax. Relevant para reads as under :

“12. It is an undisputed fact that total amount of Rs. 1,24,38,991/- was paid as service tax under different TR-6 challans between February 2005 and February 2007. It is not in dispute the clarifications issued in the circular dated 17-9-2004 includes the building constructions which are for the use of organizations or institutions being established solely for the educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purpose of profit, are not taxable being non-commercial in nature. It is also not in dispute that claim of the respondent before the concerned authority seeking refund of the above said amount was based on the above circular dated 17-9-2004 on the ground that the services are rendered for a non-profit organization. The department is also not denying that services rendered by the respondent by putting up constructions of several buildings stated above to the trust, which is a non-profit organization, hence, a non-profit service is not taxable.”

14. In the case Gujarat Adani Institute of Medical SciencesVs CCE & ST Rajkot vide Final Order No.A/11309-11310/2023 dated 22.06.2023, the Tribunal considered the very same issue as to whether the demand of service tax raised on construction of educational institutions is sustainable or not. Relevant paras read as under :

“5.3 We also find that in view of the various documentary evidence and certificates and registrations of the Appellants and analysis thereof and also considering the observations of the ld. Commissioner (Appeals) on this, there is no doubt that building constructed by the Contractor is medical college building. From the Resolution No. HSP/1007/3247/PARK2/A dated 27.05.2009, issued by the Government of Gujarat, Certificate dated 26.05.2009 issued by the Registrar under the Registration of the Societies Act, 1860, Certificate dated 26.05.2009 issued under the Bombay Public Trust Act, 1950, Registration under Section 12AA of the Income Tax Act, 1961 and Memorandum of Association framed under the Act XXI of the Registration of the 1860 for the registration of Literary Scientific and Charitable Society it is clear that the construction of building for which refund claim has been filed is used for educational purpose and the object of the of the use of the building is not for commercial purpose. The certificates and registrations produced by the Appellant clearly established that Appellant i.e M/s Gujarat Adani Institute of Medical Sciences is a charitable trust registered with public trust under the Bombay Public Trust Act, 1950.With all these facts, it is clear that building constructed by the Appellant is not commercial and industrial construction, therefore does not fall under the category of taxable services, as the same is not used for commercial and industry but it is used for providing education. We also noticed that the Appellant have been granted registration of Trust under Section 12AA of the Income Tax Act which shows that Appellant have been registered for non-commercial purpose. Since the organization of the appellant itself is non-profit purpose, it cannot be said that the building is used for commercial activity. Therefore we do not agree with the finding of the Ld. Commissioner that the activity of running medical college is nothing but a commercial one and same cannot be construed as non-commercial activity/ organization.

5.4 The appellant also argued that, whether, the building is for commercial or otherwise the primary use of such building is required to be seen. We find that this argument is convincing as the similar issue has been considered by this Tribunal in the case of B.G. Shirke Construction Technology Pvt. Ltd. Vs. C.C.E. 2014 (33) S.T.R. 77 (Tribunal – Mumbai), wherein it was held that merely because some amount is charged for using the facility of this stadium the same cannot be commercial construction. The said decision was upheld by the Hon‟ble Bombay High Court reported in 2019 (25) GSTL 8 (Bom). The similar issue has been considered in the case of Commissioner of Service Tax Vs. S.M. Sai Construction – 2016 (42) STR 716 wherein the service recipient was charitable trust registered under the Bombay Public Trust Act, 1950.The Tribunal Held that the building constructed was not commercial construction and therefore, Service Tax paid by the recipient was refundable. In an another identical case of Institute of Banking Personal Selection Vs. Commissioner of Service Tax – 2007 (8) STR 579,it was held that an organization does not declare dividend or distribute surplus/profits to its shareholders, trustees and /or members but ploughs back the surplus for the purpose of an object of the organization would be considered as charitable organization. Accordingly, Service Tax would not be charged. It is further held that merely charging of fees will not make position that the appellant institute is not a non-commercial concern.

5.5. In view of the above judgment it is settled that merely by charging fees or higher fees an institution which otherwise, belongs to a Charitable Trust cannot lose its identity as non-commercial entity.

5.6 We note that C.B.E. & C. had issued Circular No. 80/10/2004-S.T., dated 17-9-2004 and in Para 13.2 clarified that the leviability of Service Tax was primarily dependent upon the use of the building or civil structure. Further, it clarified that it was to be ascertained where building or civil structure was used or to be used for commercial or industrial purpose and further required to gather the information as to whether the buildings or civil structures were being used or to be used for the purpose of making profit or not and clarified that if the building or civil structure was used or to be used not for the purposes of profit then the same are not taxable. When the property in question is not used by Appellant for commercial purpose then it cannot be liable for payment of service tax as is apparent from Circular dated 17-09-2004. It is apparent that C.B.E. & C. circular considered the use of the said property as non-commercial in nature. In these circumstances service tax on construction of said building / property cannot be levied.” 15. In the case of KMV Projects Ltd. Vs CCE & ST Hyderabad – 2019 (27) G.S.T.L. 388 (Tri.-Hyd.), the issue considered by the Tribunal was whether construction of guest house for temples at Srisailam, Kanipakam and also educational institutions would be subject to levy of service tax. Relevant paras of said Tribunal’s decision that the demand of service tax cannot sustain are as under :

“10. The ratio laid down after thorough analysis by the Larger Bench of the definition of the works contract service (WCS) hereinabove would mean that any construction which is for non-commercial or non- industrial purposes, service tax liability under WCS will not arise. In our view, the construction of guest houses and temple complex (multi- storied complex) for the purpose of public use in a religious institution, in the absence of any further evidence to show that these guest houses are allotted to non-pilgrims as a hotel accommodation services, for those visiting the temple, we have to hold that the said services would fall under exclusion clause of works contract services and tax liability does not arise. For the period post 1-7-2012, Mega-exemption Notification No. 25/2012-S.T., dated 20-6-2012 at Sl. No. 13(c) exempts the tax liability on a building owned by an entity registered under Section 12AA of the Income-tax Act, 1961 and meant predominantly for religious use by general public. This exemption clearly covers the case of the appellant post 1-7-2012 as it is undisputed that appellant is registered with the income tax authorities under Section 12AA as a charitable institutions for the period pre and post 1-7-2012. The exemption granted by Notification No. 25/2012-S.T. (13)(c) would apply in full force. Accordingly, the demand of the service tax on the services rendered of works contract services to the religious institution does not survive and are liable to be set aside as we do so.

10. As regards demands raised on the buildings constructed for C- DAC, NFC and APHMHIDC, we find from the hand-outs given today by the Learned Counsel as well as produced before the adjudicating authority, the APHMHIDC has been stated to be engaged in creating infrastructure facilities of accommodation for medical institutions and quarters, and maintenance of hospital buildings, procurement and distribution of drugs, surgical and consumables and equipment and for storage of these items and that the said APHMHIDC is functioning as no profit and no loss basis. The said hand-out also specifically states that it is an enterprise of Govt. of Andhra Pradesh. On perusal of the profile of NFC, it states that it has been established in the year 1971 as a major industrial unit of Department of Atomic Energy, Govt. of India and the complex is responsible for supply of fuel and reactor core components for all the nuclear power reactors operating in India. The said NFC has been clearly indicated as a Unit of Department of Atomic energy, Govt. of India. As regards the C-DAC, it is indicated in the profile of C-DAC that it is a premium R & D organisation of the Ministry of Electronics and Information Technology (MEIT) for carrying out R&D in IT, electronics, and associated areas. It can be seen from the said profiles of 2-3 units that they are all units of Govt. or local authority of Govt. authorities and cannot be considered as primarily engaged for the purpose of commerce or industry. Learned AR relied upon some balance-sheet of C-DAC to state that they were profit making units to press his argument that they are commercial and industrial purposes. We find that such allegations were not there in the show cause notice and not supported also. We find that the Tribunal in the case of Ratan Das Gupta & Co v. CCE, Jaipur [2017 (3) G.S.T.L. 247 (Tri. – Del.)] and Commissioner of Service Tax v. S.M. Sai Construction [2016 (42) S.T.R. 716 (Tri. – Mum.)] following the Larger Bench decision in the case of Lanco Infratech has categorically recorded that the buildings constructed for non-commercial and non-industrial purposes are not taxable under works contract services. The said ratio squarely applies in favour of appellant for the demand of service tax in the case of buildings constructed for C-DAC, NFC and APHMHIDC, and it has to be held that these buildings constructed by the appellant and the services rendered under works contract services are not taxable pre or post 1-7-2012.

11. As regards the service tax liability on the buildings constructed for ICFAI, we find that the issue is no more res integra as the Tribunal in the case of Vij Construction Pvt. Ltd. v. CCE, New Delhi [2018 (11) G.S.T.L. 169 (Tri. – Del.)] was considering the very same issue of taxability of the services for construction of buildings for ICFAI and in paragraph No. 6 has held that in regard to campus for ICFAI University Dehradun, the buildings are for use of a recognised university for education and the same cannot be considered as commercial buildings. ICFAI University is having pan India presence, operating in various campuses, it has to be considered as an educational institution, as per the ratio of the decision of the Tribunal in the case of Vij Construction Pvt. Ltd. (supra). Accordingly, the service tax liability on the construction of buildings for ICFAI Bangalore, Jaipur and Hyderabad for the period pre and post 1-7-2012 is unsustainable and liable to be set aside and we do so.

12. Learned AR has placed reliance on the judgment of the Hon’ble High Court of A.P. and Hyderabad in the case of Tirumala Tirupathi Devasthanams v. Superintendent of Customs, Central Excise & Service Tax, Tirupathi [2013 (30) S.T.R. 27 (A.P.)] to state that the guest houses which are constructed for religious institutions and charitable institutions are liable to tax. We find that the said judgment was delivered by the Hon’ble High Court on the facts of that case inasmuch there the Hon’ble High Court was considering in a writ challenge to a letter issued by the departmental authorities to TTDC for registering themselves as providers of accommodation services. It is to be seen that the Govt. of India by issuing Notification No. 25/2012-S.T. (Sl. No. 13(c) has very clearly recorded that the services rendered to ”building owned by an entity registered under Section 12AA of the Income-tax Act and predominantly for religious use of general public are exempted.” The Revenue’s reliance on the decision of the TTDC case may not carry their case any further as the issue was different in that case.

15. Since we have disposed of the appeal on merits itself we are not recording any findings/observations on the various other submissions made by both sides; as also on limitation.” 16. The Tribunal in the case of Vijayadeepa Constructions Private Ltd. Vs CGST & Central Excise, Coimbatore vide Final Order No.40536/2024 dt. 08.05.2024 had also considered the very same issue and after referring to the Circular issued by the Board set aside the demand. Relevant paras read as under : The second issue is with regard to demand under ‘Works

“12. Contracts Service’ provided for construction of Engineering College to M/s.KTVR Siddhammal Charitable Trust. The department does not dispute that the building has been used solely for the purpose of Engineering College. So also, the said college is recognized by the AICTE. The appellant has relied upon CBEC Circular No.80/10/2004- ST dt. 17.09.2010 wherein the Board has clarified in para 13.2 as under :

“13.2 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 charitable, educational, health, or religious, sanitation philanthropic purposes and not for the purposes of profit are not Generally, being in nature. non-commercial taxable, 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.”

16. It is explained by the Board in the aforesaid circular that, when the building is solely used for educational purposes, the levy of service tax is not attracted. We, therefore, find that the building having been used for educational purpose and being non-commercial purpose, the said construction activity cannot be subject to levy of service tax during the disputed period.”

17. In view of the above discussions, we find that the demand of service tax under WCS for the disputed period for construction of educational institutions cannot sustain. The issue on merits is answered in favour of the appellant and against the Revenue.

18. The Ld. Counsel has argued on the ground of limitation. From the records, it is seen that the entire figures and details for raising the demand is taken from the accounts maintained by the appellant. Further the appellant has discharged appropriate service tax in regard to all other construction services. The appellant had not discharged service tax for constructions of educational institutions on a bonafide belief and also taking note of the clarifications issued by the Board as per circular dt. 17.09.2004. There is no positive act of suppression established by the department against the appellant. The issue is also interpretational in nature as there have been several litigations. The Board has also come forward to clarify the nature of construction services when provided to educational institutions. In such circumstances, there are no grounds for invoking the extended period and we hold the demand is time-barred. The issue of limitation is answered in favour of the appellant and against the Revenue.

19. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, if any.

(Operative part of the order pronounced in the open court on 13.06.2024)