Construction of Tourism Huts Is A Commercial Activity, Service Tax Payable: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Delhi, has upheld the service tax demand on the construction of tourism huts and similar structures for renting to tourists as it is a commercial activity and does not fall within the purview of service tax exemptions meant for non-commercial government works. The bench of Binu Tamta (Judicial Member) and Hemambika R.Priya (Technical Member) has observed that the nature of construction work carried out by the appellant for GMVN/KMVN/UKpayjal Nigam related to the construction of single bedroom/double bed room/eco log huts, which were used for renting to tourists. The renting of huts being of commercial nature, the appellant falls outside the scope of exemption notification. It is settled principle of law that the exemption notification has to be construed strictly and it is for the assessee to prove that it squarely falls within the ambit of exemption notification. The dispute arose after the Department received information from Garhwal Mandal Vikas Nigam Ltd. (GMVNL) that payments exceeding ₹13.74 crore had been made to the appellant for works contract services between 2013–14 and 2016–17. Upon scrutiny, it was found that the appellant had obtained service tax registration only in May 2015 and had paid only part of the tax despite executing multiple works for GMVNL, Kumaon Mandal Vikas Nigam Ltd. (KMVNL), Uttaranchal Pey Jal Nigam, and other state agencies. Investigations further showed that service tax was also not discharged on freight expenses under the Goods Transport Agency (GTA) category. A show cause notice issued in September 2018 demanded ₹65.62 lakh in service tax, along with interest, penalties, and late fees for non-filing and late filing of ST-3 returns. The adjudicating authority confirmed the demand in July 2019, and the Commissioner (Appeals) upheld the order in June 2020, leading the appellant to approach the Tribunal. Before CESTAT, NU Wood Industries argued that the projects were funded by the Uttarakhand Tourism Development Board (UTDB) and executed for government agencies. It contended that works undertaken for the government were exempt under Clause 12 of Notification No. 25/2012-ST, and that contracts entered before March 1, 2015, were also exempt under Clause 12A introduced in 2016. The appellant further argued that as a sub-contractor, the primary liability for service tax rested with the main contractors such as GMVNL or KMVNL. The Tribunal rejected all these arguments. It observed that the exemption under Clause 12 applies only to works “meant predominantly for use other than for commerce, industry or business.” The construction of eco-huts, single-bedroom huts, and double-bedroom huts used for renting to tourists was clearly commercial in nature, taking the case outside the scope of the exemption. The Tribunal emphasized that exemption notifications must be interpreted strictly and the burden lies on the assessee to prove eligibility. On the sub-contractor argument, the Tribunal relied on the Larger Bench ruling in CST v. Melange Developers Pvt. Ltd., which holds that sub-contractors are independently liable to discharge service tax, even if the main contractor has already paid tax on the same project. CESTAT noted that this legal position squarely applied to the present case and reaffirmed that the appellant could not avoid tax liability on this ground. Finding no infirmity in the findings of the lower authorities, the Tribunal upheld the demand and affirmed the impugned order. With this, NU Wood Industries’ appeal was dismissed, and the service tax liability along with interest and penalties stands confirmed. Case Details Case Title: M/s. NU Wood Industries Versus Commissioner of CGST Case No.: Service Tax Appeal No. 51013 Of 2020 Date: 27.11.2025 Counsel For Appellant: None Counsel For Respondent: S.K. Meena Click Here To Read Order Read More: Extended Limitation Can’t Be Invoked Without Proof of Tax Evasion Intent: CESTAT

Construction of Tourism Huts Is A Commercial Activity, Service Tax Payable: CESTAT

Membership Required

Latest articles

Jurishour | Tax Law Daily Bulletin : April 20, 2026

Recovery Notice Can’t Be Issued to ISD, CESTAT Quashes CENVAT Credit Demand and Penalty

Charging Case Without Power Supply for Hearing Aids Cannot Be Classified as ‘Static Converter’: CESTAT

DGGI Jaipur | Rajasthan High Court Denies Bail In GST Fake Invoice Syndicate Case

More like this

Jurishour | Tax Law Daily Bulletin : April 20, 2026

Recovery Notice Can’t Be Issued to ISD, CESTAT Quashes CENVAT Credit Demand and Penalty

Charging Case Without Power Supply for Hearing Aids Cannot Be Classified as ‘Static Converter’: CESTAT

About us

Company

Categories