Service Tax Payable On Construction Services Provided To RIICO And RSAMB: CESTAT
Service Tax Payable On Construction Services Provided To RIICO And RSAMB: CESTAT
The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the service tax payable on construction services provided to Rajasthan State Agriculture Marketing Board (RSAMB), and Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO).
The bench of Dr.Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the functions of RIICO and RASMB are held to be discretionary functions for commercial purposes. Hence irrespective the roads or compound wall have been constructed for these local authorities, the appellant is liable to pay service tax while providing the construction services.
The appellant, M/s. Gokul Nath Construction Co. is holder of Service Tax Registration for providing management maintenance or repair services, construction services other than residential complex, works contract services. For rendering the services, the appellant had entered into an agreement with Rajasthan State Agriculture Marketing Board (RSAMB), Jaipur, Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO), Jaipur Development Authority (JDA).
The Department observed that in respect of Commercial and Industrial Construction Services‟ provided by the appellant during the period 01.04.2014 to 31.03.2015 the appellant appears to have not paid the service tax.
The Department relied upon the definition of ‘Service’ w.e.f. 01.07.2012 under clause 44 of section 65 B of the Finance Act to mean any activity carried out by a person, for consideration.
The activity is leviable to service tax under section 66B. With these observations, the appellant was summoned to produce requisite documents. Based on the ITRs work orders received from JDA, RIICO, RSAMB and also from private companies like M/s. Parul Construction the activities rendered by the appellant were alleged to be taxable “Construction of Commercial/Industrial Service‟.
The Department observed that the activities carried out by the appellant in respect of construction of roads are fully exempted from the definition of CICS under Commercial and Industrial Construction Service (CICS) under section 65 (25 b) of the Finance Act and also in terms of the clarification issued by CBEC in para 13.04 of Circular No.80/10/2004 dated 17.09.2004.
For the same reason the construction of compound wall for JDA was also observed to be outside the levy of service tax. Similarly, the services provided in respect of management maintenance or repairs of roads of non- commercial government buildings were also found to be exempted in view of Notification No.24/2009 dated 27.07.2009 and also in view of Notification No.25/2012 dated 20th June, 2012.
However, the services were that of construction of compound wall, maintenance and repair of roads and construction of bridges for RIICO and RASMB and even to the private parties like M/s. Parul Construction and M/s. Prakash Asphalting and Toll Highways India Ltd. the department formed an opinion that these entities being engaged in commercial activities, hence, the exemption benefit, is not available to these authorities/private entities. Hence, the appellant was held liable to pay service tax on the services provided to these entities.
A SCN was served upon the appellant demanding service tax along with the proportionate interest and the appropriate penalties. The proposal was initially confirmed and the appeal against the same has been rejected. The Order-in-Appeal is a common order to another SCN issued to the appellant for the period of demand from 1st April 2010 to 31st March, 2014 proposing a demand of Rs. 66,52,774/- which was decided.
The tribunal held that there is no exemption available to the appellant while providing construction services to any private entity whose interest is nothing except commercial.
Case Details
Case Title: M/s. Gokulnath Construction Company Versus Commissioner of Central Excise & Central GST, Jaipur
Case No.: SERVICE TAX APPEAL No. 53032 OF 2018
Date: 20/03/2025
Counsel For Appellant: Aejaz Ahmed
Counsel For Respondent: None
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Mariya is the Senior Editor at JurisHour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
