Service Tax Not Payable on Construction of Educational Institutions Before July 2012: CESTAT

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has dismissed an appeal filed by the department and reaffirmed that service tax could not be levied on works contract services provided for the construction of educational institutions during the pre-negative list regime, up to July 1, 2012. The Bench of Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) examined the earlier order passed in the builder's own case and noted that the Tribunal had already relied upon CBEC Circular No. 80/10/2004-ST, which clarified that construction services provided to institutions established solely for educational, charitable, religious, health or philanthropic purposes and not for profit were non-commercial in nature and therefore not taxable. The builder was engaged in providing works contract services and had discharged service tax on taxable projects while claiming exemption for certain categories such as road works, pipeline projects and educational institutions. During an investigation covering the period from October 1, 2008 to June 30, 2012, the department alleged that the company had failed to pay service tax on construction services provided to educational institutions and had not included the corresponding receipts in its ST-3 returns. Consequently, a show cause notice was issued proposing recovery of over ₹21.25 crore in service tax, education cess and secondary and higher education cess, along with interest and penalties. The adjudicating authority eventually confirmed a service tax demand of approximately ₹19.76 crore relating to construction services rendered to private educational institutions but dropped a demand of ₹1.48 crore pertaining to construction carried out for institutions treated as government educational institutions. The Revenue challenged this limited relief before the Tribunal. During the hearing, the respondent pointed out that it had earlier challenged the very same adjudication order before CESTAT. In June 2024, the Tribunal had already set aside the service tax demand relating to construction of private educational institutions, holding that such demands were unsustainable and that the extended limitation period could not be invoked in the absence of suppression of facts. The builder argued that once the Tribunal had already ruled that construction services provided to educational institutions were not liable to service tax for the relevant period, the Revenue's attempt to classify Periyar Maniammai University and Periyar Teacher Training Institute as private institutions became irrelevant. The department contended that Periyar Maniammai University was merely a "Deemed to be University" under Section 3 of the University Grants Commission Act and was not established by either the Central Government or a State Government. Similarly, Periyar Teacher Training Institute was a private educational institution. According to the Revenue, these institutions should have been treated like other private educational institutions and the construction services provided to them should have attracted service tax. The Tribunal observed that there was no allegation that the buildings constructed for the institutions were being used for commercial purposes rather than education. On the contrary, the institutions were admittedly engaged in educational activities. The Bench further noted that the earlier Tribunal decision had already concluded that service tax demands on works contract services relating to construction of educational institutions could not survive. The Tribunal had also previously held that the demand was time-barred because the department failed to establish any positive act of suppression by the assessee. CESTAT held that since the Revenue's present appeal was based solely on the contention that Periyar Maniammai University and Periyar Teacher Training Institute should be treated as private educational institutions, and since the Tribunal had already ruled that even construction for private educational institutions was not taxable during the relevant period, the department's challenge could not succeed. The Bench also relied on its earlier decision in Sabari Builders v. Commissioner of GST & Central Excise, Coimbatore, which similarly held that service tax demands on works contract services rendered to educational institutions before July 1, 2012 were unsustainable. Accordingly, the Tribunal found the Revenue's appeal devoid of merit and dismissed it. Case Details Case Title: Commissioner of GST & Central Excise Versus M/s. R.R. Thulasi Builders (I) Pvt. Ltd. Citation: JURISHOUR-1581-CES-2026(CHE) Case No.: Service Tax Appeal No.41959 of 2015 Date: 08.06.2026 Counsel For Appellant: N. Satyanarayana, Authorized Representative Counsel For Respondent: Radhika Chandrashekar, Advocate Click Here To Read Order Read More: Ocean Freight Mark-Up Not Taxable as Service Tax: CESTAT

Service Tax Not Payable on Construction of Educational Institutions Before July 2012: CESTAT

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