The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that construction services provided for warehouses of the Haryana State Warehousing Corporation (HSWC) are liable to service tax under “Commercial or Industrial Construction Service” for the pre-GST period, while granting relief from penalty to the assessee.

The bench of S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) has observed that the possibility of commercial use of the warehouses cannot be ruled out. It emphasized that the nature of the service must be assessed based on the end use of the structure and the activities of the recipient entity. Since HSWC undertakes activities that are not purely sovereign or non-commercial, the construction services rendered to it cannot automatically qualify for exemption.

The case involved M/s Chuli Bagrain Adarsh Co-operative L&C Society, which had undertaken works contract services for various government authorities, including HSWC, during the period 2010–11 to 2013–14. The Revenue alleged non-payment of service tax amounting to ₹6.47 lakh, invoking the extended period of limitation. The demand was partially upheld by the Commissioner (Appeals), who also extended cum-duty benefit and reduced the tax liability. 

The core issue before the Tribunal was whether construction of warehouses for HSWC could be treated as non-commercial activity, thereby qualifying for exemption, or whether such activity fell within the ambit of taxable commercial construction services.

The appellant argued that HSWC functions as a government entity primarily engaged in storage of agricultural produce and not in commercial or industrial activities. It was contended that the warehouses were used solely for storage of food grains and fertilizers and therefore qualified for exemption under Notification No. 25/2012-ST, particularly for services rendered to government or governmental authorities for non-commercial purposes. 

However, the Tribunal rejected this contention and relied on its earlier ruling in similar cases. It observed that HSWC, though a public sector undertaking, is engaged in a range of activities including storage, warehousing, and related services, for which it charges rent and other fees. The Tribunal noted that HSWC is also permitted to lease out unused storage space and generate revenue, thereby exhibiting commercial characteristics.

The Tribunal further clarified that the services provided by the appellant were independent works contract services and not intrinsically linked to any sovereign function of the government. Therefore, the benefit of exemption was not available, and the demand of service tax up to 30 June 2012 was upheld.

On the issue of limitation and penalties, the Tribunal took a lenient view. It noted that the appellant had already deposited the duty along with 25% of the penalty and had acted under a bona fide belief regarding taxability. Invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalty, thereby granting partial relief to the assessee. 

The appeal was partly allowed—upholding the service tax demand while waiving the penalty.

Case Details

Case Title: M/s Chuli Bagrain Adarsh Co. Op. LC Society Versus Commissioner of Central Excise, Goods and Service Tax, Rohtak

Citation: JURISHOUR-782-CES-2026(CHAN) 

Case No.: Service Tax Appeal No. 60134 of 2018

Date:  13.04.2026

Counsel For  Appellant: Sansar Chand, Advocate

Counsel For Respondent: Yashpal Singh, Authorized Representative

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