No Service Tax Payable On Construction Services Provided To Educational Institutions Prior To 30.06.2012: CESTAT

The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable on the construction services provided to educational institutions for the disputed period, which is prior to 30.06.2012.

The bench of Sulekha Beevi.C.S. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) have observed 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 purposes and being non-commercial purposes, the said construction activity cannot be subject to levy of service tax.

On verification of ST 3 returns filed by the appellant/assessee, it was noted that the appellant has not discharged appropriate service tax for the construction services provided by them.

It was noted that the appellant has paid service tax under Works Contract Services by availing of the option of composition scheme without informing the department. So also, the appellant had not paid service tax on construction services provided to charitable trusts for the construction of educational institutions.

Separate show cost notices for the period October 2010 to September 2011 and for the period October 2011 to June 2012 were issued, proposing to demand the service tax along with interest and for imposing penalties. After due process of law, the original authority confirmed the demand and interest and imposed penalties on both issues. On appeal before the Commissioner (Appeals), the demand was upheld.

The issue raised was in respect of the demand of service tax on the consideration received by the appellant for construction services rendered for charitable trusts for the construction of educational institutions.

The appellant had availed of the exemption as clarified by the Board via Circular No. 80/10/2004-ST dated 17.09.2004. As per Circular No. 80/10/2004-ST dated 17.09.2004, constructions that 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 noncommercial in nature.

The department has taken the view that the circular has been withdrawn by subsequent Circular 2007, and therefore, the appellant is liable to pay service tax even though the constructions are provided for educational institutions.

The tribunal, while allowing the appeal, quashed the demand for a service tax on the construction services provided to educational institutions.

Counsel For Petitioner: J. Shankararaman

Counsel For Respondent: M. Selvakumar

Case Title: Sri Mookambigai Constructions India Pvt. Ltd. Versus Commissioner of GST & C. Ex, Coimbatore

Case No.: Service Tax Appeal No. 41702 of 2014

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