No Service Tax Exemption On Race Tracks Not Meant For Public Use: CESTAT

The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax exemption on race tracks is meant for public use.

The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that the race track constructed by the appellant is definitely a "road'. But to avail the benefit of Notification No. 17/2005, the appellant should have constructed a road meant for public use, i.e., a public road or place. The race track constructed by the appellant is apparently not meant for public access as a matter of right.

The officers of the Directorate General of Central Excise Intelligence (DGCEI) developed intelligence that the appellant/assessee, M/s Paramount Infraventures Pvt., Ltd., had constructed the earthen embankment for the F-1 Race Track (Formula One Grand Prix) for M/s Jaypee Sports International Ltd. but had not discharged their appropriate service tax liability.

The scope of the contract includes site formation and clearance, excavation and earthmoving, soil stabilization and demolition, etc., which are covered under 'Site Preparation Service' defined under Section 65(105)(zzza) of the Finance Act, 1994. The contractor has claimed full exemption from payment of service tax in terms of Notification No. 17/2005-ST dated June 7, 2005, on the ground that the earth work undertaken by them related to roads specially laid for conducting motor races on them and other connecting roads within the Buddha International Circuit.

A show cause notice was served upon the assessee, proposing the recovery of service tax for the period from November 2005 to March 2012, along with interest and proportionate penalties. The extended period of limitation, as envisaged under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994, was also invoked, as the contractor, on account of his various acts and omissions, is opined to have suppressed material facts with intent to evade payment of service tax and have failed to discharge the service tax liabilities.

The assessee contended that the service under another contract pertained to construction work on storm water and sewage. The work, as genuinely understood by the appellant, was in the nature of public welfare and non-commercial industrial, was not covered under the scope of taxable service under Section 65(105)(zzzz), and thus did not attract any service tax liability. In any case, on being pointed out by the department about its liability for levy of service tax, the appellant, without awaiting ascertainment of the amount of service tax and interest payable, tentatively paid an amount of Rs. 90 lakh. Hence, the show cause notice should not have been issued.

The department contended that to claim the benefit of Notification No. 17/2005 dated June 7, 2005, the construction should have been for a public road. The notification is wrongly relied on by the appellant with the sole intent to evade tax.

The activity of construction of roads that is meant for use by the general public is exempt from the whole duty. The appellant constructed a car race track. Whether a race track can be called a road for use by the general public. What is exempted in Notification No. 17/2005 is the service, as named in Entry No. 13, for the construction of roads for the general public, but not the services for constructing road simpliciters.

"Public place" is defined in Section 2(34) of the Motor Vehicles Act as "a road, street, way, or other place, whether a thoroughfare or not, to which the public has a right of access.

The tribunal held that though a race track is a road, the public has no access as a matter of right thereupon. Hence, the race tracks are not meant for public use and hence are not covered under Entry No. 13 of Notification 17/2005. The appellant is held to have wrongly availed of the exemption under notification.

Counsel For Appellant: B.K. Singh

Counsel For Respondent: S.K. Meena

Case Title: M/s. Paramount Infraventures Pvt. Ltd. Versus Commissioner of Service Tax – Delhi II

Case No.: Service Tax Appeal No. 50157 of 2017

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