In Service Tax Appeal No. 222 of 2012 -CESTAT- CESTAT (Ahmedabad) grants refund of Service Tax to Gujarat Adani Institute of Medical Sciences for construction of medical college building; Holds construction of the building, for which refund claim was filed, used for educational purposes and not for commercial purposes
Members Ramesh Nair (Judicial) & C.L. Mahar (Technical) [22-06-2023]

Read Order: Gujarat Adani Institute of Medical Sciences v. C.C.E. & S.T.-Rajkot

Chahat Varma

New Delhi, June 27, 2023: The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled in favour of Gujarat Adani Institute of Medical Sciences (appellant) regarding their eligibility for a refund of service tax paid for the construction of a medical college building at Bhuj. The Tribunal determined that since the building was used for educational purposes and not for commercial activities, the appellant was entitled to the refund.

Briefly stated, the appellant had filed a refund claim under Section 11-B of the Central Excise Act, 1944, seeking a refund of service tax paid to M/s Desai Construction Pvt. Ltd. for the construction of the medical college building at Bhuj. However, during the scrutiny of the refund claim, discrepancies were observed by the revenue department, leading to the issuance of show cause notices. The lower authority rejected the refund claims, and the Commissioner (Appeals) upheld their decision, resulting in the appellant's appeals being dismissed.

The two-member bench of Ramesh Nair (Judicial) and C.L. Mahar (Technical) observed that under Section 11B(2)(e) of the Central Excise Act, a person who had borne the tax was eligible to file a refund claim. In this case, the contractor collected the service tax separately from the appellant and deposited it into the Central Government Account. As the appellant had borne the service tax, the bench held that they had the right to submit a refund claim.

The bench further examined various documents, including a resolution issued by the Government of Gujarat, certificates under the Registration of the Societies Act, the Bombay Public Trust Act, and the Income Tax Act, as well as the Memorandum of Association. Based on these documents, it was concluded that the construction of the building, for which the refund claim was filed, was used for educational purposes and not for commercial purposes. As a result, the building did not qualify as a commercial or industrial construction and, therefore, did not fall under the category of taxable services. Instead, it was being used for providing education.

The bench also took into consideration that the appellant had obtained registration as a trust under Section 12AA of the Income Tax Act, indicating that the organization was established for non-commercial purposes. In light of this registration and the non-profit nature of the appellant, it was concluded that the building used for running the medical college should not be considered a commercial activity.

The bench emphasized that merely on the basis of the quantum of fees, the status of a charitable institution shall not be altered and the institution which was otherwise statutorily, a charitable trust cannot lose its identity as Charitable Trust.

As a result, the bench overturned the orders passed by the Commissioner (Appeals) of Central Excise and Customs.