In Service Tax Appeal No.127 of 2011 - CESTAT - CESTAT (Kolkata) holds construction undertaken by NBCC and Raitani Engineering Works, for meeting the social needs of Manipur, not taxable under 'Commercial or Industrial Construction'; sets aside demand for Service Tax
Members P.K. Choudhary (Judicial) & K. Anpazhakan (Technical) [06-06-2023]

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Read Order: National Building Construction Corporation Limited and ors v. Commissioner of Central Excise & Service Tax, Shillong

 

Chahat Varma

 

New Delhi, June 7, 2023:  In a relief to National Building Construction Corporation Limited (NBCC) and M/s. Raitani Engineering Works Pvt. Ltd. (appellants), the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal has set aside the demand for service tax under the category of ‘Commercial or Industrial Construction’ for the construction of various buildings and structures for meeting the social needs of the state of Manipur and for upliftment of needy people in the state. The Tribunal ruled that the construction falls under the category of 'works contract service' rather than 'commercial or industrial construction service'.

 

The facts of the case in brief were that M/s. Raitani Engineering Works Pvt. Ltd. was awarded a contract by NBCC on behalf of the Ministry of Urban Employment and Poverty Alleviation, for the construction of Jiribam Municipal Corporation building, Staff quarter building, Guest house building, overhead tank, etc. The funds for the project were released to NBCC by the government from the non-lapsable central pool of resources for the development of North-Eastern states. The Commissioner observed that the construction projects undertaken for the local government bodies were considered commercial activities. The Commissioner rejected the submissions put forth by the appellants that subject services, if at all taxable, would be liable to be taxed under the category of ‘works contract service’ which had not been proposed in the show cause notice.

 

The bench noted that the contract in question included the supply of goods, and therefore it could not be classified under the category of Commercial or Industrial Construction. The bench also observed that the Commissioner had considered the fact that the construction service included the supply of goods and had applied the benefits of abatement to exclude the value of goods in order to determine the assessable value for the service tax demand.

 

The bench also referred to the case of URC Construction (P) Ltd v. Commissioner of Central Excise, Salem [LQ/CESTAT/2016/91], wherein it has been held that when no proposal is made in the SCN to classify the service under the category of ‘works contract service’, the demand of service tax cannot be sustained for the period subsequent to 01.06.2007.

 

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