2021 (3) TMI 1026 - HC - Service Tax

Classification of services - commercial/industrial service or not - services provided to educational trust - contract works - HELD THAT - The petitioner had carried out the contract works for the second respondent. There is no doubt that the second respondent is an educational trust that is enjoying exemption under the Income Tax Act. The petitioner s stand from the beginning is that the service provided to such an educational trust cannot be called as commercial or industrial service. The stand of the petitioner s counsel is that the first respondent being an authority subordinate to the Tribunal is squarely bound by such a decision and that it is not open to him to go beyond it. The petitioner s counsel would state that the entire issue will have to be re-visited by the first respondent by associating the second respondent by invoking the power under Section 14 of the Central Excise Act 1944 - That was a case arising under ESI Act. The authority had initiated the proceedings against the employer. But then the employees were not associated either in individual or representative capacity. The Court felt that the statute is for the benefit of workmen and that therefore they will have to be necessarily made a party. Thus non-impleading of the second respondent in the adjudicating proceedings is really a serious defect. That vitiates the entire proceedings. That apart it is evident from the record that the petitioner had also paid the service tax for the period from 01.07.2012 onwards. Rs. 8, 40, 563/- was paid by the petitioner on 27.03.2013 and 31.03.2013. This was well before passing of the impugned order. The first respondent does not appear to have taken note of the remittance made by the petitioner herein. The matter is remitted to the file of the first respondent to pass orders afresh in accordance with law - petition allowed by way of remand.

Summary

Issues:
1. Whether the petitioner is liable to pay service tax for construction works carried out for the second respondent.
2. Whether the first respondent's order proposing service tax and penalty on the petitioner is valid.
3. Whether the second respondent should have been associated in the adjudicating proceedings.
4. Whether the non-impleading of the second respondent vitiates the entire proceedings.
5. Whether the petitioner's remittance of service tax was considered by the first respondent.

Analysis:

1. The petitioner, engaged in construction business, carried out civil contract works for the second respondent, an educational trust. The petitioner believed that since the work was for educational buildings, no service tax was applicable. However, the first respondent issued notices proposing service tax and penalties, leading to the writ petition challenging these actions.

2. The first respondent contended that the petitioner had an alternative remedy of appeal and argued against the writ petition. The court observed that the petitioner's work for the educational trust should not be considered commercial or industrial service, citing relevant legal principles from a Supreme Court decision.

3. The petitioner argued that the second respondent should have been involved in the proceedings, as their status as an educational trust was crucial to determining the nature of the service provided. The court agreed, referencing statutory provisions and a Supreme Court ruling emphasizing the importance of involving relevant parties in such proceedings.

4. The court found the non-impleading of the second respondent to be a serious defect that tainted the proceedings. Additionally, the petitioner had already paid service tax for a period before the impugned order, which the first respondent failed to acknowledge. These factors led to the quashing of the order and a remittance of the matter to the first respondent for fresh consideration.

5. The court directed the first respondent to summon the second respondent and determine whether the service provided was commercial or industrial, following the Supreme Court's guidelines. The writ petition was allowed, with no costs imposed, and the connected miscellaneous petition was closed.