2025 (3) TMI 1342 - AT - Central Excise

Exemption from service tax - providing services of construction of stadium at Sector-21 Noida against contract awarded by New Okhla Industrial Development Authority - demand made on the basis of receipts shown in 26AS statement - demand of interest and penalty. Demand of service tax made on the basis of receipts shown in 26AS statement - period 2015-16 2016-17 - HELD THAT - Construction of original work which is for the purpose of non-commercial activities for government or local or governmental authority was exempt from service tax. Governmental authority was defined as an authority established by an Act of the Parliament or a State legislature and was hundred percent in the control of Government. It was also provided that such body must perform works as mentioned in Article 243W of the Constitution. Noida Authority is set up by the U.P. Government in exercise of powers conferred under Section 3 of the Uttar Pradesh Industrial Area Development Act 1976 passed by U. P. Legislative Assembly. As per Section 3(3) of the UPIAD Act the management including chief executive will be appointed by the U.P. Government. It shows that hundred percent control of the body established under the UPIAD Act will be by the U.P. Government. As per Section 6 (e) of UPIAD Act the function of the Authority set up under the said Act includes to provide amenities and municipal services. The above facts confirm that Noida Authority falls within ambit of governmental Authority as defined under clause 2(s) of Notification No.25/12-ST dated 20.06.2012. Whether a sports stadium is for non-commercial activities or not? - HELD THAT - A stadium is a place or venue for (mostly) outdoor sports concerts or other events and consists of a field or stage completely surrounded by a tiered structure designed to allow spectators to stand or sit and view the event. It is also used for morning walks. Basically construction of sports stadium is for boosting sports. Its purpose is not for any commercial activities. The above finding also finds support from the decision of the Tribunal in the case of B.G. Shirke Construction Technology Pvt. Ltd. 2013 (2) TMI 584 - CESTAT MUMBAI held The Sports Stadia is used for public purpose. Merely because some amount is charged for using the facility it cannot become a commercial or industrial construction. Even in a Children Park entry fee is levied for maintenance of the Park. Merely because some amount is charged for using the Park it cannot be said that it is a commercial or industrial construction. Adopting the same logic the Sports Stadia in the present case is also a non-commercial construction for use by the public. Therefore we are prima facie of the view that the Sports Stadium constructed for conducting Commonwealth Games is a non-commercial construction. - thus sport stadium is predominantly used for purposes other than commercial. It is explicit from the findings that all terms and conditions specified under Notification No.25/12-ST dated 20.06.2012 as amended by N/N. 09/16-ST dated 01.03.2016 were fulfilled in the case at hand. Hence services rendered by the Appellant were exempted from service Tax. Demand of interest and penalty - HELD THAT - When the demand of tax itself is not sustainable the demand of interest and imposition of penalty does not survive. Conclusion - The services provided to a governmental authority for non-commercial purposes are exempt from service tax even if some fees are charged for maintenance or use. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

• Whether the services provided by the Appellant to the Noida Authority were exempt from service tax under the relevant notifications.
• Whether the construction of the sports stadium qualifies as a non-commercial activity under the service tax exemption provisions.
• Whether the imposition of interest and penalties on the Appellant was justified given the circumstances.

ISSUE-WISE DETAILED ANALYSIS

1. Exemption from Service Tax under Relevant Notifications

• Relevant Legal Framework and Precedents: The key legal framework involves Notification No.25/12-ST dated 20.06.2012, as amended by Notification No.09/16-ST dated 01.03.2016. The exemption applies to services provided to the government or governmental authority for non-commercial purposes.
• Court's Interpretation and Reasoning: The Tribunal examined whether the services provided by the Appellant to the Noida Authority were exempt under the notifications. The Tribunal noted that the Noida Authority was a governmental authority as defined under the notification, with 100% control by the U.P. Government, and was established to carry out municipal functions.
• Key Evidence and Findings: The Appellant's contract with the Noida Authority was executed on 23.12.2011, with appropriate stamp duty paid. The Tribunal found that the services rendered were in line with the exemption criteria, as they were for non-commercial purposes.
• Application of Law to Facts: The Tribunal applied the provisions of the notifications to the facts, concluding that the services provided by the Appellant were exempt from service tax.
• Treatment of Competing Arguments: The Department argued that the demand was sustainable, but the Tribunal found that the exemption applied, rendering the demand unsustainable.
• Conclusions: The Tribunal concluded that the services provided by the Appellant were exempt from service tax under the relevant notifications.

2. Classification of the Stadium Construction as Non-Commercial

• Relevant Legal Framework and Precedents: The Tribunal referenced the definition of non-commercial activities under the notification and previous case law, specifically B.G. Shirke Construction Technology Pvt. Ltd.
• Court's Interpretation and Reasoning: The Tribunal determined that the construction of the sports stadium was for boosting sports and not for commercial activities, aligning with the precedent that such facilities are for public use.
• Key Evidence and Findings: The Tribunal noted that the stadium was used for sports and public purposes, not for generating commercial revenue.
• Application of Law to Facts: The Tribunal applied the legal definitions and previous rulings to conclude that the stadium construction was non-commercial.
• Treatment of Competing Arguments: The Tribunal dismissed arguments that the stadium's use could be commercial due to any fees charged, emphasizing its primary public purpose.
• Conclusions: The Tribunal held that the stadium construction was non-commercial, supporting the exemption from service tax.

3. Imposition of Interest and Penalties

• Relevant Legal Framework and Precedents: Interest and penalties are typically imposed when tax demands are upheld.
• Court's Interpretation and Reasoning: Since the Tribunal found the tax demand unsustainable, the associated interest and penalties were also deemed unsustainable.
• Key Evidence and Findings: The Tribunal's finding that the services were exempt negated the basis for interest and penalties.
• Application of Law to Facts: The Tribunal applied the principle that without a valid tax demand, there can be no valid interest or penalty.
• Treatment of Competing Arguments: The Tribunal did not find any compelling arguments from the Department to justify the penalties once the tax demand was dismissed.
• Conclusions: The Tribunal concluded that the imposition of interest and penalties was not justified.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal established that services provided to a governmental authority for non-commercial purposes are exempt from service tax, even if some fees are charged for maintenance or use.
• Final Determinations on Each Issue: The Tribunal set aside the demand for service tax, interest, and penalties, allowing the appeal with consequential relief.
• Verbatim Quotes of Crucial Legal Reasoning: "It is explicit from the above findings that all terms and conditions specified under Notification No.25/12-ST dated 20.06.2012 as amended by Notification No.09/16-ST dated 01.03.2016 were fulfilled in the case at hand. Hence, it is our considered view that services rendered by the Appellant were exempted from service Tax."