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M/s. G. Ramamoorthi Constructions (I) Pvt. Ltd. Versus The Commissioner (Adjudication) , Coimbatore

2015 (11) TMI 845 - MADRAS HIGH COURT

Demand of service tax - Works contract service - Construction Services provided to to various educational institutions - exemption as per Circular No.80/10/2004 ST, dated 17.9.2004 - Held that:- Admittedly, as on the date of passing the impugned proceedings, there was no evidence available before the first respondent to hold that whether the educational institutions to whom the petitioner provided construction services, are profit oriented or whether they are established solely for educational p .....

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ected the petitioner by providing an opportunity to produce the relevant documentary evidence regarding the educational institutions to whom, the petitioner provided construction service and thereafter, he could have decided the issue. - Petitioner were under bona fide impression that the service tax on the constructions provided to the educational institutions is exempted as per Circular No.80, dated 17.9.2004 and that they only constructed classrooms, hostels, etc., which are primarily use .....

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rofit - impugned proceedings, dated 28.11.2014 of the first respondent are hereby set aside and the matter is remitted back to the first respondent to deal with the issue in terms of the exemption Circular No.80, dated 17.9.2004 - Decided in favour of assessee. - Writ Petition No.7483 of 2015 And M.P.No.1 of 2015 - Dated:- 28-7-2015 - Mr. S. Vaidyanathan, J For the Petitioner : Mr.S.Raveekumar For the Respondents : Mr. A.P.Srinivas ORDER Questioning the impugned proceedings, dated 28.11.2014 of .....

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commercial/industrial buildings and civil structures to their various clients. It appears that during the course of audit of the accounts of the petitioner, it was noticed that the petitioner provided construction services to various educational institutions, viz., Sri Krishna College, SRM Institutions, etc., and also to hospitals, viz., Ganga Medical Centre of Ganga Hospital, but they have not discharged service tax liability on the said services. According to the respondents, the above servic .....

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tating that for the construction of educational institutions, service tax is exempted as per Circular No.80/10/2004 ST, dated 17.9.2004 upto 30.6.2012 and they have been paying service tax on construction services provided to educational institutions from 1.7.2012. It is also stated that the total construction of education institutions was only ₹ 19,54,93,374/- and not ₹ 22,16,55,493/- as mentioned in show cause notice. Since the petitioner has been paying service tax regularly witho .....

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r Section 65(105)(zzzza) of the Finance Act, 1994 as a civil construction primarily for commerce or industry and hence, the petitioner is liable to pay the service tax. The first respondent also concluded that the petitioner has suppressed relevant facts relating to assessment of tax and accordingly, imposed interest and penalty. Accordingly, the first respondent has passed the impugned order. 4. Challenging the impugned proceedings, the learned counsel appearing for the petitioner would contend .....

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made for the purpose of commerce or industry and the petitioner has admittedly provided construction for the educational institutions, which would not fall within the above said definition in order to attract levy of service tax. However, the first respondent has erroneously without considering the objections made by the petitioner properly, has passed the impugned order, which are liable to be quashed. 5. On the other hand, the learned counsel appearing for the respondents would contend that th .....

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tly construed that the educational institutions to whom the petitioner provided the construction service, are commercial and hence, the above said Circular does not apply to the case of the petitioner and accordingly, imposed the service tax. Hence, the learned counsel sought for dismissal of the writ petition. 6. Heard the learned counsel appearing for the petitioner and the respondents and perused the entire records. 7. A perusal of the impugned order, it appears that the first respondent has .....

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t respondent, the exemption of service tax can be claimed only in respect of construction services provided to the institutions which should solely impart education without any profit and if the institutions are earning profits, they cannot be construed as non-commercial, but only as industries. In such case, the exemption Circular cannot be made applicable. In the present case, after following the decision of the Hon ble Apex Court in Bangalore Water Supply & Sewerage Board versus R.Rajapp .....

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regard, I would like to emphasize on the fact that the quantum of fees collected by the private institutions alone (as compared to similar Government Institutions) is not a factor alone in determining a institution as commercial or profit oriented. The collection of higher fees could be for the reasons that they may be providing better infrastructural support and they may not be supported by any educational subsidy from the Government, which the Government institutions enjoy. The question to be .....

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herefore, I reject GRCIPL s claim that any educational institution automatically would mean that their activities would be beyond the pale of commerce or industry.. . Coming back to the case on hand, GRCIPIL have failed to provide any evidence that the educational institutions to whom they provided the services of constructions had not been making systematic profits and that their sole aim is to serve the poor section of the public. Hence, I reject the claim that the educational services provide .....

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ious educational institutions, which according to the first respondent, had been making profits and that would be construed as commercial and thereby, the exemption claimed by the petitioner under Circular No.80, dated 17.9.2004 cannot be extended. Accordingly, a notice, dated 21.04.2014 has been issued to the petitioner and thereafter, ultimately, the impugned proceedings were issued. It is to be noted that the first respondent, by relying upon the ratio laid down by the Apex Court in Bangalore .....

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e substantiated only by way of establishing the credentials of such institutions and not by merely stating that they are in the field of education, however, considering the fact that the petitioner failed to provide any such evidence, the first respondent came to the conclusion that the educational institutions to whom the petitioner provided construction services, are making systematic profits and their sole aim is not to serve the poor section of the public and accordingly he rejected the cla .....

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too on mere non-production of such evidence by the petitioner. In fact, till the impugned proceedings were passed by the first respondent, it was not known or expected by the petitioner that the first respondent would come to such a contrary conclusion. If at all the first respondent was of such view, he could have very well directed the petitioner by providing an opportunity to produce the relevant documentary evidence regarding the educational institutions to whom, the petitioner provided cons .....

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tio decided in the above said decision by the Hon ble Apex Court regarding the definition industry for the purpose of settling the industrial disputes, cannot be applied to the case on hand as the present subject matter relates to Finance Act, under which, the Circular dated 17.9.2004 has been issued pertaining to the exemption of Service Tax in respect of construction services. Even assuming that the educational institution is an industry, it does not take away the benefit of exemption provid .....

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ion 65(105)(ii)(b) of the Finance Act which defined , in my opinion, is fallacious and cannot be tenable. 10. In fact, the consistent version of the petitioner is that they were under bona fide impression that the service tax on the constructions provided to the educational institutions is exempted as per Circular No.80, dated 17.9.2004 and that they only constructed classrooms, hostels, etc., which are primarily used for imparting education and not used either for commerce or industry and witho .....

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