CESTAT-Mumbai : Where assessee obtained contracts from ‘AMPC’, a charitable ‘organization, for construction activity and also obtained contracts from ‘CWC for construction of warehouses in railway land, services provided by assessee would not fall under category of ‘commercial or industrial construction service

CESTAT, Mumbai Bench

A.B. Projects (P.) Ltd. Vs. Commissioner of Central Excise, Nagpur

Section 65(25B)

Ramesh Nair, Judicial Member And Raju, Technical Member

Final Order Nos. A/88799-88800/2017

Appeal Nos. ST/85735 & 86786/2013

July 31, 2017


Circular No. 157/8/2012-ST, dated 27-4-2012,
Circular No. 80/10/2004-ST, dated 17-9-2004


Raju, Technical Member – These appeals have been filed by M/s. A.B. Project Pvt. Ltd. The issue involved in these appeals are if construction activity done for APMC and for CWC are taxable under ‘Commercial and Industrial Construction Service’.

2. Ld. Counsel for the appellant argued that they are engaged in activity of construction for APMC and for CWC Warehouse located in Railway side.

2.1 Ld. Counsel argued that insofar as APMC is concerned the same statutory body established to assist the farmers in sale and purchase of their produce. He argued that APMC is taxable in nature and therefore no service tax under the head of Commercial or Industrial Construction can be levied on the same. In support of his claim that APMC a charitable organization to relied on the decision of Hon’ble High Court in their own case in the case of Income Tax Appeal No. 4/2006 and the order dated 28-3-2007J He further argued that the contractswith APMC are inclusive of material and therefore works contract therefore no service tax could by levied on the work done for APMC for the period prior to 1- 6-2007.

2.2 Ld. Counsel further argued that the warehousing contract for CWC are located within the Railway premises and therefore are not covered by the definition of ‘Commercial or Industrial Construction Service’ as Railways is specifically excluded from the said service. He further pointed out that the warehouses are located in the Railway premises, which can be deemed to be a Transport Terminals are specifically exclude from the turnover of Commercial and Industrial Construction Service. He relied on the agreement between the Railways and CWC. He further pointed out that the contracts with CWCF is inclusive of material and therefore are works contract. In these circumstances no tax can be levied till 1-6-2007 when the works contract was made a taxable service.

3. Ld. AR argued that CWC is paying free to the Railways for the land allotted to them. He further pointed out that CWC is commercial organization. He particularly pointed out para-6 of the impugned order wherein Commissioner (Appeals) has stated that the definition of charitable organization the Income Tax Act cannot be applied to Central Excise Act.

4. We have gone through the rival submissions. We find that Hon’ble High Court in appellant’s own case has held that APMC is constituted for charitable purposes. In this regard the C.B.E. & Circular No. 157/8/2012-S.T., dated 27-4-2012 and Circular No. 80/10/2004-S.T., dated 17-9-2004 which are reproduced below:

“Circular No. 157/8/2012-S.T., dated 27-4-2012)

4. When examined with reference to its constitution and functions, the services provided by APMC out of the ‘market fee’ collected from the licensees, do not appropriately fall under the category of BSS. The distinction between BSS and BAS is explained in the instructions dated 28-2-2006 issued from F.No. 334/4/2006-TRU. In the light of the above instruction, the service provided by APMC out of the market fee is not in the nature of ‘out- sourced service’. It is not possible to hold that the licensees have outsourced the development and maintenance of agricultural market to the APMC, which could have been otherwise undertaken by them, solely in their business interest. Development and maintenance of agricultural market infra- structure undertaken by APMC in accordance with the statute, is for the benefit of all users, rather than an activity solely in the interest of licensees. Hence, APMC cannot be said to be rendering ‘business support service’ to the licensees. ‘Market fee’ is not in the nature of consideration for such BSS.

5. As statutory bodies, APMCs provide basic facilities in the market area out of the ‘market fee’ collected from the licensees, mainly to facilitate the farmers, purchasers and others. APMCs provide a host of services to the licensees in relation to the procurement of agricultural produce, which are ‘inputs’ in terms of the definition given in section 65(19) of the Finance Act, 1994 itself. To that extent the meaning of ‘input’ is much wider in scope than the meaning assigned in rule 2(k) of Cenvat Credit Rules, 2004. Therefore, it is clarified that the services provided by the APMC are classifiable as BAS and hence covered by the exemption under Notification 14/2004-S.T.”

Circular No. 80/10/2004-S.T., dated 17-9-2004)

“Construction services (commercial and industrial buildings or civil structures)

13.2. The leviability of service tax would depend primarily upon whether the building or civil structure is used, or to be used for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax.”

In view of above, the activities of APMC in respect of these contracts are not commercial in nature. Thus these contracts are not covered under the purview on commercial and industrial construction service.

It is seen that the definition of term Railways is very wide it covers the rail lines, sidings and yards but also warehouses as is apparent inition under Railways Act, 1989. The part of the said definition is below :

“(31) “railway” means a railway, or any portion of a railway, for the public carriage of passengers or goods, and icnldues —

(a) all lands within the fences or other boundary marks indicating the limits of the land appurtenant to a railway;

(b) to (c)** ** **

(d) all rolling stock, stations, offices, warehouses, wharves, workshops, manufactories, fixed plant and machinery, road and streets, running rooms, rest housed, institutes, hospitals, water works and water supply installations staff dwellings and any other works constructed for the purpose of, or in connection with, railway;”

As can be seen that warehouses are specifically covered under the term Railways and they need not necessarily belong to railways. In these circumstances, it is immaterial if the said warehouses are used commercial or otherwise, as the same are not covered within the purview of commercial and industrial construction service theappeal on this count is also allowed. In view of above, both the appeals are allowed.

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