Tuesday, May 14, 2013

Construction of hostels for educational institutes is deemed to be for non-commercial purpose; ST not leviable

Building constructed as hostel for residence of students studying in an educational institution is a non-commercial/non-industrial building and, therefore, such construction is not liable to service tax under Works Contract Services

The assessee had constructed a Boys and a Girls Hostel for students of educational institutions. It paid service tax thereon under Works Contract Services during April, 2008 to September, 2008 but thereafter it realized that as it was not constructing any building which was being used for commercial purpose therefore it was not liable to service tax, it stopped paying service tax. However, service tax was demanded from assessee.

The Tribunal set aside the service tax demand with the following observations:

1) The building was constructed as hostel for the residence of students studying in medical institute and there was no allegation that the building was used for any other purpose;

2) In above set of facts, the Board Circular No. 80/10/2004-ST, dated 17.9.2004 was applicable and the assessee was not liable to pay service tax. Accordingly, demand was set aside.- Anand Construction Co. v. Commissioner of Central Excise [2013] 33 taxmann.com 59 (Mumbai - CESTAT)