Construction of Flats for State Government Authority is Covered Under Work Contract Services and Not Liable to Service Tax

Centax Editorial Board

March 26, 2025

• 4 min. read

Case Details: Deepak Builders Versus Commissioner of Central Excise and Service Tax, Ludhiana (2025) 28 Centax 241 (Tri.-Chan)

Judiciary and Counsel Details

S/Shri S.S. Garg, Member (J) & P. Anjani Kumar, Member (T)
S/Shri K.K. Anand & A.K. Prasad, Advs., for the Assessee.
Siddharth Jaiswal & Aneesh Dewan, Authorized Representative, for the Department.

Facts of the Case

The assessee was engaged in the construction of residential LIG flats and a shopping complex for a State Government Authority. Assessee contended that the construction work undertaken by them was non-commercial in nature. The construction work was undertaken under a composite works contract involving the supply of materials and services. The service recipient had not supplied any materials free of cost. Assessee paid VAT/Sales Tax on the supply of materials and not discharged Service Tax. The assessee was not liable to pay service tax as per the Board Circular No. 80/2004-ST, dated 17-09-2004.On the basis of intelligence, the department initiated an investigation against the assessee and issued a show cause notice (SCN) demanding service tax for the period 2007-08 to 2011-12. The matter was decided by the Commissioner (Appeals), and the demand was confirmed. Aggrieved by the order, the assessee filed an appeal to the CESTAT.

CESTAT Held

The CESTAT held that the construction services provided along with materials were covered under the category of Works Contract service under 65(105)(zzzza) of Finance Act, 1994, which came into existence w.e.f. 01-06-2007. Thus, the same was not taxable under any other category prior to said date. Further, the Board’s Circular No. 80/2004-ST, dated 17-09-2004 clarified that 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. 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. Since the construction services were provided to a State Government Authority and were non-commercial, the same was not taxable.

List of Cases Cited

ABL Infrastructure Pvt. Ltd. v. Commissioner — 2015 (38) S.T.R. 1185 (Tribunal) — Relied on [Paras 5, 15, 17, 19]
Azad Construction Company v. Commissioner — 2017 (49) S.T.R. 77 (Tribunal) — Relied on [Paras 5, 15, 17, 19]
B.R. Kohli Construction Pvt. Ltd. v. Commissioner — 2017 (5) G.S.T.L. 182 (Tribunal) — Relied on [Paras 5, 15, 17, 19]
Collector v. Alcobex Metals — 2003 (153) E.L.T. 241 (S.C.) — Referred [Para 8]
Collector v. Chemphar Drugs & Liniments — 1989 (40) E.L.T. 276 (S.C.) — Referred [Para 7]
Commissioner v. Dilip Kumar and Company — 2018 (361) E.L.T. 577 (S.C.) — Referred [Para 9]
Commissioner v. Larsen & Toubro Ltd. — 2015 (39) S.T.R. 913 (S.C.) — Followed [Paras 5, 14]
Commissioner v. Neminath Fabrics Pvt. Ltd. — 2010 (256) E.L.T. 369 (Guj.) — Referred [Para 11]
Commissioner v. Reliance Industries Ltd. — 2023 (385) E.L.T. 481 (S.C.) = (2023) 8 Centax 96 (S.C.) — Referred [Para 7]
Commissioner v. Royal Enterprises — 2016 (337) E.L.T. 482 (S.C.) — Referred [Para 7]
Commissioner v. Satyam Home Makers — 2019-TIOL-2593-CESTAT-Mum — Relied on [Paras 5, 15, 17, 19]
Cosmic Dye Chemical v. Collector — 1995 (75) E.L.T. 721 (S.C.) — Referred [Para 7]
ECE Industries Ltd. v. Commissioner — 2004 (164) E.L.T. 236 (S.C.) — Referred [Para 7]
G.N. Buildev Pvt. Ltd. v. Commissioner — Final Order No. 50232/2019 by CESTAT, New Delhi — Relied on [Paras 5, 15, 17, 19]
Infinity Infotech Parks Ltd. v. Union of India — 2014 (36) S.T.R. 37 (Cal.) — Referred [Para 8]
Jaipuria Infrastructure Developers Pvt. Ltd. v. Commissioner — 2014 (36) S.T.R. 696 (Tribunal) — Relied on [Paras 6, 17]
M.M. Cylinders Pvt. Ltd. v. Commissioner — 2014 (302) E.L.T. A28 (S.C.) — Referred [Para 11]
M.M. Cylinders Pvt. Ltd. v. GDR Cylinders Pvt. Ltd. — 2012 (277) E.L.T. 78 (Tribunal) — Referred [Paras 11, 17]
Nagarjuna Constn. Co. Ltd. v. Government of India — 2012 (28) S.T.R. 561 (S.C.) — Referred [Para 10]
Nagarjuna Construction Co. Ltd. v. Government of India — 2010 (19) S.T.R. 321 (A.P.) — Referred [Para 10]
Nizam Sugar Factory v. Collector — 2006 (197) E.L.T. 465 (S.C.) — Followed [Paras 4.2, 7, 11, 18, 19]
P and B Pharmaceuticals Pvt. Ltd. v. Collector — 2003 (153) E.L.T. 14 (S.C.) — Referred [Para 7]
Pushpam Pharmaceuticals Company v. Collector — 1995 (78) E.L.T. 401 (S.C.) — Referred [Para 7]
Real Value Promoters Pvt. Ltd. — 2018-TIOL-2867-CESTAT-MAD. — Relied on [Paras 5, 15, 17, 19]
Sarabhai M. Chemicals v. Commissioner — 2005 (179) E.L.T. 3 (S.C.) — Referred [Para 7]
Satish Kumar and Company v. Commissioner — 2018-TIOL-2514-CESTAT-Del — Relied on [Paras 5, 15, 17, 19]
Shyam Spectra Pvt. Ltd. v. Commissioner — Final Order No. 56196/2024, dated 31-7-2024 by CESTAT, New Delhi — Referred [Paras 8, 17]
State of Madhya Pradesh v. Marico Industries Ltd. — 2016 (338) E.L.T. 335 (S.C.) — Referred [Para 9]
Sunil Hi-Tech Engineers Ltd. v. Commissioner — 2014 (36) S.T.R. 408 (Tribunal) — Referred [Paras 10.3, 17]
Uniworth Textiles Ltd. v. Commissioner — 2013 (288) E.L.T. 161 (S.C.) — Referred [Para 7]
Urvi Construction v. Commissioner — 2010 (17) S.T.R. 302 (Tribunal) — Relied on [Paras 6, 17]