2026-VIL-291-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Exemption from Service Tax to construction of various projects for the Government and local authorities - Refund claim of service tax paid on construction of various projects for the government and local authorities during the period from 01.04.2015 to 29.02.2016. The refund claim was filed under Section 102 of the Finance Act, 1994, which provided for retrospective exemption from service tax for the said period on construction services provided to the government, local authorities or governmental authorities - Whether the appellant was eligible for the exemption benefit under Entry 12A of Notification No. 25/2012-ST dated 20.06.2012 - HELD - There is difference between service rendered for business or commerce and the Government activities rendered for public welfare - An activity is said to be commercial in nature, if it is carried on as a business to earn profit. Profit motive is essential in determining the transaction for commerce or industry. Whether the activity actually results in profit or loss is immaterial but what is necessary is that the intention must be to earn profit. Similarly, an organization or establishment can be said to be 'commercial concern' if it is run with an intention to make money or earn profit - The construction of parking lots and an educational institute by the appellant were not for commercial or business purposes, but were undertaken to fulfill the Constitutional and statutory duties of the Government and local authorities under Article 243W of the Constitution. The nominal fees charged for use of the parking facilities were not with the intent of earning profit, but for maintaining and managing the public facilities. Therefore, the appellant was eligible for the exemption under Entry 12A of Notification No. 25/2012-ST - The order under challenge is set aside and the appeal is allowed - Whether the appellant's claim of refund on construction of parking facilities for the local authority was rightly rejected - HELD - The contracts for construction of the parking facilities were entered into prior to 01.03.2015, as required under Section 102 of the Finance Act, 1994. The Department failed to provide any evidence to show that the contracts required payment of stamp duty prior to 01.03.2015 - The CBEC vide Circular No. 334/8/2016 dated 29.02.2016 has clarified that the relevant services provided to the Government during the period under the contracts entered into prior 01.03.2015 shall remain exempted from service tax. Section 102(2) has used word ‘shall” making it mandatory for the department to refund such service tax which has been collected but which would not have been so collected as the exemption would never been withdrawn - The appellant had also submitted a Chartered Accountant's certificate to show that the incidence of tax was not passed on to the recipients. Therefore, the rejection of the refund claim is unjustified, and the order under challenge is set aside.
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