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CESTAT: Constructing hostel for Govt. not 'commercial' activity; Recruiting contractors' work force, taxable

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CESTAT sets aside service tax demand on construction of women hostel for and on behalf of Govt. of India and construction of Civil Services Officers Institute, for said activity is not commercial in nature to fall under ‘commercial or industrial construction service’ category; Referring to SC decision in L&T Ltd, CESTAT observes that Section 65(105)(zzq) r/w Section 65(25b) of Finance Act only covers contracts for services simpliciter, whereas all the contracts in present case are composite ones;

Also quashes demand on maintenance and power backup expenses recovered from clients, holding that although electricity was considered as ‘goods’, Adjudicating Authority had erred in confirming liability for lack of evidence proving discharge of sales tax on power supply, which went beyond the show cause notices issued; However, upholds liability under ‘manpower recruitment or supply agency service’ category inasmuch as assessee not only provided supervisors to keep a check on quality of work to be done by contractors, but even recruited skilled and semi-skilled work force to execute the work, while deducting monthly amount from monies due to said contractors;

Also holds assessee accountable for reversal of credit in respect of common input services used for rendering exempt services since no separate accounts were maintained nor option enshrined under Rule 6(3) of CENVAT Credit Rules availed, as well as interest u/s 73(1) r/w Rule 14 of CENVAT Credit Rules on delayed payment of tax through CENVAT Credit Account for period prior to registration  : Delhi CESTAT

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Guest Tuesday, 25 September 2018

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