CESTAT set aside the order of the Commissioner(Appeals) and allowed the refund of the service tax to the appellant and observed that merely charging fees will not make the position that the appellant institute a commercial institute

Brief Facts:

The appellant filed a refund claim for a refund of service tax under Section 11B of the Central Excise Act for the construction of a medical college building. During the scrutiny of the claim, certain discrepancies were found and accordingly, a show cause notice was issued to the appellant which rejected the refund claims and the same was upheld by the Commissioner (Appeals) who held that the activity of running a medical college was commercial in nature and same cannot be construed as a non-commercial activity.

Contentions of the Applicant:

The learned counsel appearing on behalf of the appellant contended that it was an undisputed fact that the appellant was registered as a non-commercial entity and had neither declared dividend nor distributed surplus /profit to its shareholders, trustees and/or members but ploughed back the surplus for the purpose of an object of the organization would be a charitable organization. He further argued that the relevant clauses of the Memorandum of Association revealed that the object of the Appellant to run the medical college was for non-commercial purposes. He further argued that merely charging higher fees would not make any institution a commercial institution and the funds shall be used only for the development of the hospital and for meeting the expenses of the society in terms of Clauses 9 and 10 of the Memorandum. The counsel further argued the entity would be considered a non-commercial entity if the same are registered under Section 12AA of the Income Tax Act, Bombay Public Trust Act and registered under the Societies Act.

Observations of the Court:

The tribunal observed that Section 11B(2)(e) of the Central Excise Act, 1944 permits the person who has borne the tax to file the refund claim and the refund claim must be filed only by the service provider /manufacturer and the person who has borne the duty burden can also claim the refund and there was no restriction in the provision of law regarding same. The tribunal stated that in the present case, the contractor collected the service tax separately from the Appellant and deposited it to the Central Government Account and since the Service tax has been borne by the Appellant, they have rightly lodged the refund claim.

The tribunal after analyzing various documentary evidence, certificates and registrations stated that the construction of the building for which the refund claim has been filed is used for educational purposes and the object of the use of the building is not for commercial purposes and the building constructed not being commercial and industrial construction does not fall under the category of taxable services, as the same is not used for commercial and industry but it is used for providing education.

It was further stated that service tax would not be charged and that merely charging fees will not make a position that the appellant institute is not a non-commercial concern.

The decision of the Court:

The appeal was allowed and the impugned order was set aside.

Case Title: Gujarat Adani Institute Of Medical Sciences vs. C.C.E. & S.T.-Rajkot

Coram: Hon’ble Mr. Ramesh Nair, Member (Judicial) and Hon’ble Mr. C.L Mahar, Member (Technical)

Case No.: Service Tax Appeal No. 222 of 2012 – DB

Advocate for the Applicant: Mr. Hardik Modh

Advocate for the Respondent: Mr. P.K.Singh

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