Pranav B Prem

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad has allowed the appeal filed by Ganpati Mega Builders, setting aside a service tax demand of ₹3.15 crore, a penalty of ₹31.54 lakh, and the late fee imposed by the Commissioner, CGST & Central Excise, Agra. The Bench of Angad Prasad (Judicial Member) and Sanjiv Srivastava (Technical Member) held that construction activities executed for the Rajya Krishi Utpadan Mandi Parishad (Mandi Parishad) are exempt under the Mega Exemption Notification No. 25/2012-ST and that the Revenue failed to justify denial of the benefit.

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Ganpati Mega Builders had undertaken several construction works for the Mandi Parishad and the Kanpur Development Authority (KDA). The receipts were duly declared in ST-3 returns with exemption claimed under various entries of the Mega Exemption Notification. The department, however, rejected the exemptions, treated ₹51.86 crore as taxable receipts, confirmed service tax of ₹3.11 crore on works contract services, demanded ₹4.31 lakh under reverse charge for GTA, security, and legal services, and imposed penalties and late fees. The Commissioner reasoned that the construction of shops, platforms, parking areas, and related structures in the Mandi area was “commercial,” thereby falling outside the exemption.

The Tribunal noted that for earlier years (2009–10 to 2015–16), identical disputes involving Ganpati Mega Builders had been adjudicated by the Tribunal in the assessee’s favour. These orders, which recognized the exemption for works executed for the Mandi Parishad, were neither reversed nor stayed and therefore stood binding.

Crucially, the appellant relied on the judgment of the Allahabad High Court dated 12.10.2022, delivered in its own case, which unequivocally held that the Mandi Samiti is a “Governmental Authority” under Notification No. 25/2012-ST. The High Court further held that its functions are regulatory in nature — governing agricultural markets, establishing storage facilities, roads, platforms, sheds, and other post-harvest infrastructure. Such infrastructure creation was held to be non-commercial and therefore exempt from service tax.

Observing that this High Court ruling binds all authorities in the State, the Tribunal held that structures such as platforms, shops, warehouses, parking areas, internal roads, and toilets within the Mandi premises form an integral part of post-harvest infrastructure. The Revenue’s assertion that these were commercial establishments was rejected. The Bench held that the exemption under Entries 12, 13, and 25 of the Mega Exemption Notification squarely applied.

The Tribunal also clarified that the 2017 judgment of the Delhi Bench in Krishi Upaj Mandi Samiti—relied on by the department—concerned the taxability of services provided by Mandi Samiti, whereas the present matter concerned services provided to the Mandi Parishad. Therefore, the decision did not support the denial of exemption.

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The Tribunal criticized the department for mechanically relying on Form 26AS to compute taxable receipts without correlating the entries to individual contracts, exempt components, or financial records, despite the appellant having submitted balance sheets, work orders, ledgers, and returns. This approach, it held, was legally unsustainable. Accordingly, the Tribunal quashed the entire service tax demand of ₹3.11 crore on works contract services, the ₹4.31 lakh reverse charge demand, the penalty of ₹31.54 lakh under Section 76, and the late fee of ₹60,000 for delayed ST-3 filing, along with all consequential interest liabilities. The appeal was allowed in full, granting complete relief to Ganpati Mega Builders.

Appearance

Counsel For  Appellant: Rinki Arora, Advocate 

Counsel For Respondent: AR Santosh Kumar, Authorised Representative

Cause Title: M/s Ganpati Mega Builders India Pvt. Ltd. Versus Commissioner, CGST & Central Excise, Agra

Case No: Service Tax Appeal No.70571 of 2020

Coram: Angad Prasad (Judicial Member), Sanjiv Srivastava (Technical Member)