Service Tax on Construction Activities – The recent findings of Bombay High Court

The Finance Act, 1994 was amended by the Finance Act, 2010 to introduce an explanation to Section 65(105)(zzq) and Section 65(105) (zzzh) of the 1994 Act. Besides, a new provision was introduced in the form of Clause (zzzzu) in Section 65(105). In these proceedings, there is a challenge to the constitutional validity of those provisions. In the Finance Act of 2004, Clause (zzq) was introduced in Section 65(105) in order to bring within the fold of the expression taxable service any service provided or to be provided to any person by a commercial concern, in relation to construction service. The expression ‘construction service’ was defined in Clause (30a) to mean inter alia the construction of a new building or civil structure or repairs, alteration or restoration of a building or civil structure, used, occupied or engaged or to be used, occupied or engaged primarily in commerce or industry. By the Finance Act of 2005 Clause (zzzh) was introduced into Section 65(105) so as to bring within the purview of the expression taxable service, a service provided or to be provided to any person by any other person “in relation to construction of complex”. Simultaneously, Clause (25b) was introduced to provide for a definition of the expression “commercial or construction service”.