Appellants Liable for Service Tax on Construction Service Provided to Landowners

The Tribunal held that the appellants were liable to pay service tax on the construction service provided to the landowners for the residential complex. It was determined that the landowners received constructed flats as part of the land price, indicating a provision of construction service by the appellants. The Tribunal noted that even before a separate levy on works contract, a portion of the works contract could be subject to service tax if covered by specific entries under the service tax law. A partial predeposit of Rs. 50,000 towards service tax was directed, with the remaining amount waived during the appeal process.

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Issues:
Service tax liability on construction of residential complex for landowners' share of constructed area.

Analysis:
The appellants were registered with the Service Tax Department for various services, including Construction of Complex Service. During scrutiny, it was found that in a joint venture project, they did not discharge service tax on the landowners' share of the constructed area. The department issued a show-cause notice alleging that the construction service provided to the landowners was not free but for consideration, making them liable to pay service tax. The jurisdictional Commissioner levied service tax, interest, and a penalty, leading to the appeal.

The consultant for the appellants argued that no service tax was payable as the constructed area was given to the landowners as part of the land price. Additionally, he contended that the activities fell under works contract, which was not separately taxable at the time. The consultant also argued that if service tax was applicable, the entire value of the flats could not be considered as the value of service due to the inclusion of materials.

The Tribunal observed that the landowners received constructed flats in exchange for part of the land value and cash/cheque for the remaining value, indicating the provision of construction service by the appellants. It was noted that even before a separate levy on works contract, a portion of the works contract could be subjected to service tax if covered by specific entries under the service tax law. Considering the inclusion of materials in the value of the constructed flats, the Tribunal directed the predeposit of Rs. 50,000 towards service tax, with the balance amount waived during the appeal's pendency.

In conclusion, the Tribunal found the appellants liable to pay service tax on the construction service provided to the landowners for the residential complex. The decision highlighted the applicability of service tax even in works contracts and directed a partial predeposit while waiving the remaining amount during the appeal process.

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