Tribunal rules construction of residential complexes for sale on own land not taxable

The Tribunal ruled in favor of the respondents, holding that the construction of residential complexes on their own land for selling units to buyers did not constitute a taxable service during the relevant period. The Tribunal considered conflicting judgments from various High Courts and determined that the activity did not fall under the scope of service tax liability. As a result, the Revenue's appeals were rejected, and the respondents were not required to pay service tax on the construction of residential complexes for their own benefit without providing services to customers.

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Issues:
Interpretation of service tax liability on construction of residential complexes for own benefit without service to customers.

Analysis:
The case involved three appeals by Revenue against different respondents for not paying service tax on constructing residential complexes and selling units to customers. Revenue argued that the construction activity was for the benefit of buyers and should be taxed under "construction of complex" as per section 65(105)(zzzh) of Finance Act, 1994. The respondents contended that no service was rendered to buyers as the construction was on their own land. The Commissioner (Appeals) sided with the respondents, leading to Revenue's appeals.

Revenue claimed that taking advances from buyers constituted a service, citing legal precedents. Respondents referred to CBEC circulars exempting service tax when flats are sold after completion on the builder's land. They argued that the explanation added in 2010 should not have retrospective effect, relying on a Supreme Court decision. They contended that demands for service tax were unjustified due to the CBEC clarification.

The Tribunal analyzed various court decisions on similar issues. The Punjab & Haryana High Court addressed the constitutional validity of the explanation but not its retrospective effect. The Tribunal noted a decision favoring Revenue in a refund case and an Advance Ruling Authority decision in Revenue's favor. However, the Gauhati High Court and Allahabad High Court decisions were against Revenue, creating conflicting judgments.

Considering conflicting decisions, the Tribunal held that during the period in question, the activity did not amount to a taxable service. Following the hierarchy of courts, the Tribunal ruled that the activity was not subject to service tax, rejecting Revenue's appeals.

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