CESTAT Chennai: Developers liable for service tax on residential complexes, pre-deposit ordered for appeal admission

The Appellate Tribunal CESTAT Chennai confirmed the liability of developers to pay service tax on residential complexes, denied CENVAT credit, addressed time-barred demands, and ruled on pre-deposit waivers for appeal admission. The appellant's arguments were considered, but the Tribunal emphasized the necessity of valid proof of service tax payment by contractors. A pre-deposit of One Crore was ordered within six weeks for appeal admission, with the balance dues waived subject to compliance, and the collection of dues was stayed pending appeal disposal.

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Issues:
1. Liability of developer to pay service tax on residential complexes.
2. Denial of CENVAT credit.
3. Time-barred demand for service tax.
4. Pre-deposit waiver for appeal admission.

Issue 1: Liability of developer to pay service tax on residential complexes
The appellant, engaged in constructing residential complexes, argued they were not liable to pay service tax as the actual construction contractor was paying it. Revenue contended that developers are also liable for service tax. The demand of Rs.12,47,18,238/- was confirmed by Revenue, along with denying CENVAT credit of Rs.72,34,120/- and imposing penalties. The appellant sought waiver of pre-deposit, claiming the demand was time-barred due to a clarification from CBEC. The Tribunal noted the lack of proof of service tax payment by the contractor and ordered a pre-deposit of One Crore within six weeks for appeal admission.

Issue 2: Denial of CENVAT credit
The appellant argued that the denial of CENVAT credit was a duplication as the credit had been used to pay the disputed service tax. Revenue opposed, stating the appellant had taken credit without proper documentation of service tax payment by the contractor. The Tribunal found the appellant's argument unsubstantiated and ordered a pre-deposit for appeal admission.

Issue 3: Time-barred demand for service tax
The appellant claimed the demand was time-barred based on a clarification from CBEC in 2006. The Tribunal acknowledged the time-bar issue but deferred detailed examination to the final hearing, emphasizing the need for valid proof of service tax payment for CENVAT credit eligibility.

Issue 4: Pre-deposit waiver for appeal admission
The appellant sought waiver of pre-deposit for appeal admission, arguing that the confirmed demand should have included abatement and that the CENVAT credit denial was a duplication. The Tribunal ordered a pre-deposit of One Crore within six weeks, with the balance dues waived subject to compliance. The collection of dues was stayed pending appeal disposal.

This judgment by the Appellate Tribunal CESTAT Chennai addressed the liability of developers to pay service tax on residential complexes, denial of CENVAT credit, time-barred demands, and pre-deposit waivers for appeal admission. The Tribunal emphasized the need for valid proof of service tax payment by contractors and ordered a pre-deposit for appeal admission while deferring detailed examination of the time-bar issue. The appellant's arguments regarding abatement and duplication of CENVAT credit denial were considered, leading to the ordered pre-deposit and stay on collection pending appeal disposal.

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