Tribunal rules in favor of Revenue on service tax for residential complexes

The Tribunal ruled in favor of the Revenue, holding that the construction of residential complexes was subject to service tax due to the service provider and service recipient relationship established after selling the Undivided Share (UDS) of the land. The CBEC circulars cited by the appellant were deemed inapplicable to the situation. The Tribunal also allowed the invocation of the extended period for the demand of service tax, emphasizing the need for a pre-deposit of Rs. 45 lakhs for admission of appeals to ensure a stay of recovery pending the final hearing.

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Issues:
1. Applicability of service tax on construction of residential complexes.
2. Interpretation of CBEC circulars regarding service tax on construction activities.
3. Invocation of extended period for demand of service tax.
4. Pre-deposit requirement for admission of appeals.

Analysis:
1. The judgment dealt with the applicability of service tax on the construction of residential complexes. The appellant, engaged in construction, argued that they were not liable to pay service tax as they considered themselves as developers based on CBEC circulars. The Revenue contended that the circulars were not applicable in cases where construction was undertaken on property belonging to someone else, as in the present case. The Tribunal noted that the construction was done after selling the Undivided Share (UDS) of the land, establishing a service provider and service recipient relationship, leading to the demand for service tax.

2. Regarding the interpretation of CBEC circulars, the appellant relied on Circulars stating that developers on their land need not pay service tax. However, the Revenue argued that in cases where UDS was sold first and then construction was done, a service provider and service recipient relationship existed, making the demand for service tax valid. The Tribunal found the CBEC circulars inapplicable to the facts of the case, emphasizing the service nature of the construction activity after selling UDS.

3. The invocation of the extended period for the demand of service tax was contested by the appellant, claiming that as registered assesses, they had paid service tax initially, and the department was aware of the construction activities. The Revenue justified the extended period citing lack of information disclosure and subsequent audit findings. The Tribunal decided to examine the time bar issue during the final hearing, emphasizing the need for a pre-deposit for admission of the appeals.

4. The judgment addressed the pre-deposit requirement for admission of appeals, considering arguments from both sides. The Tribunal referred to a previous case and called for a pre-deposit of Rs. 45 lakhs within 8 weeks, with further directions for compliance and waiver of the balance amount upon deposit. The pre-deposit was deemed necessary pending the final hearing, ensuring the stay of recovery until the appeal's disposal.

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