2023 (1) TMI 1332 - AT - Service Tax

Construction of approach roads exempt from service tax under Circular B1/6/2005-TRU, residential premises for self-use also exempt

SVJ Innovabuild Pvt. Ltd. Versus C.C.E & S.T. Silvasa

CESTAT Ahmedabad ruled that construction of approach roads falls outside service tax net per Circular B1/6/2005-TRU, setting aside the demand. Service tax ... Levy of service tax - construction of Approach Roads and Residential Premises within the factory of Classic Marble Company Private Limited - difference in the figures recorded in ST-3 vis-a-vis the actual receipts - HELD THAT:- In light of Circular No. B1/6/2005-TRU dated 27.07.2005, it is apparent that the activity of construction of roads is beyond the service tax net and therefore, demand of service tax on construction of road cannot be sustained. The same is set aside and appeal to that extent is allowed. Demand of service tax on residential houses made for their clients namely Classic Marble Company Private Limited - demand confirmed on the ground that the activity of construction of road is a composite contrat for not only for construction of road but also for residential premises - HELD THAT:- When the residential complex is built for self use then it remains outside the service tax net - the demand on the construction of road and residential premises cannot be sustained and the same is set aside. Difference in the receipts towards exempted services shown in ST-3 return - HELD THAT:- It is seen that the impugned order does not contain adequate explanation for the said exempted services - The appellant has claimed that the variation is on account of inclusion of amount in service tax gross value/ VAT amount/ booking of TDS/ declaration of receipt entry - there are no mention of these facts in the impugned order nor does the impugned order contain any examination of this data. It is doubtful if this data was submitted before the original adjudicating authority - matter remanded back to original adjudicating authority to examine the reconciliation produced by the appellant, in these appeal papers decide afresh. Appeal allowed in part and part matter on remand. Issues Involved:1. Demand of service tax on construction of approach roads within factory premises.2. Demand of service tax on construction of residential premises within factory premises.3. Demand of service tax due to discrepancies between figures in ST-3 returns and actual receipts.Issue-Wise Detailed Analysis:1. Demand of Service Tax on Construction of Approach Roads:The appellant contested the demand of service tax on the construction of approach roads within the factory premises, arguing that such construction is categorically excluded from the definition of 'works contract' under Section 65 (105) (zzzza) and is not a taxable activity. The appellant relied on several CBEC Circulars, specifically Circular B2/8/2004-TRU dated 10.09.2004, Circular No. B1/6/2005-TRU dated 27.07.2005, and Circular No. 110/4/2009-ST dated 23.02.2009, which clarified that construction of roads is excluded from the service tax net. The tribunal agreed with the appellant, stating that the construction of roads is beyond the service tax net and set aside the demand of service tax on this ground.2. Demand of Service Tax on Construction of Residential Premises:The appellant argued that the construction of residential premises for Classic Marble Company Private Limited should not be subject to service tax. The appellant cited several decisions, including those in HK Ramani (2023), Natvar Const. Co. (2023), Nithesh Estates Ltd. (2015), CCE Pudhchery vs Lanco Tanjore Power Co Ltd. (2018), and CCE vs Mall Enterprises (2016), to assert that residential complexes made for own use or for housing employees are outside the taxable net. The tribunal referred to the case of Nithesh Estate Limited, which clarified that if a residential complex is constructed for personal use, it remains outside the service tax net. Consequently, the tribunal set aside the demand of service tax on the construction of residential premises.3. Demand of Service Tax Due to Discrepancies Between Figures in ST-3 Returns and Actual Receipts:The appellant challenged the demand of service tax based on alleged discrepancies between the figures declared in ST-3 returns and actual receipts. The appellant argued that no tax liability can be ascertained without first determining whether taxable services were provided. The appellant relied on the case of UOI vs Garware Nylons Ltd. (1996) to assert that the burden of proof is on the department to establish if any receipt is taxable. The tribunal noted that the impugned order did not contain adequate explanation for the exempted services and that the appellant had provided a detailed reconciliation of the differences in figures. The tribunal set aside this demand and remanded the matter back to the original adjudicating authority for fresh adjudication, instructing them to examine the reconciliation produced by the appellant.Conclusion:The tribunal allowed the appeal concerning the demand of service tax on the construction of roads and residential premises for Classic Marble Company Private Limited. The demand related to discrepancies between figures in ST-3 returns and actual receipts was set aside and remanded to the original adjudicating authority for fresh adjudication. The tribunal emphasized the need for a thorough examination of the reconciliation data provided by the appellant.