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

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 on residential premises constructed for self-use by the company was also held exempt from service tax liability. However, regarding discrepancies in ST-3 returns versus actual receipts for exempted services, the matter was remanded to original adjudicating authority due to inadequate examination of appellant's reconciliation data and explanations for variations including VAT amounts and TDS bookings. Appeal partially allowed with remand.

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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.

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