Tribunal rules in favor of Vinayaka Homes, services classified as 'construction of residential complex service'

The Tribunal ruled in favor of M/s. Vinayaka Homes, holding that their services constituted 'construction of residential complex service' and not 'works contract service' during the period from January, 2009 to March, 2009. It was determined that the services provided were exempt from service tax as per Circular No. 108/2/2009-S.T. The appeal was allowed, and the demand for service tax on 'works contract service' was rejected.

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Issues:
Recovery of service tax on 'Works Contract Service' for the period from January, 2009 to March, 2009.

Analysis:
The appellants, M/s. Vinayaka Homes, contested the demand of service tax on 'works contract service' by arguing that they were actually providing 'Construction of Residential Complex' services under Section 65(105)(zzzh) of the Finance Act, 1994 during the relevant period. They maintained that no service tax was applicable on 'construction of residential complex service' at that time as they had paid VAT under the 'works contract' category for the materials used in their services.

The Revenue, represented by the learned AR, contended that the services provided by the appellants fell under 'works contract' and were thus liable for service tax recovery for the period in question.

Upon careful consideration of the facts and submissions, the Tribunal found that the appellants were indeed offering 'construction of complex service' by designing, planning, developing, and preparing sites on their land for construction activities for clients. It was noted that the activities did not align with the elements of a 'works contract'. The Tribunal clarified that the appellants' services were correctly categorized as 'construction of residential complex service' and were not subject to service tax for the period from January, 2009 to March, 2009.

The Tribunal referenced Circular No. 108/2/2009-S.T., dated 29-1-2009, which highlighted that services related to 'construction of residential complex' were excluded from service tax. The circular emphasized that until the completion of construction and full payment, services provided by the seller (promoter/builder/developer) were considered 'self-service' and did not attract service tax. Only services provided by contractors, designers, or similar service providers were taxable.

It was further clarified that the services became taxable only after 1-7-2010 when an Explanation was added to the definition of 'construction of complex service' under Section 65(105)(zzzh) of the Finance Act, 1994 by the Finance Act, 2010 dated 8-5-2010.

In conclusion, the impugned order was set aside, and the appeal was allowed with any consequential relief deemed necessary.

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