Residential complex construction for employees is staff welfare, not taxable service, when the units remain for residential use.

Construction of a residential complex for occupation by employees of the recipient company was treated as housing provided for staff welfare and not as taxable construction service merely because the units were used by employees in the course of business. The dispute turned on whether the residential units retained their residential character and whether employee occupation changed the tax treatment; relying on Board circulars and prior tribunal precedent, the CESTAT held that such use did not create service tax liability under the residential complex category. The service tax demand was therefore unsustainable and the Revenue's appeal failed.

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Issues: (i) Whether construction of a residential complex for use by the employees of the recipient company attracted service tax under the category of construction of residential complex.

Issue (i): Whether construction of a residential complex for use by the employees of the recipient company attracted service tax under the category of construction of residential complex.

Analysis: The dispute turned on whether residential units constructed under the agreement were for residential use and whether their occupation by employees for the recipient company's business altered the tax character of the activity. The order under challenge had relied on the Board's circular and earlier tribunal authority, and the issue was found to be covered by precedent holding that housing provided to workers or staff is a welfare measure and that such use does not create the requisite tax liability merely because the units are occupied by employees of a business entity.

Conclusion: The demand of service tax was not sustainable, and the Revenue's appeal failed.

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