Retrospective circular clarification on self-construction excludes taxable service relationship and requires fresh reconsideration of the matter.

A later CBEC circular clarifying that a builder or developer constructing on its own without engaging another person does not create a taxable service relationship was treated as a clarification of law and therefore applied retrospectively to pending matters. On that basis, the prior order was found liable to reconsideration because the clarification was prima facie favourable and had not been available to the original and appellate authorities. The matter was remanded for de novo consideration without insisting on pre-deposit, and the self-supply character of the activity was recognised for reassessment in light of the circular.

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Issues: Whether the later CBEC circular clarifying that a builder or developer constructing on his own without engaging any other person does not create a taxable service relationship applied retrospectively so as to warrant setting aside the appellate order and remanding the matter.

Analysis: The circular dated 23.08.2007 was treated as a clarification of the law and, therefore, applicable to pending matters retrospectively. It stated that where no other person is engaged for construction work, the builder or developer undertakes construction on its own, the service provider and service recipient relationship does not exist, and the activity is in the nature of self-supply of services. As the clarification was prima facie favourable to the appellant and had not been available when the original authority and the appellate authority decided the matter, the order was held liable to be reconsidered afresh in its light.

Conclusion: The matter was remanded for de novo consideration without insisting on pre-deposit, and the retrospective effect of the circular was accepted in favour of the appellant.

Ratio Decidendi: A circular issued as a clarification of law applies retrospectively to pending proceedings, and where it negates the existence of a taxable service relationship on the facts, the matter must be reconsidered afresh.

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