2018 (7) TMI 434 - AT - Service Tax

Tribunal rules no service tax on sale of undivided land share

M/s. Golden Ventures Versus Commissioner of C.E. & S.T., Chennai

The Tribunal held that there was no service tax liability on the appellant for the sale of undivided share of land (UDS). The appeal was allowed with ... Construction services - Construction of residential Complexes - flats constructed for own units - scope of the term 'Personal use' - Suppression of facts or not? - invocation of proviso to Section 73(1) of Finance Act, 1994 - demand of duty with interest and penalty - applicability of CBEC Circular. No. 332/35/2006-TRU, Circular No. 80/10/2004 and CBEC Circular No. 108/02/2009 - extended period of limitation. Held that:- What is sought to be excluded by Section 65(91a) of the Finance Act, 1984 is only a person who directly engages any other person, far from the construction of such complex, which is intended for his personal use as residence. This, read with the explanation provided for “personal use” coupled with the facts of the case on hand for construction of 106 units, makes it abundantly clear that the residential complex so constructed, was not for the personal use as residence of the appellant. Applicability of decision in the case of Magus Construction Pvt.Ltd. [2008 (5) TMI 18 - HIGH COURT OF GAUHATI] to the acts of present case - Held that:- The issue involved in the case of Magus Construction Pvt.Ltd. is clearly in the context of builders who construct flats and then effect sale of the same, as contrary to the sale of UDS alone in the case on hand - the case do not apply to the facts of present case. It is also equally relevant to refer to another decision/order of this very Bench, in the case of CCE .Vs. M/s. Lancy Tanjore Power Co. Ltd.[2018 (3) TMI 1010 - CESTAT CHENNAI], wherein, the court has concluded that since the definition provided under Section 65(91a) specifically excluded construction undertaken for personal use including permitting the complex use as residence by another person, that exclusion covered the construction activity of the assesse and thus the service tax liability would not sustain. There will be no service tax liability on the appellant - appeal allowed. Issues Involved:1. Taxability of the appellant's activities under Section 65(105)(zzzh) read with Section 65(91a) of the Finance Act, 1994.2. Invocation of extended period for demand.3. Appellant's liability for service tax as a promoter.4. Applicability of CBEC circulars and relevant case laws.Issue-wise Detailed Analysis:1. Taxability of the Appellant's Activities:The appellant, a partnership firm in the construction business, executed only one project involving the sale of undivided share of land (UDS) and construction of flats. The Revenue issued a Show Cause Notice (SCN) alleging that the appellant's activities were taxable services under Section 65(105)(zzzh) read with Section 65(91a) of the Finance Act, 1994. The appellant contended that the flats were constructed for its own use and relied on various CBEC Circulars and judicial decisions to support their claim. However, the adjudicating authority confirmed the demand, interest, and penalties proposed in the SCN.2. Invocation of Extended Period for Demand:The appellant argued that the SCN was issued nearly two years after they had informed the Department about their project, and therefore, the demand was hit by limitation. The Revenue countered that the appellant neither obtained registration nor paid service tax from the introduction of the services under the Service Tax Net, nor filed any ST-3 returns, indicating suppression of facts with an intention to evade tax.3. Appellant's Liability for Service Tax as a Promoter:The appellant contended that as a promoter, they had engaged a contractor for the construction of flats, and thus, any service tax liability should be on the contractor. They argued that their activities were in the nature of self-service, which is not liable for service tax. The Revenue, however, maintained that the appellant's construction of a residential complex with more than 12 units was taxable, and the CBEC circulars did not exclude the appellant's situation from service tax liability.4. Applicability of CBEC Circulars and Relevant Case Laws:The Tribunal analyzed various CBEC circulars and judicial decisions, including the cases of Magus Construction Pvt. Ltd., Prince Foundation Pvt. Ltd., and Krishna Homes. The Tribunal noted that the exclusion in Section 65(91a) applies only to a person who directly engages another for construction intended for personal use. The Tribunal found that the appellant's construction of 106 units was not for personal use and therefore did not qualify for the exclusion.The Tribunal also referred to the decision of the Principal Bench in Krishna Homes, which clarified that if a builder engages a contractor for construction, the contractor is liable to pay service tax. The Tribunal concluded that the appellant, as a promoter, was not liable for service tax on the sale of UDS.Conclusion:The Tribunal held that there was no service tax liability on the appellant for the sale of UDS. The appeal was allowed with consequential reliefs, if any. The operative part of the order was pronounced in open court.