Court rules in favor of Assessee in Service Tax dispute over construction for ITC Limited

The High Court upheld the Tribunal's decision that the Respondent Assessee was not liable to pay Service Tax on the 'Residential Complex' constructed for ITC Limited. The construction fell within the exclusion clause of the definition of 'Residential Complex' under the Finance Act, as it was intended for personal use by ITC Limited. The Court found that the sub-contractor had already paid the Service Tax, and the extended period of limitation did not apply due to the Assessee's genuine belief in non-liability, supported by the CBEC Circular. The Revenue's appeal was dismissed.

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Issues Involved:
1. Levy of Service Tax on the 'Residential Complex' constructed by the Respondent Assessee.
2. Whether the construction activity falls within the meaning of "personal use" under Section 65(91a) of the Finance Act, 1994.
3. Applicability of the CBEC Circular dated 24-05-2010 regarding Service Tax liability.
4. Validity of the Show Cause Notice dated 08-07-2009 concerning the extended period of limitation under Section 73(1) of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Levy of Service Tax on the 'Residential Complex':
The Revenue contended that the Respondent Assessee, M/s. Nithesh Estates Limited, was liable to pay Service Tax on the construction of a 'Residential Complex' for M/s. ITC Limited. The Tribunal held that the construction activity fell within the Exclusion Clause of the definition of 'Residential Complex' under Section 65(91a) of the Finance Act, 1994, and thus was not liable for Service Tax. The Tribunal's decision was based on the fact that the construction was intended for personal use by ITC Limited, specifically for its employees.

2. Personal Use under Section 65(91a):
The Tribunal concluded that the 'Residential Complex' constructed for ITC Limited was for personal use, as ITC intended to provide the accommodation to its employees. The definition of 'personal use' includes permitting the complex for use as residence by another person on rent or without consideration. The Tribunal relied on the CBEC Circular dated 24-05-2010, which clarified that if a residential complex is constructed for personal use, it is not exigible to Service Tax.

3. Applicability of CBEC Circular dated 24-05-2010:
The Tribunal and the High Court both referred to the CBEC Circular dated 24-05-2010, which stated that if a government department engages a contractor for constructing a residential complex for its personal use, Service Tax is not leviable. The High Court agreed with the Tribunal's application of this Circular, stating that the same principle should apply to private entities like ITC Limited. The Court noted that the sub-contractor, M/s. Larsen and Toubro Limited, had already paid the Service Tax, and thus, the principal contractor, M/s. Nithesh Estates Limited, was not liable.

4. Validity of Show Cause Notice and Extended Period of Limitation:
The Tribunal held that the demands made in the Show Cause Notice dated 08-07-2009 did not fall within the extended period of limitation under Section 73(1) of the Finance Act, 1994. The High Court agreed, noting that the Respondent Assessee had a bona fide belief that it was not liable to pay Service Tax, supported by the CBEC Circular and the fact that the sub-contractor had already paid the tax. Therefore, the extended period of limitation was not applicable.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision that the Respondent Assessee was not liable to pay Service Tax on the 'Residential Complex' constructed for ITC Limited. The construction was for personal use, and the sub-contractor had already discharged the Service Tax liability. The Court also held that no substantial question of law arose in the case, including the issue of the extended period of limitation.

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