2018 (9) TMI 920 - AT - Service Tax

Tribunal rules in favor of local authority in service tax case, emphasizing residential complex criteria

The Tribunal ruled in favor of the appellant, a public/local authority, in a case concerning the demand of service tax under 'Construction and Residential ... Construction and Residential Complex Services - Demand alongwith Interest and penalties - time limitation - work for Noida Authority for development of Housing Pockets by providing and laying water lines, providing and laying sewer lines, construction of internal roads, construction of internal drains & culverts, development of parks, providing of water, sewer & electric connections etc. and construction of 544 HIG Houses Held that:- Tribunal in the case of Commissioner of Customs, Central Excise & Service Tax, Allahabad vs. Ganesh Yadav [2017 (5) TMI 1251 - CESTAT ALLAHABAD] has held that the flats constructed under “Works Contract” for the welfare of weaker section of the society cannot be held to be intended for commerce or industry. Time Limitation - Held that:- All the facts were in the knowledge of the Revenue and no mala fide can be attributed to the appellant - extended period cannot be invoked. Appeal allowed - decided in favor of appellant. Issues:1. Confirmation of demand of service tax under the head of 'Construction and Residential Complex Services'2. Applicability of Service Tax to activities undertaken by a Government Body/Public Authority3. Requirement of more than twelve residential units for a building to be classified as a Residential Complex4. Point of limitation regarding the time frame for raising the demand of Service TaxIssue 1: Confirmation of demand of service tax under the head of 'Construction and Residential Complex Services'The judgment addresses the confirmation of a demand of service tax amounting to Rs. 1,60,40,363 under the category of 'Construction and Residential Complex Services' as per the Finance Act, 1994. The appellant, a public/local authority, undertook various construction activities for Noida Authority, including laying water and sewer lines, constructing roads, drains, parks, and houses. The demand was confirmed along with interest and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.Issue 2: Applicability of Service Tax to activities undertaken by a Government Body/Public AuthorityThe appellant argued that the activities undertaken were in furtherance of discharging statutory functions of a Government Body/Public Authority and thus not liable to service tax. They cited circulars and legal cases to support their claim that such activities between government entities are exempt from service tax. The Tribunal considered this argument in light of the nature of the activities performed by the appellant for Noida Authority and the statutory functions involved.Issue 3: Requirement of more than twelve residential units for a building to be classified as a Residential ComplexThe appellant contested the demand by highlighting the definition of a 'Residential Complex' under the Finance Act, 1994, which necessitates a building to have more than twelve residential units to qualify. They argued that this essential criterion was not addressed in the impugned order. Legal precedents were cited to support the contention that each building must have more than twelve units for it to be classified as a Residential Complex, emphasizing the importance of this aspect in determining the tax liability.Issue 4: Point of limitation regarding the time frame for raising the demand of Service TaxThe appellant raised a point of limitation, asserting that the demand raised in the present case was time-barred. They argued that a previous show cause notice issued in 2008 for a different category of services should have covered the activities now in question. The Tribunal examined the timeline of events, including the issuance of show cause notices and the subsequent demand for service tax, to determine whether the extended period of limitation could be invoked in this case.In conclusion, the Tribunal found in favor of the appellant on multiple grounds. They held that the demand of tax was time-barred due to the previous show cause notice and that the activities undertaken by the appellant for Noida Authority did not fall under the category of taxable services. The judgment emphasized the importance of meeting specific criteria, such as the number of residential units in a building, for classification under relevant tax provisions. The impugned order confirming the demand of service tax was set aside, and the appeal was allowed in favor of the appellant.