Builder exempt from service tax pre-2010 on construction activities. Interest and penalties set aside.

The Tribunal allowed the appeal, ruling that the appellant, a builder of residential complexes, was not liable to pay service tax for the period before 01.07.2010 on construction activities. The decision was based on established legal principles, circulars, and case laws supporting the non-taxability of such services before the specified date. Consequently, the interest and penalties imposed were set aside, providing relief to the appellant.

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Issues:
1. Liability of service tax on construction activity by a builder prior to 01.07.2010.
2. Imposition of interest and penalties.

Analysis:
1. The appellant, a builder of residential complexes, sold undivided portions of land along with semi-constructed apartments. The service tax department observed that the appellant had not discharged service tax on the amount received for construction during April 2008 to September 2008. The appellant calculated the service tax liability after availing abatement and paid the same. Subsequently, a show cause notice was issued demanding the unpaid service tax, imposing penalties under Sec.76 and 77 of the Finance Act. The lower authority confirmed the demand, interest, and penalties. The appellant appealed against this decision.

2. The appellant contended that construction services by a builder before 01.07.2010 were not liable for service tax, citing circulars issued by the Board and relevant case laws. The circulars clarified that construction services provided by builders before 01.07.2010 were not taxable. The appellant relied on case laws such as Krishna Homes, UB Construction Pvt Ltd, and Vinayaka Homes, which supported the non-taxability of such services before the specified date. The Tribunal also acknowledged the settled legal position that construction services by builders before 01.07.2010 were not taxable, as confirmed by the circulars and previous judgments. Therefore, the appellant was not required to pay service tax for the period in question, and consequently, interest and penalties were set aside.

3. The Tribunal, after considering the arguments and legal precedents, allowed the appeal, stating that the appellant was not liable to pay service tax for the relevant period before 01.07.2010. The decision was based on the settled legal position, circulars, and case laws supporting the non-taxability of construction services by builders before the specified date. As a result, the interest and penalties imposed were also set aside, providing consequential relief to the appellant.

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