2019 (2) TMI 476 - AT - Service Tax

Appellant wins appeal on service tax for residential bungalows under construction

Mehta & Modi Homes Versus CCT, Secunderabad - GST

The appellant, a works contract service provider, sold residential bungalows under construction and ceased service tax payment based on CBEC ... Taxability - Construction of Complex Services - period April, 2006 to December, 2010 - Held that:- On an identical issue, in the case of Kolla Developers & Builders [2018 (11) TMI 164 - CESTAT HYDERABAD] this Bench has held that construction of residential complex by the builders prior to 01.07.2010 is not taxable in terms of CBEC Circular No. 108/2/2009-ST dated 29.01.2009 and No. 151/2/2012-ST dated 10.02.2012 - appeal allowed - decided in favor of appellant. Issues:1. Applicability of service tax on the sale of residential bungalows under construction.2. Interpretation of the term 'residential complex' for service tax purposes.3. Availability of personal use benefit for buildings intended for personal use.4. Tax levy on the sale of under-construction units pending before the Supreme Court.5. Contention on limitation for the tax demand.Analysis:1. The appellant, registered under works contract service, sold residential bungalows under construction and discontinued service tax payment based on CBEC clarifications. A show cause notice demanded service tax for the period April 2006 to December 2010. The Commissioner confirmed the demand and penalties, leading to the appeal.2. The appellant argued that their construction did not fall under the definition of a residential complex per Sec.65(91a) of the Finance Act, 1994, as none of their buildings had more than 12 units. Citing relevant case laws and a previous decision by the Bench, they contended that they should not be charged service tax.3. Additionally, the appellant claimed that since the complex was intended for personal use, the benefit of personal use exclusion should apply, further supporting their position against the service tax levy.4. The appellant also raised the issue of the pending Supreme Court decision on the tax levy for under-construction units, questioning the finality of the tax imposition. They contested the demand on grounds of limitation as well.5. In a similar case, the Bench had previously ruled that construction of residential complexes before July 2010 was not taxable based on CBEC circulars. Following this precedent, the Bench found in favor of the appellant, setting aside the demand, interest, and penalties, thus allowing the appeal with consequential relief.