2019 (3) TMI 863 - AT - Service Tax

Tribunal rules in favor of appellant, overturning demand for construction services; detailed analysis and legal precedents cited.

Ashok Kumar Mittal Versus C.C.E. & S.T. -Raipur

The Tribunal ruled in favor of the appellant, setting aside the demand and penalties related to the construction of residential complex service and Works ... Construction of residential complex service - the appellant have constructed individual row houses, where in each block there is one residential unit - demand of service tax - Held that:- It is admitted fact that the appellant have constructed individual row houses/units and not a building/buildings having more than 12 residential units which is the condition precedent for categorization of service under the category of ‘construction of residential complex service’. The ruling of a coordinate Bench of this Tribunal in the CST, New Delhi V/s Gandharva Infrastructure & Projects Ltd. [2017 (9) TMI 270 - CESTAT NEW DELHI] is per incurrium as it have erred in ignoring and not following the binding ruling of Hon’ble Supreme Court in the case of Commissioner v. Macro Marvel Projects Ltd. [2008 (9) TMI 80 - CESTAT, CHENNAI] wherein under similar facts and circumstances where row houses were constructed under a housing scheme having one unit in each house, it have been held that such activity is not liable to Service Tax under ‘Construction of Residential Complex Service’. Appeal allowed - decided in favor of appellant. Issues:1. Whether the demand under the category of construction of residential complex service was rightly raised.2. Classification of the appellant's activities under the category of Works Contract Service.3. Invocation of the extended period of limitation.Analysis:Issue 1:The primary issue in this appeal was whether the demand under the category of construction of residential complex service was correctly raised. The appellant had undertaken civil construction work for the Chhattisgarh Housing Board (CHB), involving various contracts for residential houses, roads, bridges, and other related structures. The Commissioner (Appeals) dropped the demand for some works, citing specific exemptions for activities like road construction. However, the demand under the construction of residential complex service was upheld, considering the contracts as divisible due to the supply of materials by the appellant. The appellant claimed benefits under specific notifications due to the lack of evidence regarding VAT payments on goods supplied. The Tribunal, after considering the arguments, ruled in favor of the appellant, noting that the constructed units were individual row houses, not buildings with more than 12 residential units, a prerequisite for classification under the construction of residential complex service. The Tribunal also criticized a previous ruling for not following a binding Supreme Court decision, ultimately setting aside the demand and penalties.Issue 2:Another key aspect raised in the appeal was the classification of the appellant's activities under the Works Contract Service category, as per established legal principles. The appellant argued that their activities constituted composite contracts involving both goods and services, falling under Works Contract Service from June 1, 2007, based on a Supreme Court precedent. The Tribunal, however, focused on the specific nature of the constructed units and their compliance with the criteria for residential complex services, ultimately deciding in favor of the appellant and rejecting the Works Contract Service classification.Issue 3:Regarding the invocation of the extended period of limitation, the appellant contended that under the given facts and circumstances, such an extension was not warranted. The Tribunal did not delve deeply into this issue as the primary focus was on the classification of services and the specific nature of the constructed units. No specific proposal in the show cause notice regarding Works Contract Service further supported the Tribunal's decision to set aside the demand and penalties.In conclusion, the Tribunal's detailed analysis and reliance on legal precedents led to a favorable outcome for the appellant, setting aside the demand and penalties related to the construction of residential complex service and Works Contract Service, based on the specific nature of the constructed units and the applicable legal principles.