Service Tax Demand on Construction Services Disputed Period Ruled Unsustainable

The Tribunal held that the demand of service tax under Construction of Residential Complex Services was not sustainable for the disputed period due to the composite nature of the contracts involving both material supply and services. The decision in the case of M/s. Real Value Promoters (P) Ltd. was cited to support setting aside the demand, interest, and penalties. The Tribunal determined that post-01.06.2007, the demand could only be upheld under Works Contract Service. The appeal was allowed, and the impugned order was set aside with any consequential reliefs granted.

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Issues:
1. Whether demand of service tax under Construction of Residential Complex Services is sustainable.
2. Application of abatement benefit in case of composite contracts.
3. Applicability of previous judgments on demand of service tax.

Analysis:
1. The appellants were involved in construction of residential complexes without discharging service tax, leading to a show-cause notice for the period Oct.’06 to Mar.’11. The original authority confirmed the demand, interest, and penalties. The Tribunal initially dismissed the appeal, but the High Court remanded the matter for fresh consideration.

2. During the hearing, the appellant's counsel argued that the demand under Construction of Residential Complex Services cannot be sustained for the disputed period as the contracts were composite in nature involving both supply of material and services. Citing the case of M/s. Real Value Promoters (P) Ltd., the counsel sought to set aside the demand, interest, and penalties.

3. The Revenue's representative supported the findings in the impugned order. The Tribunal considered the issue of demand of service tax under various categories and referred to the decision in the case of M/s. Real Value Promoters (P) Ltd. The Tribunal held that for composite contracts post-01.06.2007, the demand can only be sustained under Works Contract Service. The counsel for the appellants highlighted the denial of abatement benefit, indicating the composite nature of the contracts involving both material supply and services. The Tribunal concluded that the demand of service tax under Residential Complex Service cannot be sustained. For the period pre-01.06.2007, the decision in the case of M/s. Larsen & Toubro was deemed applicable, stating that demand of service tax on composite contracts is not sustainable before the introduction of Works Contract Service. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.

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