Residential complex "Nilgiri Homes" exempt from service tax pre-01.07.2010. Correct computation ordered, interest/penalties set aside.

The Tribunal held that "Nilgiri Homes" qualifies as a residential complex subject to service tax. No service tax is applicable for services provided before 01.07.2010. The demand for service tax was remanded for correct computation, excluding non-taxable receipts. As service tax was not chargeable for agreements with individual buyers, interest and penalties were set aside. The appeal was allowed, and the impugned order was overturned with consequential relief.

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Issues Involved:
1. Applicability of service tax on construction services for individual houses versus residential complexes.
2. Taxability of construction services provided prior to 01.07.2010.
3. Correct computation of service tax demand.
4. Imposition of interest and penalties.

Issue-wise Detailed Analysis:

1. Applicability of Service Tax on Individual Houses versus Residential Complexes:
The appellants argued that they were constructing individual houses, not residential complexes, and thus were not liable for service tax. They referred to Section 65(91a) of the Finance Act, 1994, which defines a "residential complex" as a building or buildings with more than twelve residential units. They cited the Tribunal's decision in Macro Marvel Projects Ltd and Baba Constructions Pvt Ltd, which held that individual houses do not qualify as residential complexes. The department countered that the entire area, "Nilgiri Homes," qualifies as a residential complex due to common areas and facilities, and that individual houses are included in the definition of residential units. The Tribunal found that the earlier judgments did not consider the full definition, including the explanation that a "residential unit" includes a single house. Thus, the Tribunal concluded that "Nilgiri Homes" qualifies as a residential complex with more than twelve residential units, making it subject to service tax.

2. Taxability of Construction Services Provided Prior to 01.07.2010:
The appellants contended that no service tax is chargeable for construction services provided before 01.07.2010. The Tribunal acknowledged this argument and noted that part of the demand for the period January 2010 to December 2010 falls before 01.07.2010. Consequently, no service tax is applicable for services rendered prior to this date.

3. Correct Computation of Service Tax Demand:
The appellants argued that the demand was incorrectly computed on the sale deed value, including non-taxable receipts like the sale of land, VAT, and registration charges. The first appellate authority had already remanded the matter for re-computation of the demand. The Tribunal upheld this remand for accurate re-computation, excluding non-taxable receipts.

4. Imposition of Interest and Penalties:
The appellants argued against the imposition of interest and penalties. Given the Tribunal's findings that no service tax is chargeable on agreements entered into with individual buyers for completion of their buildings, the demands for interest and penalties were also set aside.

Conclusion:
The Tribunal concluded that "Nilgiri Homes" qualifies as a residential complex and is subject to service tax under the works contract service. However, no service tax is chargeable for services rendered prior to 01.07.2010. The matter was remanded for re-computation of the demand, excluding non-taxable receipts. Consequently, the demands for interest and penalties were set aside. The impugned order was set aside, and the appeal was allowed with consequential relief.

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