Appellant wins appeal on construction tax demand; High Court order stands; major demand set aside

The Tribunal ruled in favor of the appellant, setting aside the demand related to construction of residential flats due to the absence of a service tax recovery mechanism. The decision was based on legal precedents and the absence of a stay on the High Court's order pending appeal in the Apex Court. The appeal was disposed of accordingly, with the confirmed demand subject to interest and penalty, while the major demand was set aside.

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Issues:
Appeal against demand of service tax on construction of residential flats and renting of immovable property service.

Analysis:
The appellant was involved in constructing residential flats without paying service tax, leading to an investigation and issuance of a show cause notice for service tax demand. The adjudicating authority partially dropped the demand on construction of residential flats but confirmed it for renting of immovable property service. The Commissioner (Appeals) set aside the dropping of demand for residential flats, resulting in a total demand of Rs. 74,98,182. The appellant contested the demand of Rs. 71,73,190, arguing the absence of a mechanism for service tax recovery on construction of residential flats, citing a Tribunal case. The respondent countered with a High Court decision, pending appeal in the Apex Court, challenging the Tribunal case's relevance.

The Tribunal analyzed the issue, considering the High Court's stance on following its orders until overturned by the Apex Court. Referring to a similar case, the Tribunal concluded that service tax was not payable due to the absence of a recovery mechanism, aligning with the Tribunal's previous decision. Consequently, the demand of Rs. 71,73,190 was set aside, with no penalty imposed. However, the appellant accepted a demand of Rs. 3,24,992, which was confirmed along with applicable interest and penalty under the Finance Act, 1994.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand related to construction of residential flats due to the absence of a service tax recovery mechanism. The decision was based on legal precedents and the absence of a stay on the High Court's order pending appeal in the Apex Court. The appeal was disposed of accordingly, with the confirmed demand subject to interest and penalty, while the major demand was set aside.

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