2022 (3) TMI 1259 - AT - Service Tax

Residential staff quarters not taxable as works contract or construction of complex service. Extended demand period not applicable.

The tribunal held that the construction of residential quarters for staff does not constitute taxable services under 'works contract service' or ... Classification of services - Works Contract Service or construction of residential quarters for their employees - CBEC circular F No. 332/16/2010-TRU dated 24.05.2010 - extended period of limitation - HELD THAT:- In the instant case, it is not the case of the department that the residential quarters, the construction of which was undertaken by the appellants, for Shree Cements Ltd, Bewar, Wonder Cements Ltd, Nimbahera and Power Grid Corporation of India are for commercial use in any manner. Tribunal in the case of M/S MANISHA PROJECTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & S.T., GHAZIABAD [2019 (3) TMI 448 - CESTAT ALLAHABAD] held C.B.E. & C. had issued Circular No. 80/10/2004-S.T., dated 17-9-2004 and in Para 13.2 clarified that the leviability of Service Tax was primarily dependent upon the use of the building or civil structure. Further, it clarified that it was to be ascertained where building or civil structure was used or to be used for commercial or industrial purpose and further required or gather the information as to whether the buildings or civil structures were being used or to be used for the purpose of making profit or not and clarified that if the building or civil structure was used or to be used not for the purposes of profit then the same are not taxable. Invocation of extended period - HELD THAT:- The issue involved is of interpretation and thus, the bona fides of the appellants to hold a different opinion cannot be suspected and thus extended period cannot be invoked. The impugned order is not sustainable on merits as well as limitation - Appeal allowed - decided in favor of appellant. Issues Involved:1. Classification of the service provided by the appellant.2. Applicability of service tax on the construction of residential quarters for employees.3. Invocation of the extended period for demand and penalty.Issue-wise Detailed Analysis:1. Classification of the Service Provided by the Appellant:The primary issue is whether the service provided by the appellant falls under 'construction of complex services' or 'works contract service.' The appellant argued that the construction of residential quarters for the staff/employees of their clients should be excluded from taxable services like 'construction of complex,' 'commercial or industrial construction,' and 'works contract service.' The appellant emphasized that these quarters were for personal use and not for commercial or industrial purposes. The department, however, contended that the service falls under 'works contract service' as per the explanation under Section 65(105)(zzzza) of the Finance Act, 1994.2. Applicability of Service Tax on the Construction of Residential Quarters for Employees:The appellants argued that the construction of residential quarters for staff does not fall under taxable services as they are meant for personal use and not for commercial or industrial purposes. They referenced CBEC circular F No. 332/16/2010-TRU dated 24.05.2010 and several tribunal decisions, including Khurana Engineering Ltd. Vs. Commissioner and Sugandha Construction Pvt. Ltd. Vs. CCE, Bhopal, which held that such constructions are not taxable. The department's position was that even residential complexes fall under taxable services post-1.07.2010 if they are part of a composite works contract.3. Invocation of the Extended Period for Demand and Penalty:The appellant contested the invocation of the extended period for demand, arguing that their records were audited without any objections being raised, and the issue involves interpretation of statute. They cited that penalties under Section 78 should not be invoked due to the bona fide nature of their interpretation. The tribunal found merit in this argument, noting that the issue involves interpretation and thus extended period and penalties cannot be justified.Conclusion:The tribunal concluded that the construction of residential quarters for staff does not fall under taxable services like 'works contract service' or 'construction of complex service' as they are for personal use and not for commercial or industrial purposes. The tribunal referenced various circulars and previous tribunal decisions supporting this view. Additionally, the tribunal held that the extended period for demand and penalties cannot be invoked due to the interpretative nature of the issue. Consequently, the appeal was allowed, and the impugned order was set aside, granting the appellant consequential relief as per law.