2023 (3) TMI 445 - AT - Service Tax

Tribunal rules in favor of appellant in Service Tax appeal for residential complexes

M/s. South India Shelters Private Limited Versus Commissioner of Central Excise, Chennai

The Tribunal ruled in favor of the appellant, M/s. South India Shelters Pvt. Ltd., Chennai, in the appeal against a Service Tax Order-in-Original for ... Short payment of service tax - Construction of Residential Complex Service - non filing of periodical ST-3 returns - allegations against the assessee are that they were engaged in the construction of residential complexes, which became taxable on 16.06.2005, but they have taken registration with the Department only during June 2008 - HELD THAT:- The demand period in the impugned order covers the period from May 2006 to June 2010, ie under the category of ‘Construction of Residential Complex Service’ for the periods from May 2006 to September 2009 in respect of project namely, SIS Danube and under the category of ‘Works Contract’ for the period from March 2008 to September 2009 in respect of project namely, SIS Safaa and another Notice dated 06.04.2011 proposing to levy Service Tax under the category of Works Contract for SIS Safaa for the period from October 2009 to June 2010. Works Contract Service came under Service Tax levy with the introduction of section 65(105)(zzzza) in the Finance Act 1994 from 01/06/2007. The period covered under the demand for works contract as per the impugned order is post 01/06/2007 and hence the service rendered by the appellant is prima facie eligible for the levy of service tax - the co-ordinate Delhi Bench of the Tribunal in the case of M/S KRISHNA HOMES VERSUS CCE, BHOPAL AND CCE, BHOPAL VERSUS M/S RAJ HOMES [2014 (3) TMI 694 - CESTAT AHMEDABAD] has examined the liability of a builder/developer/promoter to pay service tax on the construction of residential complex for its customers. The Tribunal has taken notice of C.B.E.C. Circular No. 332/35/2006-TRU dated 01/08/2006 wherein it was clarified that where a builder/developer/promoter builds a residential complex engaging a contractor, the contractor shall be liable to pay service tax on the gross amount charged under construction of complex service and if no person is engaged by the builder/developer/promoter and who undertakes construction work on his own, the question of providing taxable service to any person by any other person does not arise and it would be in the nature of self service. Since the period where duty has been demanded in the impugned order is prior to 01/07/2010, no liability for paying tax either under ‘construction of complex service’ or ‘works contract’ would lie on the builder/developer/promoter during the period covered by the impugned order. Appeal allowed. Issues:Appeal against Service Tax Order-in-Original for construction of residential complexes.Analysis:1. Allegations and Registration: The appellant, M/s. South India Shelters Pvt. Ltd., Chennai, faced allegations for engaging in taxable construction activities without appropriate Service Tax payment and delayed registration with the Department. Notices were issued demanding Service Tax for specific periods. 2. Appellant's Arguments: The appellant contended that a developer of residential complexes is not liable to pay Service Tax before 01.07.2010 based on CBEC Circular No. 108/02/2009-S.T. They argued that the demand for the period from May 2006 to September 2009 is time-barred and cited relevant case laws in their favor. 3. Revenue's Position: The Revenue argued that the appellant undertakes construction services for clients based on agreements for land sale and flat construction. They highlighted the taxable nature of construction services under the Act and emphasized the presence of service elements in the agreements. 4. Legal Precedents: The judgment referred to legal precedents, including the Supreme Court's decision in CCE vs. Larsen & Toubro Ltd., emphasizing that pure service contracts are taxable, while composite work contracts were not liable for service tax before 01/06/2007. 5. Decision on Tax Liability: The Tribunal ruled in favor of the appellant, stating that the demand for Service Tax on construction of residential complexes pre and post 01/06/2007 was not valid. The liability of a builder/developer to pay service tax on such activities was examined, and it was concluded that no tax liability existed before 01/07/2010. 6. Outcome: The impugned order was set aside, and the appeals were allowed in favor of the appellant. No orders were passed on other issues raised, and consequential relief was granted as per the law.