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of <h1>Residential complex construction not subject to service tax</h1> <h3>Prime Developers, Pushpak Enterprise, Prakruti Developers and Samruddhi Constructions Versus C.C.E. & S.T. -Vadodara-I</h3> Prime Developers, Pushpak Enterprise, Prakruti Developers and Samruddhi Constructions Versus C.C.E. & S.T. -Vadodara-I - TMI The issues involved in the present appeals are:(i) Whether carrying out activity of Construction of Residential Complex (with material) as a developer, where the contract was executed before 01.06.2007 and where services were provided before and after 01.06.2007, is liable to service tax for the period up to 01.06.2007 at all, and after such date under 'Residential Complex Service'.(ii) In connection with the demand on the above issue in respect of the amount of service tax paid during the investigation, whether the appellant is entitled to a refund or otherwise and whether refund is barred by Section 73 (3) of Finance Act, 1994 as upheld in the impugned orders.Issue (i): Liability to Service Tax on Construction of Residential ComplexThe appellant argued that the construction service provided along with material falls under the category of works contract service, not under the Construction of Residential Complex. The show cause notice itself admitted this by extending a 67% abatement, which is only available when the service is provided along with material. It was contended that works contract service was not taxable until 01.06.2007, and even post this date, the demand under the Construction of Residential Complex category is unsustainable. The appellant also cited CBIC Circulars and judgments to support the claim that no service tax was applicable on developers of residential complexes until 01.07.2010.The Tribunal found that the construction of residential complex with material is classifiable under works contract service, which was not taxable up to 01.06.2007 as per the Supreme Court judgment in Total Environment Building System P. Ltd. For the period post 01.06.2007, the demand was not sustainable as it was raised under the wrong category. Additionally, as per the Board Circular No. 108/02/2009 dated 29.01.2009, construction service provided by the builder/developer was not taxable up to 01.07.2010.Issue (ii): Entitlement to Refund of Service Tax Paid During InvestigationThe appellant argued that the refund is due for the service tax deposited during the investigation since the demand itself is not sustainable. The lower authorities denied the refund based on Section 73 (3) of the Finance Act, 1994, which the appellant contended was not applicable as a show cause notice was issued. The Tribunal agreed, stating that Section 73 (3) applies only when service tax is paid along with interest and no show cause notice is issued. Since a show cause notice was issued in this case, the rejection of the refund was deemed baseless and untenable.ConclusionThe Tribunal set aside the demand of service tax and allowed the appellant's entitlement to the refund as a consequential benefit. All the appeals were allowed accordingly.(Pronounced in the open court on 21.07.2023)
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