Service tax demand set aside for residential complex construction involving composite contracts and personal use

CESTAT Chennai allowed the appeal against service tax demand on construction of residential complex services. The appellant received amounts from Tamil Nadu Police Housing Corporation for construction activities during 2005-2006 and 2007-2008 to 2009-2010. Following precedents including K. Elango Packiaraj and Nithesh Estates Ltd., the Tribunal held that service tax demand cannot sustain when ultimate owner receives property for personal use and when construction activities involve composite contracts of materials and labour. The demand was set aside for all periods.

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Issues Involved:
1. Liability to pay Service Tax on construction activities for Tamil Nadu Police Housing Corporation.
2. Applicability of Service Tax for the period prior to 01.06.2007.
3. Definition and scope of 'Construction of Residential Complex' services for the period 2007-2008 to 2009-2010.

Summary:

Issue 1: Liability to pay Service Tax on construction activities for Tamil Nadu Police Housing Corporation
The appellant, engaged in 'Construction of Residential Complex' for Tamil Nadu Police Housing Corporation, was issued Show Cause Notices for the period 2005-2006 and 2007-2008 to 2009-2010, proposing to demand Service Tax along with interest and penalties. The original authority confirmed the demand, which was upheld by the Commissioner (Appeals). The appellant contested this before the Tribunal.

Issue 2: Applicability of Service Tax for the period prior to 01.06.2007
For the period prior to 01.06.2007, the Tribunal referenced the Hon'ble Supreme Court decision in Commissioner of Central Excise and Customs, Kerala v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)], which held that Service Tax on composite construction activities (involving both materials and services) cannot be levied prior to this date. Consequently, the demand for this period was set aside.

Issue 3: Definition and scope of 'Construction of Residential Complex' services for the period 2007-2008 to 2009-2010
For the period 2007-2008 to 2009-2010, it was argued that the construction services provided to Tamil Nadu Police Housing Corporation were intended for the residential use of police personnel. The Tribunal examined the definition under Section 65(91a) of the Finance Act, 1944, which excludes complexes intended for personal use. The Tribunal cited several decisions, including K. Elango Packiaraj Vs. Commissioner of Central Excise, Madurai [2020 (2) TMI 291-CESTAT CHENNAI] and Siva Engineering Company Vs. Commissioner of GST and Central Excise Coimbatore [2019(2) TMI 87-CESTAT CHENNAI], which supported the appellant's stance that such activities do not fall under the taxable category of 'Construction of Residential Complex' services. Therefore, the demand for this period was also set aside.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals with consequential reliefs, if any.

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