Service Tax Not Applicable on Unfinished Flat Sale; Only on Post-Sale Completion Costs, Tribunal Rules.

The Tribunal ruled in favor of the appellant, determining that service tax is not applicable to the value of the unfinished flat at the time of sale or agreement of sale. The appellant is liable for service tax only on amounts received for completing the unfinished flat after the sale. The Tribunal also clarified that service tax does not apply to other charges like electricity installation and maintenance. The appellant must reconcile tax payments, considering any excess payments made, and adjust the final tax liability. The appeal was allowed, and the impugned order was set aside.

---

---

Issues involved:
The issue involved in this appeal is whether the appellant assessee is liable to service tax on the sale value of the unfinished flat, for which the agreement of sale/sale deed was entered and thereafter vide separate agreement, the appellant builder completed the construction for separate consideration.

Summary:

Issue 1: Liability to Service Tax on Unfinished Flat Value
The appellant argued that service tax cannot be demanded on the value of the unfinished flat sold, as there was no agreement of service until the execution of the sale deed. The appellant contended that the amount attributed to the value of the unfinished flat, as per the sale deed, should be excluded from the gross value. The Tribunal held that the appellant is not liable to service tax on the value of the unfinished flat, including the value of undivided share in land, as on the date of sale or agreement of sale. The appellant is only liable to service tax for receipts received towards finishing the unfinished flat(s) after the date of sale. The Tribunal clarified that service tax is not applicable to other receipts like electricity installation, maintenance charges, and maintenance security. The appellant is liable to service tax under Works Contract Service (WCS) only on the amount attributed to construction activity after the agreement of sale or execution of sale deed.

Issue 2: Calculation of Tax Liability
The appellant demonstrated through a table that they had paid an excess amount compared to the service tax payable. Citing a precedent order, the appellant requested relief based on the excess payment. The Tribunal allowed the appeal, set aside the impugned order, and directed the appellant to file a calculation of tax in line with the Tribunal's decision. The adjudicating authority was instructed to consider any additional taxes paid by the appellant and adjust the final tax liability accordingly.

Conclusion:
The Tribunal ruled in favor of the appellant, stating that service tax is not applicable to the value of the unfinished flat at the time of sale. The appellant is liable for service tax only on receipts related to finishing the unfinished flat post-sale. The Tribunal directed the appellant to reconcile tax payments and adjust the final tax liability accordingly. The appeal was allowed, and the impugned order was set aside.

---