Service tax classification for residential flat construction turned on works contract service, not construction of residential complex service.

Service tax on construction of residential flats was not chargeable for the period before 1 July 2010, in view of the Board circular. For the period after that date, the activity was taxable, where applicable, as works contract service under section 65(105)(zzzza) of the Finance Act, 1994, and not under construction of residential complex service. The demand was therefore unsustainable under the wrong head of tax classification.

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Issues: Whether service tax was leviable on construction of residential flats for the period April 2010 to March 2011, and whether the demand could be sustained under the head of construction of residential complex service instead of works contract service.

Analysis: For the period prior to 01.07.2010, service tax was held not chargeable on construction of residential property or flats in view of the Board circular. For the period after 01.07.2010, the demand was found to have been raised under the wrong category, because construction of residential property or flats was taxable, where applicable, as works contract service under Section 65(105)(zzzza) of the Finance Act, 1994, following the precedent of the Tribunal.

Conclusion: The demand was unsustainable under construction of residential complex service, and the proper classification was works contract service; the appeal was allowed and the impugned order was set aside.

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