Revenue loses appeal as service tax demands totaling Rs 72 crores dropped for time-bar and improper reclassification under Section 65A

CESTAT Hyderabad dismissed Revenue's appeal challenging Commissioner's order dropping service tax demands. The tribunal upheld dismissal of Rs. 50,86,324/- demand for pre-June 2007 period as time-barred, rejected Rs. 17,84,97,162/- differential demand due to improper reclassification from residential complex construction to works contract service under Section 65A, and confirmed dropping Rs. 3,98,08,809/- demand under Section 73A for lack of evidence of tax collection without payment. Only Rs. 21,029/- GTA service demand was confirmed.

---

---

Issues Involved:
1. Demand of Rs. 50,86,324/- under "Construction of Residential Complex" services.
2. Demand of Rs. 20,17,82,210/- under "Works Contract Service."
3. Demand of Rs. 3,98,08,809/- under Section 73A.
4. Demand of Rs. 21,029/- under "GTA Services."

Summary:

1. Demand of Rs. 50,86,324/- under "Construction of Residential Complex" services:
The Tribunal held that the demand for Rs. 50,86,324/- does not survive as service tax cannot be levied on transactions between a developer/service provider and a purchaser of a flat prior to 01.07.2010. This was consistent with previous rulings in similar matters.

2. Demand of Rs. 20,17,82,210/- under "Works Contract Service":
The Tribunal observed that the demand was wrongly classified under "Works Contract Service" instead of "Construction of Residential Complex." The Commissioner noted that service tax was only chargeable from 01.07.2010 and not on the constructed area shared with the landowner. The difference of Rs. 18 crores was due to the erroneous reclassification by the Department, and thus, the demand was dropped.

3. Demand of Rs. 3,98,08,809/- under Section 73A:
The Commissioner detailed the reasons for the difference in the proposed and actual deposited amounts, noting that the service tax was proposed on non-taxable values such as projects below 12 units, projects not commenced, and projects transferred to other service providers. The demand was dropped as it was found that the service tax was rightly paid by the assessee, and the show cause notice was issued erroneously.

4. Demand of Rs. 21,029/- under "GTA Services":
The Tribunal confirmed that the demand of Rs. 21,029/- under GTA services was paid prior to the issuance of the show cause notice and was appropriated in the first Order-in-Original. Therefore, this issue no longer survives.

Conclusion:
The Tribunal found no illegality or impropriety in the impugned order and dismissed the Revenue's appeal. The cross-objections by the respondent-assessee were also disposed of, and the assessee was entitled to consequential benefits as per law.

---