Service tax not leviable on construction of residential complex for Army personnel during 2005-2010 period

CESTAT Bangalore held that service tax was not leviable on construction of residential complex services for Army personnel during 16.06.2005 to 31.05.2007. Following SC precedents in Larsen Toubro Ltd. and Total Environment Building Systems, the tribunal ruled works contracts were not chargeable to service tax prior to 01.06.2007. For period 01.06.2007 to 31.05.2010, tribunal relied on Sugandha Construction precedent establishing service tax was not leviable on service element of works contracts. The impugned order was set aside and appeal allowed.

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Issues:
The judgment involves the liability of service tax on 'Renting of Immovable Property Service' and 'Works Contract Service' u/s 68, 77, and 78 of the Finance Act, 1994.

Liability for Service Tax - Period Prior to 01.06.2007:
The appellant, engaged in construction, argued that prior to 01.06.2007, there was no charging section for service tax on 'Works contract service'. They relied on the judgment of the Hon'ble Supreme Court in CC Vs. Larsen & Toubro Ltd (2015 (39) STR 913 (SC)) to support their claim that demand for the period from 2005-2007 is unsustainable. The Tribunal noted that tax liability for residential units built for the Ministry of Defence personnel was clarified by the jurisdictional Commissionerate, stating that if the layout does not require approval by any authority, it is excluded from tax entry. Consequently, the construction activity for the Ministry of Defence personnel was found not liable for service tax for the period prior to 01.06.2007.

Liability for Service Tax - Period from 01.06.2007 to 31.05.2010:
Regarding the liability for service tax for the period from 01.06.2007 to 31.05.2010, the appellant argued that service tax is not applicable to construction of residential complexes for the Ministry of Defence, as layouts for Defence Services do not require approvals as clarified by the Ministry of Finance. They cited relevant judgments and circulars to support their position. The Tribunal, considering the submissions and precedents, concluded that the appellant is not liable for service tax for construction of residential units for the army personnel during this period.

Conclusion:
The Tribunal held that the appellant is not liable for service tax for the construction of residential units for the Ministry of Defence personnel, both for the period prior to 01.06.2007 and from 01.06.2007 to 31.05.2010. The judgment was based on the interpretations of relevant laws, circulars, and judicial precedents, including the decisions of the Hon'ble Supreme Court and other Tribunals. As a result, the impugned order was set aside, and the appeal was allowed with consequential relief, if any, in accordance with the law.

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