Promoters not liable for service tax on residential construction until July 2010, educational buildings exempt

CESTAT Chennai allowed the appeal regarding non-payment of service tax on works contracts. The tribunal held that promoters/developers are not liable for service tax on residential complex construction until 1.7.2010, and appellant's claimed abatement was valid. For engineering college construction, no service tax applied as the building served educational purposes per CBEC circular. The extended limitation period was improperly invoked as appellant acted in good faith following board clarifications, with no evidence of suppression or evasion. Previously paid amount of Rs.32,15,158 remained undisturbed.

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Issues Involved:
1. Demand under 'Works Contracts Service' for construction of residential complex.
2. Demand under 'Works Contracts Service' for construction of Engineering College.
3. Invocation of the extended period of limitation.

Summary:

1. Demand under 'Works Contracts Service' for construction of residential complex:
The Tribunal examined the demand made for the period April 2009 to February 2012. The appellant, categorized as a builder/promoter/developer, was initially not liable to pay service tax as per Circular No. 108/02/2009 dated 29.01.2009. For the period prior to 1.7.2010, the Tribunal held that the appellant is not liable to pay service tax under 'Works Contracts Service' for construction of residential complexes. Post 1.7.2010, the appellant paid service tax but the department denied abatement. The Tribunal found this denial erroneous, holding that the appellant is entitled to abatement, referencing the case of Heavy Engineering Corporation Ltd. VS CCGST - 2023 (8) Centax 287 (Tri.-Calcutta). Consequently, the demand for the disputed period was set aside, maintaining the payment of Rs.32,15,158/- made by the appellant.

2. Demand under 'Works Contracts Service' for construction of Engineering College:
The appellant argued that the construction of the Engineering College for M/s.KTVR Siddhammal Charitable Trust was not for commercial purposes. The Tribunal referred to CBEC Circular No.80/10/2004-ST dated 17.09.2010, which clarified that buildings used solely for educational purposes are non-commercial and not subject to service tax. Since the college was recognized by AICTE and used solely for educational purposes, the Tribunal held that the construction activity could not be subjected to service tax.

3. Invocation of the extended period of limitation:
The Tribunal noted that the demand was based on figures from the appellant's accounts, with no evidence of suppression of facts or intent to evade tax. The appellant had followed the Board's circular and paid service tax accordingly. The Tribunal ruled that the invocation of the extended period was not legal and proper, thereby answering the issue of limitation in favor of the appellant.

Conclusion:
The appeal was allowed with consequential relief, maintaining the payment of Rs.32,15,158/- made from 1.7.2010 to February 2012.

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