Promoter/builder/developer not liable for service tax on residential complexes before July 1, 2010 under Section 65(105)(zzzh)

CESTAT Chennai held that promoter/builder/developer is not liable to pay service tax for construction of residential complexes for period prior to 1.7.2010. The tribunal relied on CBEC Circular No.108/2/2009-ST dated 29.01.2009 clarifying exemption from service tax liability. Following precedent in Krishna Homes case and recent tribunal decision, the demand under Works Contract Service was unsustainable. The explanation added to Section 65(105)(zzzh) effective 1.7.2010 confirmed no liability existed before this date. Appeal allowed, impugned order set aside with consequential reliefs.

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Issues:
1. Whether the demand raised under 'Works Contract Service' against the appellant, a promoter/developer engaged in construction of residential complexes, for the period prior to 1.7.2010 is sustainable.

Analysis:
The appellant, engaged in construction services, stopped paying service tax from February 2009 following a CBEC circular. The Department issued a show cause notice demanding service tax for the period from 1.2.2009 to 30.09.2009. The original authority confirmed the demand, interest, and penalties. The appellant argued that as per Circular No. 108/2/2009-ST, promoter/builder/developer is not liable to pay service tax until 1.7.2010. They cited a Tribunal decision in Krishna Homes Vs CCE Bhopal, where demand against promoters/builders for construction of residential complexes was set aside based on the circular. The appellant contended that the demand cannot sustain due to the circular exempting them from service tax obligations.

The issue before the Tribunal was whether the demand raised under 'Works Contract Service' against the appellant, a promoter/developer, for the period before 1.7.2010 was sustainable. The Tribunal considered Circular No. 108/2/2009-ST, which clarified that promoter/builder/developer is not required to pay service tax for construction of residential complexes. Referring to the decision in Krishna Homes case, the Tribunal held that the demand could not be sustained. The Tribunal highlighted the explanation added to Section 65(105)(zzzh) from 1.7.2010, deeming builder/promoter/developer as a service provider to the buyer for construction of residential complexes. Relying on a recent decision, the Tribunal set aside the demand, concluding that the appellant was not liable to pay service tax prior to 1.7.2010. The impugned order was overturned, and the appeal was allowed with consequential reliefs, if any.

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