Service tax demand against promoters/builders cannot be sustained for period prior to July 2010 per Board Circular

The CESTAT Chennai allowed the appeal of a promoter/builder who had entered into joint venture agreements for construction of residential complex services during October 2007 to September 2011. The tribunal held that service tax demand against promoters/builders cannot be sustained for the period prior to 01.07.2010, citing Board Circular No.108/2/2009 and following precedents from Krishna Homes and Pragati Edifice cases. The tribunal further ruled that for composite contracts involving both material supply and services, service tax demands can only be raised under Works Contracts Services, not under Residential Complex Services for the period before 01.07.2012. The impugned order was set aside.

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Issues:
Whether the appellant is liable to discharge service tax under the category 'Construction of Residential Complex Services' for the period from October 2007 to September 2011.

Detailed Analysis:
The appellant, a partnership firm engaged in providing Construction of Complex Services, was found to have not discharged service tax for various periods. Show Cause Notices were issued proposing to demand service tax, interest, and penalty. The Original Authority confirmed the demand, interest, and penalty, which was upheld by the Commissioner (Appeals), leading the appellant to appeal before the Tribunal.

The appellant argued that as a Promoter/Developer/Builder, they are not liable to pay service tax for construction of residential projects prior to 01.07.2010, citing a Board Circular. The appellant contended that the services provided were composite in nature, involving both material supply and services, and referenced a previous Tribunal decision to support their case.

The department's Authorized Representative reiterated the findings in the impugned order during the hearing. The Tribunal considered the issue of the appellant's liability to discharge service tax under the category 'Construction of Residential Complex Services' for the specified period. It was noted that the appellant had entered into Joint Venture agreements for such services, and based on a Board Circular, the demand raised against the appellant was deemed unsustainable.

Referring to a previous Tribunal decision involving a similar issue, it was established that the demand for service tax against a Promoter/Builder cannot sustain for the period prior to 01.07.2010. The Tribunal also discussed the nature of Works Contracts being composite in cases where both material supply and services are involved, leading to the conclusion that the demand under Construction of Residential Complex Services could not be sustained.

Consequently, the impugned order was set aside, and the appeals were allowed with any consequential reliefs.

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