2024 (6) TMI 443 - AT - Service Tax

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

M/s. Indira Housing Versus The Commissioner of Service Tax, Chennai

The CESTAT Chennai allowed the appeal of a promoter/builder who had entered into joint venture agreements for construction of residential complex services ... Liability of appellant to discharge service tax - Construction of Residential Complex Services - period October 2007 to September 2011 - HELD THAT:- On perusal of the SCN, it is noted that the appellant had entered into Joint Venture agreements with the land owners for the Construction of Residential Complex Services. It is clear that the appellant is a Promoter/Builder of residential projects and as per the clarification of the Board Circular vide No.108/2/2009 dated 29.01.2009, the demand raised against the appellant for Construction of Residential Complex Services is unsustainable. The issue as to whether a Promoter/Builder is liable to pay service tax, was considered by the Tribunal in the case of M/s.Krishna Homes Vs. Commissioner of Central Excise [2014 (3) TMI 694 - CESTAT AHMEDABAD] and it has held that the demand of service tax against the promoter/builder/developer cannot sustain for the period prior to 01.07.2010. The said decision was followed by the Tribunal in the case of Pragati Edifice Pvt. Ltd Vs. Commissioner of Central Excise & Service Tax [2019 (9) TMI 792 - CESTAT HYDERABAD] wherein it was held that the demand raised under construction of residential projects against the Promoter/Builder cannot sustain for the period prior to 01.07.2010. Apart from this, the Works Contracts are composite in nature, involving both supply of material and rendition of services, and are composite in nature. The Tribunal in the case of Real Value Promoters Pvt Ltd [2018 (9) TMI 1149 - CESTAT CHENNAI] has considered the issue as to whether the demand can be raised under Residential Complex Services/Commercial/Industrial Services for the period prior to 01.07.2012, when the contracts are composite in nature and has held that the demand of service tax for composite contracts can be made only under Works Contracts Services. The impugned order is set aside - Appeal allowed. 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.