2025 (2) TMI 480 - AT - Service Tax

Developer wins appeal on service tax classification for composite works contracts involving property transfer

Shri. V.R. Nachimuthu Versus Commissioner of CGST & CE, Salem

CESTAT Chennai allowed the appeal in favor of the developer regarding service tax liability under construction of complex service for January 2009 to ... Levy of service tax - whether the activities of the appellant developer is exigible to service tax under construction of complex service for the period from January 2009 to March 2010? - HELD THAT:- The issue stands decided in the appellant’s favour by the decision of this Tribunal in the appellant’s own case in M/S. SMS GARDENS PVT. LTD. AND M/S. V.R. NACHIMUTHU (CBE) VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, SALEM [2021 (1) TMI 1213 - CESTAT CHENNAI]. In the said decision in para 4.1, the activities of the appellant have been discussed and it was held that 'The show cause notices in all these cases prior to 1.6.2007 and subsequent to that date for the periods in dispute, proposing service tax liability on the impugned services involving composite works contract, under ‘Commercial or Industrial Construction Service’ or ‘ Construction of Complex’ Service, cannot therefore sustain.' Conclusion - For composite contracts involving transfer of property in goods, service tax liability would fall under Works Contract Service. The impugned order in appeal upholding the impugned order in original of the adjudicating authority confirming the demand under construction of complex service together with demand of appropriate interest and penalties imposed, is unsustainable and is liable to be set aside - Appeal allowed. The Appellate Tribunal considered the appeal challenging the demand of service tax made for the period January 2009 to March 2010 under Section 73(2) of the Finance Act, 1994. The main issue was whether the appellant's activities as a developer in the construction of residential complexes were subject to service tax during the mentioned period.The appellant, engaged in construction services, argued that Circular No.108/02/2009-ST clarified that construction services provided by the developer would not be taxable before July 1, 2010. The appellant relied on various tribunal decisions and a Supreme Court ruling to support their position that service tax was not applicable to their activities during the relevant period.The Tribunal referred to its own decision in the appellant's previous case, where it was held that construction services involving composite contracts, such as those provided by the appellant, were not subject to service tax under the categories of commercial or industrial construction service or construction of complex service. The Tribunal emphasized that for composite contracts involving transfer of property in goods, service tax liability would fall under Works Contract Service.Based on the precedent set by previous decisions, including those affirmed by the Supreme Court, the Tribunal concluded that the demand for service tax under construction of complex service, along with interest and penalties, was unsustainable. Therefore, the impugned orders confirming the demand were set aside, and the appeal was allowed with consequential relief as per law.In summary, the Tribunal ruled in favor of the appellant, holding that their construction activities did not attract service tax for the period in question, based on the nature of the contracts involved and relevant legal interpretations.