2025 (3) TMI 1063 - AT - Service Tax

Independent duplex houses with single residential units don't qualify as Residential Complex under Section 65(91a) requiring twelve plus units

CESTAT New Delhi held that construction of independent duplex houses with single residential units does not constitute a 'Residential Complex' under ... Refund of the service tax paid under protest - construction project undertaken by the appellant qualifies as a 'Residential Complex' under Section 65(91a) of the Finance Act, 1994, thereby subjecting it to service tax or not - HELD THAT:- Perusal makes it clear that ‘Residential Complex’ would be a complex comprising of a building or buildings, having more than twelve residential units, thus, independent buildings having twelve or less than twelve residential units would not be covered by the definition of ‘Residential Complex’. In the present case, the appellant had constructed independent duplex houses having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be ‘Construction of Residential Complex’ and, therefore, the service tax cannot be levied. This issue is otherwise no more res integra as being already decided by the Principal Bench of the Tribunal in Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai [2008 (9) TMI 80 - CESTAT, CHENNAI] wherein the demand of service tax was for the period 16 June, 2005 to November, 2005 under “Construction of Complex” service under Section 65(30a) of the Act. The Bench examined the scope of ‘Construction of Complex’ and the meaning of ‘Residential Complex’ under section 65(91a) of the Act and observed 'Admittedly, in the present case, the appellants constructed individual residential houses, each being a residential unit, which fact is also clear from the photographs shown to us. In any case, it appears, the law makers did not want construction of individual residential units to be subject to levy of service tax. Unfortunately, this aspect was ignored by the lower authorities and hence the demand of service tax. In this view of the matter, we are also not impressed with the plea made by the appellants that, from 1-6-2007, an activity of the one in question might be covered by the definition of ‘works contract’ in terms of the Explanation to section 65 (105)(zzzza) of the Finance Act, 1994 as amended. ‘According to this Explanation, ‘construction of a new residential complex or a part thereof’ stands included within the scope of ‘works contract’. But, here again, the definition of ‘residential complex’ given under section 65(91a) of the Act has to be looked at. By no stretch of imagination can it be said that individual residential units were intended to be considered as a “residential complex or a part thereof.' It is also found that the definition of ‘Residential Complex’ as per Section 65(91a) of the Act is applicable for both the entries under Section 65(105)(zzzza) for works contract. Therefore, there cannot be an argument that the expression ‘Residential Complex’ has to be interpreted in one manner for works contract and in a different manner of levy of tax on construction of a residential complex. Conclusion - The appellant is entitled for claiming refund of the amount which was deposited under protest specifically for the reason that appellant is not liable to pay tax while constructing independent residential duplex houses. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are: Whether the construction project undertaken by the appellant qualifies as a 'Residential Complex' under Section 65(91a) of the Finance Act, 1994, thereby subjecting it to service tax. Whether the appellant is entitled to a refund of the service tax paid under protest, given the claim that the project does not meet the definition of a 'Residential Complex.' Whether the doctrine of unjust enrichment applies in this case, preventing the refund of the service tax paid.ISSUE-WISE DETAILED ANALYSIS1. Definition of 'Residential Complex' and Taxability Relevant legal framework and precedents: Section 65(91a) of the Finance Act, 1994, defines 'Residential Complex' as a complex comprising buildings with more than twelve residential units, common areas, and facilities. The Tribunal referenced several precedents, including Macro Marvel Projects Ltd. v. Commissioner of Service Tax, Chennai, which clarified that independent buildings with twelve or fewer residential units do not constitute a 'Residential Complex.' Court's interpretation and reasoning: The Tribunal interpreted that the appellant's project, consisting of independent duplex houses with one residential unit each, does not meet the definition of a 'Residential Complex' as it does not comprise more than twelve residential units in a single building. Key evidence and findings: The Tribunal found that the appellant's project consisted of independent duplex houses, each being a standalone residential unit, thus not forming a 'Residential Complex' as per the statutory definition. Application of law to facts: Applying Section 65(91a), the Tribunal concluded that the appellant's construction activity does not attract service tax as it does not qualify as a 'Residential Complex.' Treatment of competing arguments: The Department argued that the presence of common facilities like gardens and community halls qualified the project as a 'Residential Complex.' However, the Tribunal dismissed this argument, emphasizing the statutory requirement of more than twelve residential units in a single complex. Conclusions: The Tribunal concluded that the appellant's project is not taxable under the 'Construction of Residential Complex Service' category.2. Entitlement to Refund and Unjust Enrichment Relevant legal framework and precedents: The Tribunal referred to previous judgments affirming that service tax cannot be levied on constructions not meeting the definition of a 'Residential Complex.' The principle of unjust enrichment was considered, which prevents refunds if the tax burden has been passed to customers. Court's interpretation and reasoning: The Tribunal found no evidence that the appellant passed the tax burden to its customers, thus negating the application of unjust enrichment. Key evidence and findings: The appellant consistently maintained that no service tax was charged to customers, and the Department failed to provide evidence to the contrary. Application of law to facts: The Tribunal applied the doctrine of unjust enrichment and found it inapplicable due to a lack of evidence that the tax burden was transferred to customers. Treatment of competing arguments: The Department's reliance on the unjust enrichment doctrine was rejected due to insufficient proof that the appellant had transferred the tax burden. Conclusions: The Tribunal ruled that the appellant is entitled to a refund of the service tax paid under protest.SIGNIFICANT HOLDINGS Core principles established: The Tribunal reaffirmed that independent residential units, even if numerous, do not constitute a 'Residential Complex' unless they are part of a single building with more than twelve units. It also reinforced that the doctrine of unjust enrichment requires concrete evidence of tax burden transfer to apply. Final determinations on each issue: The Tribunal determined that the appellant's project is not taxable under the 'Construction of Residential Complex Service' category, and the appellant is entitled to a refund of the service tax paid under protest.