Partial completion certificate treated as completion certificate; service tax demand failed, and extended limitation could not be invoked.

A valid partial completion certificate for a completed, habitable portion was treated as equivalent to a completion certificate for service tax purposes, so consideration received after its issue for sale of the flat was not taxable. The demand also failed on limitation because the notice was issued beyond the normal period and the record did not show wilful suppression or misstatement with intent to evade tax, which are required to invoke the extended period. On both grounds, the service tax demand, interest and penalty were set aside with consequential relief.

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Issues: (i) Whether a partial completion certificate issued under the municipal building rules can be treated at par with a completion certificate for the purpose of exemption from service tax on consideration received for sale of a flat after such certificate. (ii) Whether the demand was barred by limitation and the extended period could be invoked.

Issue (i): Whether a partial completion certificate issued under the municipal building rules can be treated at par with a completion certificate for the purpose of exemption from service tax on consideration received for sale of a flat after such certificate.

Analysis: Clause (b) of Section 66E of the Finance Act, 1994 excludes from the scope of declared service a sale where the entire consideration is received after issuance of a completion certificate by the competent authority. The relevant municipal rules permitted issuance of a partial completion certificate for a completed and habitable specified portion, and also permitted occupation-related consequences for such certified portion. The Court treated the partial completion certificate and completion certificate as substantively equivalent for the specified portion certified, especially when both were based on the same completion-related documents and the law did not draw a distinction between them for service tax purposes.

Conclusion: The partial completion certificate was accepted as equivalent to a completion certificate for the certified portion, and the sale consideration received after its issue was held not liable to service tax.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked.

Analysis: The show cause notice for the relevant period was issued beyond the normal statutory period under Section 73(1) of the Finance Act, 1994. The demand was founded on audit findings and on information already available in the statutory returns, without demonstration of wilful suppression or misstatement with intent to evade tax. In the absence of the essential ingredients for the extended period, the demand could not be sustained on limitation.

Conclusion: The extended period was held to be unavailable and the demand was barred by limitation.

Final Conclusion: The service tax demand, together with interest and penalty, was set aside, and the appeal succeeded with consequential relief.

Ratio Decidendi: Where the governing law does not distinguish between a partial completion certificate and a completion certificate for the certified portion, a valid partial completion certificate issued for a habitable completed portion is sufficient to deny service tax on consideration received after its issue; an extended limitation period cannot be invoked without proof of wilful suppression or misstatement with intent to evade tax.

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