Self service principle bars service tax on earlier residential construction; cenvat credit must be re determined and remitted.

Construction of residential complexes that amounts to self provision by the builder/promoter is not subject to service tax for the period before the statutory expansion of taxable scope with effect from 01.07.2010; applying the self service principle and relevant Board guidance, no service tax liability was sustained for the disputed months. Consequentially, cenvat credit availed and used to discharge that liability requires re determination under the Cenvat Credit Rules, 2004; the exact quantum and method of reversal or adjustment is remitted to the original authority for fresh computation and disposal.

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Issues: (i) Whether the appellant is liable to pay service tax for the period February 2009 to May 2010 in view of Circular No.108/02/2009 dated 29.01.2009 and Circular No.151/2/2012-ST dated 10.02.2012; (ii) Whether the cenvat credit availed and utilized by the appellant needs to be reversed or re-determined in view of the Tribunal's finding on service tax liability.

Issue (i): Whether the appellant is liable to pay service tax for the period February 2009 to May 2010 in view of Board Circulars and prevailing law.

Analysis: The Tribunal examined the legal position governing taxation of construction of residential complexes prior to the insertion of the Explanation to Section 65(105)(zzzh) w.e.f. 01.07.2010. It reviewed precedent including the decision(s) holding that prior to 01.07.2010 construction of residential complexes, whether characterised as service simpliciter or as works contract, could not be subjected to service tax where the activity amounted to self-provision by the builder/promoter and the Explanation expanding taxable scope was prospective. The Tribunal relied on Board Circular No.108/02/2009 and subsequent Tribunal decisions which applied the self-service principle and held that no service tax was leviable on such construction activities prior to 01.07.2010.

Conclusion: The appellant is not liable to pay service tax for the period February 2009 to May 2010. (Decision in favour of the assessee.)

Issue (ii): Whether the cenvat credit availed and utilized by the appellant must be reversed or re-determined following the finding on service tax liability.

Analysis: The Tribunal noted that the appellant had availed cenvat credit and utilized credit to discharge the disputed service tax liability; accumulated credit stood reflected in books up to June 2010. Given the Tribunal's conclusion that the output services were not taxable in the disputed period, the availability and utilization of cenvat credit require re-determination under the Cenvat Credit Rules, 2004. The Tribunal considered the Board Circular No.962/05/2012-CX dated 28.03.2012 and precedent on appropriation of credit but held that the exact quantum and manner of reversal/adjustment must be examined and fixed by the original authority in accordance with the Rules.

Conclusion: The matter of reversal/adjustment of cenvat credit is remitted to the original authority for re-determination in accordance with the Cenvat Credit Rules, 2004. (Decision remanding the credit issue against the assessee.)

Final Conclusion: The Tribunal set aside the demands of service tax for the disputed period as unsustainable and remanded the issue of reversal/adjustment of cenvat credit to the original authority for fresh computation and disposal under the applicable cenvat credit rules.

Ratio Decidendi: No service tax is leviable on construction of residential complexes prior to 01.07.2010 whether characterised as service simpliciter or as a works contract where the activity falls within the self-service principle; consequences for cenvat credit must be determined by the original authority under the Cenvat Credit Rules, 2004.

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