2026 (3) TMI 1066 - AT - Service Tax

Taxability of construction services before July 2010: administrative clarification removes service tax liability for pre-change construction activity.

CBEC Circular No.108/02/2009-ST clarified that construction of residential complexes performed before 01.07.2010 did not attract service tax; this ... Liable to pay service tax - Construction of residential complex - clarification in CBEC Circular No.108/02/2009-ST - Whether the appellants who rendered service of Construction of Residential Complex Service but registered under Works Contract Service during the period 01.04.2009 to 30.06.2010 are liable to pay service tax prior to 01.07.2010 under Works Contract Service. Liability to pay service tax on works contract / construction services rendered during the period 01.04.2009 to 30.06.2010 - HELD THAT:- The Tribunal held that services of construction of residential complexes rendered prior to 01.07.2010 are not chargeable to service tax and applied the clarification in CBEC Circular No.108/02/2009-ST and the Tribunal's consistent precedents which treat such services as not taxable in the period before the explanation inserted w.e.f. 01.07.2010. The Tribunal summarised and followed earlier bench decisions in the case of Modi Ventrues vs. CCT, [2020 (3) TMI 1481 - CESTAT HYDERABAD], holding that where construction services were rendered prior to completion/transfer and before 01.07.2010 they amounted to self-service or fell within the non-taxable characterisation and therefore no service tax could be levied on works contract services for that period. [Paras 5, 7] Appellants are not liable to pay service tax for services rendered in the period 01.04.2009 to 30.06.2010 and the impugned order is set aside. Final Conclusion: The Tribunal allowed the appeal, holding that construction/works contract services rendered prior to 01.07.2010 (including the period 01.04.2009 to 30.06.2010) are not taxable in view of CBEC Circular No.108/02/2009-ST and consistent Tribunal precedents, and set aside the impugned adjudication accordingly. Issues: Whether appellants rendering construction of residential complex service but registered under works contract service for the period 01.04.2009 to 30.06.2010 are liable to pay service tax for services rendered prior to 01.07.2010.Analysis: Applicable administrative clarification and precedent law examine taxability of construction-related services prior to 01.07.2010. CBEC Circular No.108/02/2009-ST dated 29.01.2009 clarifies that construction of complex services prior to 01.07.2010 was not taxable. Tribunal decisions addressing whether identical services characterised as works contract service fall within that clarification have concluded that construction by builders prior to 01.07.2010 is not subject to service tax, including rulings in Krishna Homes vs. CCE, Modi Ventures vs. CCT, and subsequent consistent decisions of the Tribunal. The legal framework distinguishes composite works contracts and service simpliciter, and treats services rendered prior to issuance of completion certificate or transfer as self service for the period prior to 01.07.2010.Conclusion: The impugned demand of service tax for the period 01.04.2009 to 30.06.2010 is not sustainable; appeal is allowed in favour of the assessee and the impugned order is set aside.Ratio Decidendi: CBEC Circular No.108/02/2009-ST dated 29.01.2009, as applied by consistent Tribunal precedent, establishes that construction of residential complexes by builders is not taxable under works contract or construction of complex services for services rendered prior to 01.07.2010.