Residential complex service tax fails when statutory unit threshold is unmet and demand lacks independent verification.

Service tax on construction of a residential complex was said to be inapplicable where the project comprised only four residential units, because the statutory threshold of more than twelve residential units was not met. The commentary also states that a demand based merely on comparison of ST-3 returns and bank statements is unsustainable unless the nature and taxability of the underlying receipts are independently verified. It further notes that the extended period of limitation cannot be invoked without material showing wilful suppression, misstatement, or intent to evade tax. The disputed demand was therefore described as liable to deletion, subject to appropriation of the amount already paid.

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Issues: (i) Whether construction of a residential complex consisting of only four flats attracted service tax under the category of construction of residential complex service; (ii) Whether the demand raised merely on comparison of ST-3 returns and bank statements, without independent verification of the nature of service, was sustainable; (iii) Whether invocation of the extended period of limitation was justified.

Issue (i): Whether construction of a residential complex consisting of only four flats attracted service tax under the category of construction of residential complex service.

Analysis: The statutory definition of residential complex applies to a complex comprising a building or buildings having more than twelve residential units, along with the prescribed common facilities. The documentary record, including the development agreement, showed construction of only four residential units. On those facts, the activity did not satisfy the statutory threshold for levy under this category.

Conclusion: The demand under construction of residential complex service was not leviable and was rightly set aside, in favour of the assessee.

Issue (ii): Whether the demand raised merely on comparison of ST-3 returns and bank statements, without independent verification of the nature of service, was sustainable.

Analysis: The demand was based on a comparison of amounts reflected in ST-3 returns and bank statements, without establishing by independent evidence that the receipts were attributable to taxable services. Mere arithmetical comparison, without verifying the nature and taxability of the underlying activity, was held insufficient to sustain a service tax demand.

Conclusion: The demand over and above the amount already admitted and paid was unsustainable on this basis and was set aside, in favour of the assessee.

Issue (iii): Whether invocation of the extended period of limitation was justified.

Analysis: The assessee was registered, had been filing ST-3 returns, had informed the department about cessation of operations, and had already paid the short-paid amount before adjudication. No corroborative material established wilful suppression, misstatement, or intention to evade tax. In the absence of such foundational facts, the extended limitation period could not be invoked.

Conclusion: Invocation of the extended period was unsustainable and the additional demand was set aside, in favour of the assessee.

Final Conclusion: The appeal resulted in deletion of the disputed service tax demand apart from appropriation of the amount already paid, with the related interest and penalties also not surviving.

Ratio Decidendi: Service tax liability cannot be fastened on a residential construction activity unless the statutory threshold is met, and a demand cannot be sustained solely on comparison of return figures and bank entries without independent verification and proof of taxability; absent wilful suppression, the extended period of limitation is not invocable.

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