Composite residential construction and inseparable maintenance charges were treated as not separately taxable under service tax law.

For the pre-1 July 2010 period, residential construction undertaken as a composite arrangement was treated as outside service tax on construction of residential complex service, following the settled Tribunal view and the CBEC circular. The text also states that maintenance charges embedded in the construction agreement were not taxable as management, maintenance or repair service where they were not separately contracted or independently collected after completion. On those facts, both demands were set aside and the entire tax demand was annulled.

---

---

Issues: (i) Whether service tax was payable on construction of residential complex services for the period 16.06.2005 to 31.03.2006. (ii) Whether maintenance charges collected under the construction agreement were taxable under management, maintenance or repair service.

Issue (i): Whether service tax was payable on construction of residential complex services for the period 16.06.2005 to 31.03.2006.

Analysis: The liability was examined in light of the settled position that, for builders undertaking composite works contract activity in respect of residential construction, no service tax could be levied for the relevant pre-01.07.2010 period. Reliance was placed on the consistent Tribunal view and the CBEC circular clarifying the non-taxability of such construction activity for the period in question.

Conclusion: The demand under construction of residential complex service was not sustainable and was set aside.

Issue (ii): Whether maintenance charges collected under the construction agreement were taxable under management, maintenance or repair service.

Analysis: The maintenance amount was found to form part of the composite construction and sale arrangement, with no separate agreement or independent collection for post-completion maintenance. Since the charge was inseparable from the overall construction bargain, it did not constitute a distinct taxable maintenance service on the facts found.

Conclusion: The demand under management, maintenance or repair service was not sustainable and was set aside.

Final Conclusion: The entire demand was annulled and the appeal succeeded with consequential relief.

Ratio Decidendi: Where residential construction is undertaken as a composite arrangement and the alleged maintenance charge is not separately contracted or collected as an independent service, service tax cannot be sustained on either head for the relevant pre-taxable period.

---