TaxTMI 
TaxTMI 
2024 (9) TMI 1747
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....ice tax on the gross amount charged. From 01.04.2007, they were availing benefit of Notification No. 1/2006-CE dated 01.03.2006. Since they have been availing the cenvat credit and also availing the exemption under the said Notification, show-cause notice was issued to them on 23.09.2008 for recovery of the service tax short-paid amounting to Rs. 1,00,59,034/- and cenvat credit of Rs. 2,54,945/- with interest and penalty. On adjudication, the demand was dropped by the Commissioner. Hence, the Revenue is in appeal. 3. At the outset, the learned Authorised Representative for the Revenue reiterating the grounds of appeal submitted that the learned Commissioner in the impugned order observed that the agreement between respondent and the client is not an agreement for sale of a flat after construction, but it is a tripartite agreement entered into between the landowner, the builder and the allottee, wherein the landowner has entrusted the builder who has undertaken the development of the land and construction of the apartment complex on behalf of several intending purchasers of undivided intermingled share of land and the builder has also been authorised to find out bu....
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....r construction is between the purchaser of the undivided share of land and the builder and hence, there is no sale of flat after construction of the complex. Each apartment holder entrusts the builder the construction of his apartment, i.e., a residential unit for which plan and building permit is obtained from the Corporation of Calicut by the builder. 12.10 Now the question is whether construction of a single residential unit is a taxable service? Tax liability arises only in respect of a complex consisting of more than 12 residential units as per the relevant provisions mentioned above. Hence, the service provided to a person for construction of a residential unit cannot be treated as a taxable service. The definition given for a residential complex also makes this point very clear. It has also been clarified by Board's Circular No. 108/2/2009-ST dated 29.01.2009. The relevant portion of the circular is reproduced below. "Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and construction; and after such construction the ultimate....
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....clude a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person". There is no dispute that the complex constructed by both the assessees in these appeals are covered by the definition of "residential complex" as given in Section 65(91a). There is also no dispute that both the assessees had engaged contractors for construction of the complexes. The dispute in these appeals is as to whether the assessees would be liable to pay Service Tax on the amounts charged by them from their customers with whom they had entered into agreements for construction of the residential units and whose possession was to be handed over on completion of the construction and full payment having been made by the customers. It is seen that on this point, the Tax Research Unit of the Central Board of Excise & Customs, which is a wing of the C.B.E. & C. dealing with legislation work, had vide Circular No. 332/35/2006-TRU, dated 1-8-2006 clarified that in case where a builder, promoter, developer builds a residential complex having more than 12 residenti....
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....he validity of the 'Explanation' added to Sections 65(105)(zzq) and (zzzh) was challenged on several grounds. The Bombay High Court, also considered the issue whether the explanation was prospective or retrospective in operation and ruled that the explanation inserted by the Finance Act, 2010 brings within the fold of taxable service a construction service provided by the builder to a buyer where there is an intended sale between the parties whether before, during or after construction; that the 'Explanation' was specifically legislated upon to expand the concept of taxable service; that prior to the explanation, the view taken was that since a mere agreement to sell does not create any interest in the property and the title to the property continues to remain with the builder, no service was provided to the buyer; that the service, if any, would be in the nature of a service rendered by the builder to himself; that the explanation expands the scope of the taxable service, provided by builders to buyers pursuant to an intended sale of immovable property before, during or after the construction and therefore the provision is expansive of the existing intent and not clarificatory of ....