2010 (6) TMI 349 - AT - Service Tax

Waiver of pre-deposit - Penalty - Revenue is of the view that the activity undertaken by the applicant falls under the category of Construction of Complex Service - appellant was paying service tax at the rate of 12% on the amount received by them after availing abatement of taxable value under Notification No. 1/2006-S.T - revealed during the investigation that the appellants were availing Cenvat credit on input services - appellant was remitting service tax at the rate of 2% on the amount received from their clients under the category of Works Contract Services - appellant has undervalued and paid less service tax - SCN issued - penalty imposed - Held that - service provided by seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of self-service and consequently would not attract service tax - taxable service till the execution of sale deeds would be in the nature of self service and consequently would not attract service tax - Waiver of pre-deposit - Allowed

Summary

Issues:
Waiver of pre-deposit of service tax, interest, and penalties under various sections of the Finance Act, 1994 for the period from 1-1-2007 to 31-3-2008.

Analysis:
1. The appellant was engaged in the construction of residential and commercial complexes, with the Revenue contending that the activity falls under 'Construction of Complex Service.' A Show Cause Notice was issued as it was found that the appellant undervalued and paid less service tax. The adjudicating authority confirmed the demands, interest, and penalties imposed.

2. The appellant moved for waiver of pre-deposit, arguing that all services rendered would fall under 'Works Contract Services' based on precedents. The appellant's agreements for sale and construction were deemed as agreements for sale of flats, not final until a sale deed is executed.

3. The Revenue argued that the appellant had separate agreements for selling undivided shares of land and constructing flats, with ownership transferring upon the sale agreement. Precedents were cited to support the Revenue's position.

4. The Tribunal found that the appellant's agreements were not final until a sale deed was executed, rejecting the Revenue's argument. The adjudicating authority's reasoning was found flawed, contrary to previous decisions, and the Board's Circular clarified that service tax is not applicable until the execution of sale deeds.

5. The Board's Circular emphasized that services provided until the sale deed execution are 'self-service' and not taxable. The Tribunal held that the appellant had a prima facie case for waiver of pre-deposit, allowing the application and staying recovery until the appeal's disposal.

In conclusion, the Tribunal granted the appellant's request for waiver of pre-deposit based on the interpretation of the nature of services provided and the applicability of service tax as clarified by the Board's Circular.