2010 (11) TMI 363 - AT - Service Tax

Waiver of pre-deposit - Construction of residential complex - Impugned show-cause notice on the ground that they had provided construction service for construction of their residential premises not free of cost but for consideration - Prima facie, the owners of the land have received the constructed flats against which they have traded part of the value of the land and for remaining part of the value of the land they have received cash/cheque - As such, it cannot be held at the prima facie stage of hearing the stay application that no construction service has been rendered. The Larger Bench of the Tribunal has already decided that the works contract can be vivisected even for the period prior to separate levy on such works contract and portion of the works contract can be subjected to service tax if the same is otherwise covered by a specific entry under the service tax law 2010 -TMI - 76005 - CESTAT, NEW DELHI - LB - Do not have a case for total waiver of the predeposit - The value of the constructed flats would also include supply of materials - Direct the appellants to predeposit Rs. 50,000/- The predeposit of the balance amount shall remain waived.

Summary

Issues:
Service tax liability on construction of residential complex for landowners' share of constructed area.

Analysis:
The appellants were registered with the Service Tax Department for various services, including Construction of Complex Service. During scrutiny, it was found that in a joint venture project, they did not discharge service tax on the landowners' share of the constructed area. The department issued a show-cause notice alleging that the construction service provided to the landowners was not free but for consideration, making them liable to pay service tax. The jurisdictional Commissioner levied service tax, interest, and a penalty, leading to the appeal.

The consultant for the appellants argued that no service tax was payable as the constructed area was given to the landowners as part of the land price. Additionally, he contended that the activities fell under works contract, which was not separately taxable at the time. The consultant also argued that if service tax was applicable, the entire value of the flats could not be considered as the value of service due to the inclusion of materials.

The Tribunal observed that the landowners received constructed flats in exchange for part of the land value and cash/cheque for the remaining value, indicating the provision of construction service by the appellants. It was noted that even before a separate levy on works contract, a portion of the works contract could be subjected to service tax if covered by specific entries under the service tax law. Considering the inclusion of materials in the value of the constructed flats, the Tribunal directed the predeposit of Rs. 50,000 towards service tax, with the balance amount waived during the appeal's pendency.

In conclusion, the Tribunal found the appellants liable to pay service tax on the construction service provided to the landowners for the residential complex. The decision highlighted the applicability of service tax even in works contracts and directed a partial predeposit while waiving the remaining amount during the appeal process.