2013 (3) TMI 225 - AT - Service Tax

Construction of complex on own land and sale of flats thereafter - explanation added on 1.7.2010 - retrospective or prospective - held that - The decision of the case of G S Promoters 2010 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT is on the issue of constitutional validity of the explanation added by Finance Act, 2010. The decision does not examine the question whether the explanation has retrospective validity. This issue is examined in detail by the Tribunal in the case of Skynet Builders 2012 (4) TMI 427 - CESTAT, NEW DELHI - The Ld. A. R. for Revenue is not able to make any reason why the present cases should be treated differently. - following the reasoning given in the said decision of Skymet Builders 2012 (4) TMI 427 - CESTAT, NEW DELHI , decided in favor of assessee.

Summary

Issues:
1. Interpretation of the explanation added by Finance Act 2010 regarding service tax on construction activities.
2. Prospective vs. retrospective effect of the explanation.
3. Applicability of service tax on construction activities prior to 1.7.2010.
4. Judicial precedents and their impact on the present case.

Issue 1: Interpretation of the explanation added by Finance Act 2010 regarding service tax on construction activities:

The case involved appeals and cross-objections related to the taxation of construction activities concerning residential complexes. The Builders were constructing and selling flats, entering into agreements with buyers and receiving advance payments. The Central Board of Excise and Customs (CBEC) clarified that such activities were for the builder's benefit, not the buyer's, and thus no service tax was applicable. However, the Finance Act 2010 amended the entry to include an explanation deeming construction intended for sale as a service provided by the builder to the buyer.

Issue 2: Prospective vs. retrospective effect of the explanation:

The Revenue contended that the explanation merely clarified existing provisions and did not create new legal obligations, making the tax leviable even for periods before 1.7.2010. The Builders argued that the explanation, added in 2010, should only have prospective effect and not impose tax liabilities for past periods. They relied on a Tribunal decision supporting their position.

Issue 3: Applicability of service tax on construction activities prior to 1.7.2010:

The Revenue issued demands for service tax based on the interpretation of the amended entry, leading to appeals and cross-objections. The Tribunal analyzed whether the explanation should be applied retrospectively, considering the impact on tax liabilities for activities conducted before 1.7.2010.

Issue 4: Judicial precedents and their impact on the present case:

The Revenue cited a High Court decision supporting the imposition of service tax on similar activities. However, the Tribunal distinguished this case from the present matter, focusing on the retrospective validity of the explanation. Relying on a previous Tribunal decision, the Tribunal ruled in favor of the Builders, allowing one appeal and rejecting the others filed by Revenue.

In conclusion, the Tribunal's decision was based on the interpretation of the Finance Act 2010 explanation, determining its prospective or retrospective effect on service tax liabilities for construction activities. The judgment highlighted the importance of legal precedents and the need for clarity in tax legislation to avoid disputes regarding the applicability of taxation laws to specific business activities.