2013 (7) TMI 327 - AT - Service Tax

Construction activities Industrial, Commercial and residential Buildings Is service tax applicable on Builder, Promoter or Developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lakhs in one previous year Held that - Liability arises in the hands of the appellants - the appellants will be eligible for Cenvat credit on services provided by the contractor to the appellants if such services were billed to the appellants and paid for by them The actual construction activity is undertaken by the contractor for which he is liable to pay tax - Such activity is only an input service for providing services rendered by the appellants to the individual buyers of UDS in land, for constructing the flats - the entry will cover not just the activity of construction but all other activities in relation to construction of the complex - If the tax paid corresponds to the same service and amounts billed to the individual customers then the tax paid by sub-contractor cannot be more than the demand on the provider of service itself as it comes out from the facts of the case. - one third amount ordered to be pre-deposited - stay granted partly.

Summary

Issues:
1. Whether the appellants are liable to pay service tax for construction activities on two projects.
2. Whether the appellants' argument of not providing construction services to individual buyers is valid.
3. Interpretation of Circular F. No. 332/35/2006-TRU and its applicability.
4. Double taxation issue raised by the appellants.
5. Applicability of Section 65(91a) exclusion to the case.
6. Whether the demand is time-barred.
7. Pre-deposit waiver for the appellants.

Issue 1:
The Revenue noticed that the appellants stopped paying service tax from October 2006 onwards while executing two residential complexes. A demand of Rs. 1,48,17,194/- was confirmed against them along with interest and penalties for the period July 2006 to September 2009.

Issue 2:
For the project Manchester Grand, the appellants argued that they did not provide construction services to individual buyers but only sold Undivided Share (UDS) in land and constructed flats. They relied on Circular F. No. 332/35/2006-TRU to support their contention. The Revenue argued that the construction activity took place on the land belonging to individual customers, not the appellants.

Issue 3:
The Circular clarified the levy of service tax on construction services. The appellants argued that if considered as providing services, it should be to individual flat owners falling under an exclusion in Section 65(91a). The Revenue highlighted that the Circular's clarification did not apply to the case at hand.

Issue 4:
The appellants raised concerns about double taxation, as the contractor had already paid taxes. The Revenue argued that the contractor's tax payment did not extinguish the appellants' tax liability.

Issue 5:
Regarding the applicability of Section 65(91a) exclusion, the Revenue contended that it applies only if the complex is for the residential purpose of the person getting it constructed, which was not the case here.

Issue 6:
The Revenue argued that the demand was not time-barred, as the appellants had stopped paying tax without informing the Department based on their interpretation of a Circular.

Issue 7:
After considering arguments from both sides, the Tribunal ordered the appellants to make a pre-deposit of Rs. 50 lakhs within 8 weeks, as there were arguable issues and facts that needed verification. The pre-deposit was required before the waiver of balance dues arising from the impugned order.

This detailed analysis covers the various issues involved in the legal judgment delivered by the Appellate Tribunal CESTAT CHENNAI.