2013 (8) TMI 295 - AT - Service Tax

Construction of Residential Complexes Service provider or not - Duty Demand Interest and Penalty Assesse was engaged in the business of Construction of Residential Complexes Revenue was of the view that assesse had not paid appropriate service tax on different projects executed by them - Whether the activity undertaken by the assesse comes within the category of service or not and whether there was the relationship of service provider and service recipient - The land continued to belong to the assesse and therefore there was no service provider and recipient - Service tax liability cannot be determined based on what the assesse calls itself, whether as a builder, a developer, a promoter etc. - The liability was to be determined with reference to the criterion whether there was a service provider and service recipient - This was the essence of the clarifications issued by CBEC - When un Divided Shares was sold the person to whom it was sold becomes the legal owner of un Divided Shares Decided in favor of assesse. Residential Complex u/s 65(105)(zzzh) Waiver of pre-deposit - Held that - Construction of residential complex was taxable u/s 65(105) (zzzh) prior to 01-06-2007 following the judgement of LCS City Makers Vs. CST Chennai 2012 (6) TMI 363 - CESTAT, CHENNAI considering the financial hardship of the assesse 4.50Crore were ordered to be submitted as pre-deposit upon such submission rest of the duty to be waived till the disposal Decided partly in favor of assesse.

Summary

Issues Involved:
1. Liability of service tax on construction activities conducted by the applicant.
2. Definition and applicability of service tax on developers versus service providers.
3. Time-barred demand for service tax.
4. Financial hardship and pre-deposit requirements.

Detailed Analysis:

1. Liability of Service Tax on Construction Activities:
The applicant, engaged in the construction of residential complexes, was investigated for non-payment of appropriate service tax for the period from April 2006 to June 2010. The Revenue issued three Show Cause Notices, resulting in a tax demand of Rs. 11,21,54,460/- and denial of Rs. 7,11,365/- towards Cenvat credit. The applicant contended that since the construction was on their own land and for their own benefit, there was no service provider-recipient relationship, thus no service tax liability. However, the Tribunal noted that the applicant sold Undivided Shares (UDS) of land to buyers and then undertook construction, collecting payments in installments. Therefore, the Tribunal determined that there was indeed a service provider-recipient relationship, making the applicant liable for service tax.

2. Definition and Applicability of Service Tax on Developers:
The applicant argued that as a developer, they were not liable for service tax based on CBEC Circulars until an explanation was added in section 65 (105) (zzzh) of the Finance Act, 1994, effective from 01-07-2010. The Tribunal, however, emphasized that the liability is determined by the existence of a service provider-recipient relationship, not by the applicant's designation as a developer. The Tribunal found that the applicant's sale of UDS and subsequent construction for buyers constituted a taxable service, regardless of the applicant's claims of retaining land possession for construction purposes.

3. Time-Barred Demand for Service Tax:
The applicant argued that part of the demand was time-barred, as the Show Cause Notices covered periods from 01-04-06 to 30-06-10. The Tribunal rejected this argument, noting that the applicant had not adequately disclosed relevant information to the department, justifying the extended period for issuing the Show Cause Notices.

4. Financial Hardship and Pre-Deposit Requirements:
The applicant pleaded financial hardship, citing unsold flats and a market slump, and requested waiver of pre-deposit. The Tribunal, considering the financial constraints and the Revenue's interest, ordered the applicant to make a pre-deposit of Rs. 4,50,00,000/- within eight weeks, with the balance dues' pre-deposit waived and collection stayed during the appeal's pendency.

Conclusion:
The Tribunal concluded that the applicant was liable for service tax on the construction activities performed for buyers of UDS, rejecting the arguments based on the developer status and time-barred demand. The Tribunal ordered a significant pre-deposit considering the financial hardship and the Revenue's interest. The decision underscores the importance of the service provider-recipient relationship in determining service tax liability.