2013 (11) TMI 1259 - AT - Service Tax

Stay application - Construction of residential complexes - Held that - Prima facie, considering the facts of this case and the decision in the case of LCS City Makers (2012 (6) TMI 363 - CESTAT, CHENNAI), we are of the view that there is tax liability to be paid by the applicant - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
1. Interpretation of Board's Circular regarding service tax on construction activity.
2. Liability of service tax on the construction of residential complexes.
3. Predeposit amount and stay on collection during the appeal.

Analysis:
1. The judgment revolves around the interpretation of Board's Circular No.108/2/2009 dated 29.1.2009 concerning the applicability of service tax on construction activities. The applicant, engaged in constructing residential complexes, sold undivided portions of land to buyers before constructing flats. The applicant argued that they did not pay service tax for the construction activity from January 2009 to November 2009 based on their understanding of the circular.

2. The Revenue contended that service tax was indeed payable for such activities as per the relevant entries in the Finance Act, supported by the circular. A show-cause notice was issued, leading to the confirmation of service tax, interest, and penalty against the applicant after adjudication. The applicant's counsel continued to rely on the circular, claiming that the activity was not taxable, while the learned AR argued that the circular clarified the tax liability in such scenarios, citing a previous Tribunal decision.

3. After considering the arguments and the precedent set by the Tribunal in a similar case, LCS City Makers Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai, the judges held that there was a tax liability on the applicant. Consequently, the applicant was directed to make a predeposit of Rs.50,00,000 within six weeks, with a stay on the collection of the remaining dues during the appeal process. This decision was made to ensure compliance with the tax liability while providing relief to the applicant during the appeal period.