2014 (1) TMI 255 - AT - Service Tax

Demand of service tax - Construction of industrial & commercial complexes - Construction activity for self benefit - Held that - clarifications issued by C.B.E. & C. to the effect that when construction is done in one s own land for sale of constructed flats such activity will not be subjected to service tax. Case of G.S. Promoters was in the context of explanation added in Section 65(105)(zzzh) to make it clear that in such situation also, service is involved if advances are taken from prospective customers. This explanation was added by Finance Act, 2010 - The decision of Hon ble High Court in the case of G.S. Promoters reported in 2010 (12) TMI 34 - PUNJAB AND HARYANA HIGH COURT only upheld the amendment made by Finance Act, 2010. The decision did not examine the issue whether the explanation would have retrospective validity. Therefore, we waive any pre-deposit of dues arises out of impugned order and there shall be stay for recovery of the same during the pendency of the appeal - Stay granted.

Summary

Issues:
1. Applicability of service tax levy on construction of industrial & commercial complexes.
2. Interpretation of legal position regarding construction activity for own benefit.
3. Comparison between 'works contract' and 'construction of industrial or commercial complex' categories for service tax.

Issue 1: Applicability of service tax levy on construction of industrial & commercial complexes.

The appellant was brought under service tax levy for constructing buildings in their land and selling flats during April 2007 to September 2007. The appellant argued that since the construction was for their own benefit, the service tax demanded was not sustainable. They contended that they had been paying service tax under 'works contract' category as per Section 65(105)(zzzza) of Finance Act, 1994, and should not be classified under 'construction of industrial or commercial complex' after a certain date.

Issue 2: Interpretation of legal position regarding construction activity for own benefit.

The Revenue argued that the construction was done against agreements for sale, citing a precedent where the Hon'ble High Court of Punjab & Haryana ruled in favor of the Revenue in a similar case. However, clarifications from C.B.E. & C. stated that construction on one's land for selling flats would not attract service tax. The Tribunal highlighted that a specific explanation added in Section 65(105)(zzzh) by Finance Act, 2010 addressed situations involving advances from prospective customers. The Tribunal clarified that the Hon'ble High Court's decision in the mentioned case upheld the 2010 amendment but did not address the retrospective validity of the explanation.

Issue 3: Comparison between 'works contract' and 'construction of industrial or commercial complex' categories for service tax.

The Tribunal noted that the appellant's construction activity fell within the 'works contract' category under Section 65(105)(zzzza) initially. However, the issue arose when the Revenue attempted to categorize it under 'construction of industrial or commercial complex'. The Tribunal considered the legal implications of these categories and the retrospective effect of relevant amendments, ultimately waiving any pre-deposit of dues from the appellant and granting a stay on recovery during the appeal process.

This detailed analysis of the judgment addresses the issues related to the applicability of service tax levy on construction activities, the interpretation of legal positions regarding construction for one's benefit, and the comparison between different service tax categories.