2014 (3) TMI 35 - AT - Service Tax

Waiver of pre-deposit of tax - Interest u/s 75 - Penalties under Section 77 and 78 - Demand of tax - Construction of Residential Complex Service - Held that - it appears from the Sale Deed and Construction Agreement that the applicant proposed to develop the property into a multi-storeyed residential complex not for personal use. Prima facie, we find that it is not a case that the applicant constructed the complex for personal use. Hence, the applicant has failed to make out a prima facie case for waiver of pre-deposit of the entire amount of tax and penalty - Conditional stay granted.

Summary

Issues:
Waiver of pre-deposit of tax under Section 73(2) of the Finance Act, 1994 along with interest under Section 75, and penalties under Sections 77 and 78 based on the construction of residential complexes.

Analysis:
The applicant sought waiver of pre-deposit of tax amounting to Rs.22,20,816 imposed under Section 73(2) of the Finance Act, 1994, along with interest under Section 75 and penalties under Sections 77 and 78. The applicant contended that the tax demand was confirmed for the construction of residential complexes, arguing that the exclusion clause of Section 65(91a) of the Finance Act exempts tax liability for residential complexes constructed by a person directly engaging in planning and design for personal use. The applicant cited relevant Board circulars and a Tribunal case to support the exemption claim for the normal period demand of approximately Rs.1 lakh.

The authorized representative for the respondent reiterated the Commissioner (Appeals) findings and referred to the Sale Deed and relevant clauses. The representative highlighted a Tribunal case where the issue was decided against the applicant. Upon reviewing the records and relevant provisions, the Tribunal observed that as per Section 65(91a) of the Finance Act, a "Residential Complex" excludes complexes constructed by a person directly engaging others for design or planning intended for personal use as residence. The Tribunal noted that the applicant's documents indicated the construction of a multi-storeyed residential complex for commercial purposes, not for personal use. Consequently, the Tribunal found the applicant failed to establish a prima facie case for the waiver of the entire tax and penalty amount. Therefore, the Tribunal directed the applicant to deposit Rs.10 lakhs within six weeks, with the balance dues waived and recovery stayed during the appeal process.

In conclusion, the Tribunal denied the full waiver of the tax and penalty amount, as the applicant could not demonstrate that the construction of the residential complexes fell within the exemption clause of Section 65(91a) of the Finance Act. The Tribunal's decision was based on the lack of evidence supporting the applicant's claim that the construction was for personal use, leading to the directive for partial deposit and waiver of the remaining dues pending appeal.