2014 (11) TMI 629 - AT - Service Tax

Waiver of pre deposit - Construction of residential complex service - Works contract service - appellants submitted that the appellants had undertaken married accommodation project for army which involved construction of residential quarters. He submits that the service rendered by them cannot be considered as residential complex service since the army layout does not require approval of any competent authority which is one of the requirements in the definition of residential complex service. - Held that - Definitions of works contract show clearly that even under works contract service, we have to go to the definition of residential complex to see what exactly was meant by residential complex. The definition of works contract service does not explain what is residential complex. Therefore, whether the service is works contract service or residential complex service, the principles to be considered are one and the same. When a residential complex is built for use of the Govt whether it is by a sub-contractor under a main contractor or otherwise, end use is what is required to be considered. - When the end use of the residential complex is not covered by the definition of residential complex at all, the fact that the contractor is a main contractor or a sub-contractor in our opinion on a prima facie basis is not relevant. Therefore, the decision of the Tribunal in the case of Khurana Engineering Ltd. (2010 (11) TMI 81 - CESTAT, AHMEDABAD) is prima facie applicable. In view of the above, it can be said that the appellants have made out a prima facie case in their favour for complete waiver. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted for a period of 180 days from the date of this order - Stay granted.

Summary

Issues:
1. Taxability of construction services provided to Military Engineering Services (MES) as a sub-contractor.
2. Interpretation of the definitions of "construction of complex service" and "works contract service" under relevant sections.
3. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Issue 1: Taxability of Construction Services
The appellant undertook the construction of a Married Accommodation Project for Military Engineering Services (MES) as a sub-contractor. The department contended that this service is taxable and issued a show-cause notice demanding service tax. The adjudicating authority dropped the demand for the period January 2007 to May 2007 under residential complex service but confirmed the demand under works contract service for the period from June 2007 to March 2011. The appellant argued that the service provided cannot be considered residential complex service as the army layout does not require approval from any competent authority. The appellant also relied on a previous tribunal decision to support their case.

Issue 2: Interpretation of Definitions
The definition of works contract service under Section 65(105)(zzzza) includes residential complex service. The definition of residential complex involves a building with more than twelve residential units, common areas, and specific facilities or services approved by an authority. The judgment emphasized that the principles to be considered for works contract service and residential complex service are the same. It was highlighted that the end use of the residential complex is crucial in determining tax liability, regardless of whether the construction was undertaken by a main contractor or a sub-contractor.

Issue 3: Applicability of Penalties
The order confirmed a demand under works contract service for a specific period and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The tribunal considered the arguments presented by both sides and concluded that the appellants made a prima facie case in their favor for a complete waiver. As a result, the requirement of pre-deposit was waived, and a stay against recovery was granted for a specified period from the date of the order.

This judgment from the Appellate Tribunal CESTAT Bangalore addressed the taxability of construction services provided to Military Engineering Services, the interpretation of relevant definitions under the law, and the applicability of penalties under the Finance Act, 1994. The tribunal analyzed the definitions of works contract service and residential complex service to determine the tax liability in the case. The judgment emphasized the importance of considering the end use of the residential complex in assessing tax obligations, irrespective of the contractor's status. Ultimately, the tribunal granted a waiver of pre-deposit and a stay against recovery for a specified period based on the appellant's prima facie case.