2015 (9) TMI 102 - AT - Service Tax

Construction of Residential Complex service - Tax demanded under works contract - Held that - Appellant was regularly paying service tax whereas in the show-cause notice it is seen that the demand covers a period of 2006-07 to 2010-11. Year-wise calculation of the amount paid as service tax, amount of consideration received, etc. are not forthcoming. On the one hand, we have situation where the Commissioner has confirmed the demand on the ground that the appellant has not paid service tax and on the other hand, there is a situation where the appellant has claimed that they were paying service tax but there was no clarity. - no reasons have been given as to why the appellants did not make any payment of service tax even after 1.7.2010 and made a payment of ₹ 20 lakhs when investigation was taken up. No detailed statement showing the actual liability, the amount paid, the amount received, claimed as abatement have been presented. - except for claim for abatement of 67% which may have some force, we are unable to come to any conclusion in favour of the assessee. The conclusion is that the appellant is liable to pay tax demanded. - stay granted partly.

Summary

Issues:
Demand for service tax on construction of residential complexes; Abatement of service tax; Clarification on service tax liability before and after specific dates; Rejection of abatement request; Service tax on land owner's share of flats; Deduction of material cost for levy of service tax; Non-payment of service tax after specific dates; Financial difficulties of the appellant.

Analysis:
The judgment dealt with the demand for service tax on the construction of residential complexes by the appellants. The period of dispute was from 2007-08 to 2011-12. The appellants, who were builders of residential complexes, entered into various agreements with landowners and buyers for construction and sale of flats. The issue arose when the service provided by the appellants was treated as "Works Contract" instead of "Construction of Residential Complex" service, leading to a demand for service tax amounting to Rs. 2,74,57,431/- along with interest and penalties.

The appellant claimed that they were paying service tax regularly and had availed abatement of 67% till a specific date, which was later increased to 75%. However, the demand was made based on the classification of the service as a works contract. The appellant argued that there was no service tax liability on residential flats before a particular date when the complex was built and sold by the builder/developer itself. They also mentioned that a clarification issued by the Board in 2009 led them to stop paying service tax, further complicating the matter.

The judgment highlighted discrepancies in the appellant's submissions regarding the value of materials, costs, and payments made towards service tax. The lack of clarity in the records and the confusion regarding the figures presented raised doubts about the appellant's claims. The tribunal emphasized that the burden of proof for claiming exemptions rested on the appellant, and mere assertions without proper documentation were insufficient to establish eligibility for abatement or exemptions.

Despite the appellant's claim of financial difficulties, no concrete evidence was presented to support this assertion. The tribunal, after considering all submissions, concluded that except for a possible claim for abatement of 67%, they were unable to find in favor of the appellant. Therefore, the appellant was held liable to pay the demanded tax amount. However, considering the circumstances, the tribunal directed the appellant to deposit a specific percentage of the demand within a stipulated time frame, with a waiver of the pre-deposit requirement for the balance amount pending the appeal.

In conclusion, the judgment addressed various issues related to the demand for service tax on construction activities, abatement requests, service tax liabilities before and after specific dates, and the burden of proof on the appellant to establish eligibility for exemptions. The tribunal's decision reflected a thorough analysis of the facts presented and provided a balanced approach considering the appellant's financial difficulties while ensuring compliance with tax obligations.