2016 (11) TMI 1555 - AT - Service Tax

Works contract - construction of residential complex - Demand of service tax - appellant-assessee had constructed the flats for Saharanpur Development Authority (S.D.A.) under Manyaver Kanshiramji Shahri Garib Awas Yojana for the Government of U.P. - Held that - as per the scheme, houses were allotted without any consideration, i.e. free of cost to the weaker section of the society on lease basis. Ownership of the flats is always with the Government of U.P. - it is covered by the Explanation (a) of the said Section 65(95a). Thus, the complex is not subjected to Service Tax on the basis of work contract as residential complex was given without consideration - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service Tax liability on construction of residential houses under a government scheme.

Analysis:
The appellant filed an appeal against an order passed by the Commissioner, Customs, Central Excise & Service Tax, Ghaziabad, regarding the construction of flats for a government scheme. The scheme aimed to provide free housing to the underprivileged. The department contended that construction of more than 12 units in a block is liable to Service Tax under a work contract. The Commissioner found no exemption applicable and imposed Service Tax on the appellant. The appellant challenged this decision.

Upon hearing both parties and examining the record, it was noted that the houses were allotted without any consideration to the weaker section of society on a lease basis. The ownership of the flats remained with the Government of U.P. Section 65(91a) defined a residential complex, with an explanation stating that "personal use" includes permitting the complex for use as a residence without consideration. In this case, the houses were provided for residence without any cost, falling under the explanation of Section 65(91a). Therefore, the complex was not subject to Service Tax based on a work contract as it was provided without consideration. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential benefits.

This judgment clarifies the application of Service Tax in the context of constructing residential houses under a government scheme for the underprivileged. It emphasizes the importance of considering whether the houses were provided without any consideration, as it impacts the liability for Service Tax under a work contract. The decision provides a clear interpretation of relevant legal provisions and their application in specific scenarios, ensuring that exemptions are appropriately considered in such cases.