2018 (2) TMI 1889 - AT - Service Tax

Construction of Complex Services - Separate consideration for land - Department was of the view that the amount recovered as land value should also form part of the total consideration received for payment of service tax - HELD THAT - The agreements entered into by the appellant with the buyer clearly indicate that the consideration recovered is partly for the sale of undivided rights of the land on which the complex has been constructed and rest is for the construction charges. The two amounts are indicated separately in the agreements entered into with the buyers as well as recorded separately in the Books of Accounts of the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of service tax liability on consideration received for sale of undivided rights of land and construction charges under 'Construction of Complex Services' category.

Analysis:
The appeal was filed against Order-in-Appeal No. 143/2008 dated 18.09.2008 regarding service tax liability for services provided falling under 'Construction of Complex Services' category as per Section 65(30a) and taxable under Section 65(105) of the Finance Act 1994 for the period June 2005 to March 2006. The Department contended that the consideration received by the appellant, which included the sale of undivided rights of the land and construction charges, should all be subject to service tax. However, the appellant argued that service tax was only applicable to the amount received for the construction of the residential complex based on a Board's Clarification dated 27.07.2005.

Upon review of the agreements between the appellant and the buyers, it was observed that the consideration was distinctly segregated into amounts for the sale of undivided rights of the land and construction charges. These amounts were also separately recorded in the Books of Accounts. Considering this clear separation and in light of the TRU clarification, the Tribunal found no justification to levy service tax on the portion attributed to land charges. Consequently, the impugned order demanding service tax on the land value was set aside, and the appeal was allowed.

This judgment clarifies the tax liability under the 'Construction of Complex Services' category, emphasizing the importance of clear segregation of consideration amounts for different components of the service provided. It highlights the significance of documentary evidence, such as agreements and accounting records, in determining the applicability of service tax on specific elements of a composite service transaction. The decision also underscores the relevance of official clarifications issued by competent authorities in interpreting tax provisions and resolving disputes regarding tax liabilities in a specific sector or service category.