2008 (9) TMI 80 - AT - Service Tax

Demand on the amount collected by the appellants from their clients as consideration for construction and transfer of residential houses - scope of construction of complex - construction of residential complex having not more than 12 residential units is not sought to be taxed - Admittedly, in the present case, the appellants constructed individual residential houses, each being a residential unit held that construction of individual residential units are not subject to levy of service tax

Summary

Issues: Appeal against demand of service tax for construction of residential houses; Applicability of 'construction of complex' service under Section 65(30a) of the Finance Act, 1994; Imposition of penalty under Section 76; Interpretation of 'residential complex' under Section 65(91a) of the Act.

Analysis:
1. The appeal challenged a service tax demand of Rs. 15,63,145 for the period 16-6-2005 to 30-11-2005 related to the construction of residential houses under the head "construction of complex" service as per Section 65(30a) of the Finance Act, 1994. The appellant contended that the work done by them fell under 'works contract' which became taxable only from 1-6-2007 under Section 65(105)(zzzza) of the Act. The authorities imposed a penalty under Section 76. The tribunal noted that the demand was based on the amount collected for construction and transfer of residential houses, which the appellant argued did not fall under the definition of 'construction of complex' as per the Act.

2. The tribunal examined the definitions provided under the Act for 'construction of complex' and 'residential complex'. 'Construction of complex' includes construction of a new residential complex, completion services related to residential complex, and repair or renovation services. On the other hand, 'residential complex' is defined as a complex with more than twelve residential units, common areas, and specific facilities. It was observed that the construction of individual residential units, as in the present case, did not meet the criteria of a 'residential complex' as per the Act. The tribunal highlighted that the legislative intent was to tax residential complexes with more than 12 units, excluding individual residential units from service tax liability.

3. The appellant argued that post 1-6-2007, the activity could be considered a 'works contract' under the amended Section 65(105)(zzzza) of the Act. However, the tribunal reiterated that individual residential units did not qualify as a 'residential complex or a part thereof' under the Act. The tribunal emphasized that their observations on 'works contract' were specific to the grounds of the appeal and not binding precedent. Consequently, the tribunal set aside the impugned order, allowing the appeal and disposing of the stay application.

This detailed analysis of the judgment outlines the key legal issues, interpretations of relevant provisions, and the tribunal's reasoning leading to the decision in favor of the appellant.