2008 (7) TMI 196 - AT - Service Tax

Construction of residential complexes - appellant had not paid the service tax due - contention of appellant that he is not the service provider he is only selling the property, is not correct - He may be employing very many contractors for the construction, is not the relevant point Therefore, demand is confirmed - since appellant had certain doubts about the liability and as the question of interpretation of the Finance Act is involved, penalty is set aside - interest liability is upheld

Summary

Issues:
1. Challenge to levy of Service Tax under construction of residential complexes.
2. Interpretation of dominant intention theory and abatement method.
3. Challenge to penalties imposition.
4. Challenge to interest under Section 75.
5. Classification of service under Works Contract Service.
6. Liability of service tax on the appellants as service providers.

Analysis:
1. The appellants contested the levy of Service Tax under the category of construction of residential complexes, arguing they do not render any taxable service. They relied on Board Circulars and challenged the Commissioner's interpretation of the dominant intention theory. They also disputed the penalties and interest imposed, citing lack of mens rea and prior payment of service tax.

2. The Tribunal examined the agreements and found the appellants to be developers of residential complexes, thus liable for service tax. Despite doubts about liability, penalties were set aside due to prior payment of service tax. Interest liability was upheld, and the abatement method was considered in determining the duty demand.

3. The Tribunal clarified that the construction activity undertaken by the appellants could not be taxed before 01.06.2007 as a works contract. The service provided was classified under Works Contract Service, not construction of complex service, prior to the specified date.

4. The learned SDR argued that the appellants were service providers engaged in constructing residential complexes, making them liable for service tax. The relationship between the appellants and flat buyers was emphasized as essential for tax liability.

5. The Tribunal upheld the levy of service tax on the appellants as service providers based on the agreements and the nature of the construction activity. The penalties were set aside due to doubts about liability and prior payment of service tax. Interest liability was upheld, and the duty demand was determined considering the abatement method.

6. The judgment concluded by upholding the levy of service tax on the appellants for construction of residential complexes, setting aside penalties, and upholding interest liability. The decision was pronounced in open court on 28.7.2008 by the Appellate Tribunal CESTAT Bangalore.