2017 (5) TMI 897 - AT - Service Tax

Construction of complex services - liability of tax - 10 individual houses built for Rajasthan Housing Board in the NRI scheme - Held that - Sharing facilities provided by local Authorities available to all residential units by way of road, street lights, park, water supply unit does not make the residential unit covered by the tax entry u/s 65 (91a) of the FA, 1994 - the impugned order failed to justify the categorization of the construction carried out by the appellant, with reference to 10 independent houses, as construction of residential complex in terms of the above tax entry - demand set aside. Works Contract Service - composition scheme - Held that - the appellants did opt for the said scheme and have paid service tax under the said scheme - all consideration received under the said works contract should be eligible for composition scheme. Penalties imposed on appellants also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appellant's liability to service tax under construction of complex services.
2. Appellant's eligibility for composition scheme in works contract.

Analysis:

Issue 1: Appellant's liability to service tax under construction of complex services
The appeal challenged an order by the Commissioner (Appeals) upholding the original order imposing service tax on the appellant for alleged non-payment under "construction of complex services" and "works contract service." The appellant contended that they constructed individual residential houses, not residential complexes as defined by Section 65(91A) of the Finance Act, 1994. The Tribunal noted the definition of "residential complex" requiring more than 12 units with common facilities within an approved layout. The lower Authorities found the appellant liable based on the presence of common facilities shared with other houses. However, the Tribunal held that mere sharing of common facilities like roads, street lights, and parks, not within an approved layout, does not make individual houses taxable as residential complexes. The impugned order lacked legal merit as it failed to establish the necessary criteria for taxation under Section 65(91A).

Issue 2: Appellant's eligibility for composition scheme in works contract
Regarding the composition scheme in works contracts, the Tribunal found that the appellant opted for the scheme and paid service tax accordingly. The Tribunal agreed with the appellant that all consideration received under the works contract should be eligible for the composition scheme. There was no justification for denying the scheme for part of the works contract. Consequently, the impugned order was set aside on both issues, and the penalties imposed on the appellant were deemed unjustifiable. The appeal was allowed in favor of the appellant on these grounds.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the impugned order and penalties imposed, based on the lack of legal merit in establishing the appellant's liability for service tax under construction of complex services and affirming the appellant's eligibility for the composition scheme in works contracts.