2017 (5) TMI 1251 - AT - Service Tax

Work Contract - Whether the respondent-assessee is liable to service tax for constructing low cost housing or housing for economically weaker section for Varanasi Development Authority Varanasi? Held that - this Tribunal in the case of Lanco Infratech Ltd. vs. CC CE & ST 2015 (5) TMI 37 - CESTAT BANGALORE (LB) has held that such activity which was not taxable prior to 01.06.2007 under the category of Commercial and Industrial Construction continue to be non taxable under the category of Works Contract Service from 01.04.2007. The activity for constructing houses by the appellant for economically weaker section under works allotted by the Varanasi Development Authority under the scheme of Government of U.P. the activities is neither taxable under works contract services nor under Construction of Complex/Commercial or Industrial Construction Services more particularly under the exclusion clause which provides that construction classifiable under the category of residential complex service does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout and the construction of such complex is intended for personal use as residence by such person and personal use have been further explained as including or permitting the complex for use as residence by another person on rent or without consideration. Appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the respondent-assessee is liable to service tax for constructing low-cost housing or housing for economically weaker sections for Varanasi Development Authority.

Analysis:
The appeal filed by Revenue questions the liability of the respondent-assessee to pay service tax for constructing low-cost housing for Varanasi Development Authority. The Revenue contended that the respondent is liable to pay service tax under the category of "Work Contract Service" for constructing civil structures and new buildings for Varanasi Development Authority. A demand of ?34,02,716 was made, and penalties were imposed under various sections of the Finance Act, 1994. The Order-in-Original confirmed the demand and penalties. However, the learned Commissioner (Appeals) allowed the appeal, stating that the constructions were not commercial or industrial and were performed for economically weaker sections under a government scheme, hence not taxable under the category of Work Contract Service.

The Revenue appealed before the Tribunal, arguing that the construction was taxable under Works Contract Service as per the relevant section of the Finance Act. The Revenue contended that the exemption claimed by the respondent based on the nature of the project was not acceptable under the specific notification providing exemptions for certain projects. The Revenue maintained that constructing houses for economically weaker sections for Varanasi Development Authority falls under Works Contract Service and is taxable.

The Tribunal found the issue to be incorrect based on previous judgments. It cited a Larger Bench ruling that activities not taxable under Commercial and Industrial Construction pre-01.06.2007 remain non-taxable under Works Contract Service post-01.04.2007. Additionally, a co-ordinate Bench decision rejected a stay application for service tax on similar activities. The Tribunal agreed with the learned Commissioner (Appeals) that constructing houses for economically weaker sections under government schemes is not taxable under Works Contract Service or Construction of Complex/Commercial or Industrial Construction Services. The appeal of Revenue was dismissed, and the respondent was entitled to consequential benefits as per the law.