2017 (8) TMI 552 - AT - Service Tax

Construction of residential complex - Section 65(30a) of the Act - whether under the admitted fact that they have constructed individual residential flats/units/houses? - whether they are liable to pay service tax under the provisions of Finance Act read with the Rules under the period in dispute 2010-11 and 2014-15? - Held that - both for the period prior to 01 July, 2012 and subsequent to that date, that construction of residential complex having not more than 12 residential units per building or block prior to 01 July, 2012 and two or more units after 01 July, 2012 is not sought to be taxed under the provisions of the Finance Act/Service Tax provisions. For the levy, it should be registered complex comprising more than 12 units prior to 01 July, 2012 and more than one residential unit in a complex from 01 July, 2012. Admittedly in the present case, the appellant constructed individual residential houses, each block, being a residential unit which is an admitted fact. In any case, it appears that the legislature did not want to tax construction of individual residential units to the levy of service tax. We find that the learned Commissioner have erred in considering the approved plan for construction of more than 12 individual units on a large plot of land as a residential complex which we find is wrong and misconceived. Demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues: Whether construction of individual residential units/houses by the appellant is liable for service tax under the Finance Act for the period 2010-11 to 2014-15.

Analysis:
1. Issue of Liability for Service Tax: The main issue in this appeal was whether the construction of individual residential units/houses by the appellant firm falls under the purview of service tax under the Finance Act. The Revenue contended that the appellant provided services in respect of units of villas/flats, which were sold without obtaining the completion certificate from the competent authority, thereby invoking the extended period of limitation to demand service tax. The appellant challenged this demand on various grounds.

2. Interpretation of Relevant Provisions: The Tribunal analyzed the relevant provisions of the Finance Act both before and after July 1, 2012. It was observed that prior to July 1, 2012, the construction of a residential complex with more than 12 units was taxable, while after that date, the threshold was reduced to more than one residential unit in a complex. The Tribunal noted that the appellant had constructed individual residential houses, each being a separate unit, and not a complex with multiple units as required for taxation under the Act.

3. Contentions and Findings: The appellant raised four key points in their defense, including the argument that individual units do not fall under the definition of a residential complex, units were sold only after obtaining completion certificates, no tax should be levied on the sale of immovable properties, and the demand was barred by limitation. The Tribunal found merit in these contentions and held that the construction of individual residential units by the appellant did not attract service tax liability under the relevant provisions of the Finance Act.

4. Decision and Conclusion: Ultimately, the Tribunal allowed the appeal, setting aside the impugned order. It was concluded that the show cause notice demanding service tax was not maintainable as the appellant's construction of individual residential units did not meet the criteria for taxation under the Finance Act. The appellant was granted consequential benefits in accordance with the law. The judgment clarified the distinction between taxable residential complexes and individual residential units, providing relief to the appellant in this case.