2017 (12) TMI 446 - AT - Service Tax

Construction of Residential Complexes - case of appellant is that the appellants have undertaken such construction for use by army personnel. These constructions do not attract service tax liability as they are not covered by the statutory definition for such tax - Held that - the tax liability of such residential units built for DGMAP, Ministry of Defence, has been clarified by the jurisdictional Commissionerate vide letter dated 10.08.2008 based on the Board s clarification to the effect that construction of complexes for MAP for Army personnel is not liable to tax if their lay out does not require approval by an authority under any law for the time being in force. This clarification has been issued after a specific reference has been made by the Director (Contracts), DGMAP, Army Headquarters, New Delhi - the construction is for the Ministry of Defence for use of the Army personnel and as such, these are for personal use. In such situation also, it gets excluded from the tax entry - demand set aside. Commercial and Industrial Construction Services - the appellant claimed that these are carried out in pursuance to a composite works contract - Held that - This aspect requires re-verification and a fresh decision by the Original Authority as the Apex Court decision laying down the law on the tax liability in the case of Commissioner, Central Excise & Customs Versus M/s Larsen & Toubro Ltd. and others 2015 (8) TMI 749 - SUPREME COURT on composite works contract was not available during the adjudication proceedings - matter on remand. Appeal allowed in part and part matter on remand.

Summary

Issues: Tax liability for construction of residential complexes and commercial/industrial construction services, applicability of service tax, penalty imposition, demand for extended period.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the appeal was filed against the order of the Commissioner of Central Excise, Bhopal, regarding tax liability for the period from 10.08.2004 to 31.03.2008. The dispute revolved around service tax liability for construction activities of residential and commercial buildings. The impugned order confirmed a service tax liability of &8377; 92,88,572/- against the appellant under two tax entries: "Construction of Residential Complexes" and "Commercial and Industrial Construction Services" of the Finance Act, 1994. Additionally, penalties were imposed under Sections 78 and 77 of the Act.

The appellant contended that the constructions for army personnel under "Construction of Residential Complexes" were not subject to service tax as they were not covered by the statutory definition. They argued that these constructions were for personal use by army personnel and did not require approval from any authority, thus exempt from service tax. Regarding tax liability under "Commercial and Industrial Construction Services," the appellant claimed the property was not for sale but for use by Cantonment Authorities for commercial purposes under a composite works contract involving goods and services, which, as per the decision of the Supreme Court, attracted tax liability only from 1.6.2007.

The Tribunal noted that constructions for the Ministry of Defence for army personnel's personal use were excluded from service tax liability based on a clarification from the jurisdictional Commissionerate. Referring to a previous Tribunal decision, it upheld the exclusion from tax liability. Concerning commercial constructions, the Tribunal acknowledged liability but remanded the matter to the Original Authority for re-verification and fresh decision in accordance with the Supreme Court's ruling on tax liability for composite works contracts.

Ultimately, the Tribunal held that the appellant was not liable for service tax on residential units for army personnel and remanded the issue of tax liability for commercial constructions back to the Original Authority for reconsideration in line with the Supreme Court's decision. The appeal was disposed of accordingly.