2018 (6) TMI 925 - AT - Service Tax

Construction of residential complex - appellant is mainly engaged in promotion of residential complex - whether service tax is payable for the construction of residential complex service in respect of the dwelling units constructed by the assessee prior to 1.7.2010 i.e. before introduction of the Explanation to the Section 65(105)(zzzh) and thereafter? - Held that - Though it is discussed in the order that the promoter / assessee has sold the USD in the land to a few prospective buyers, there is no document to substantiate the same - The permission certificate for construction of the complex as well as the completion certificate is issued in the name of the assessee. These documents therefore strongly indicate that the land belongs to assessee till the completion of construction. In the instant case, prior to 1.7.2010, the levy of service tax cannot sustain for the reason that the assessee is the land owner and the construction done by himself without engaging a contractor would amount to self-service. The amendment brought to effect a deeming fiction, that if any sum is received from the prospective buyer before grant of completion certificate would be construction of residential complex service. The said amendment is prospective in nature and would be effective only after 1.7.2010 - However, in the instant case, the completion certificate shows that the construction activity has been completed on 19.11.2008. The provision of service, which is the taxable event during the impugned period happened prior to 1.7.2010. Therefore, the said amendment cannot be pressed upon the assessee to demand service tax. Demand cannot sustain - appeal allowed - decided in favor of appellant.

Issues Involved:
1. Liability of service tax under "construction of residential complex services".
2. Applicability of Board circulars and self-service exemption.
3. Impact of the amendment to Section 65(105)(zzzh) effective from 1.7.2010.
4. Ownership and transfer of undivided share (UDS) in property.
5. Validity of penalties imposed under the Finance Act, 1994.

Detailed Analysis:

1. Liability of Service Tax under "Construction of Residential Complex Services":
The department issued show cause notices demanding service tax from the assessee, who is engaged in the promotion of residential complexes, under the category of "construction of residential complex services." The lower authorities confirmed the demand along with interest and imposed penalties, except under Section 76 of the Finance Act, 1994, which was waived. The assessee contested the demand, arguing that the construction was carried out using his own staff and labor, without engaging any contractors, thus falling outside the purview of "construction of residential complex services" as per the Board circulars.

2. Applicability of Board Circulars and Self-Service Exemption:
The assessee relied on Board circulars (F.No. 332/35/2006 dated 1.8.2006, Circular No. 96/7/2007-ST dated 23.8.2007, and Circular dated 29.1.2009), which clarified that if the builder undertakes construction on his own land without engaging any other person, it amounts to self-service and does not attract service tax. The Tribunal noted that the land belonged to the assessee until the completion of construction, as evidenced by permission and completion certificates issued in the assessee's name. Therefore, the construction activity prior to 1.7.2010 was considered self-service and not subject to service tax.

3. Impact of the Amendment to Section 65(105)(zzzh) Effective from 1.7.2010:
The amendment introduced an Explanation deeming any sum received from prospective buyers before the grant of a completion certificate as "construction of residential complex service." The Tribunal held that this amendment is prospective and cannot be applied to the assessee's case, as the construction was completed on 19.11.2008, before the amendment's effective date. Therefore, the demand for service tax for the period after 1.7.2010 was also unsustainable.

4. Ownership and Transfer of Undivided Share (UDS) in Property:
The department argued that the assessee sold the UDS to prospective buyers, thereby not being the owner of the property. However, the Tribunal found no documents substantiating this claim. The property remained under the assessee's ownership until the completion of construction, and the sale of UDS was only an agreement to sell, not transferring any interest in the property until the construction was completed and full payment was made. This supported the assessee's claim of self-service.

5. Validity of Penalties Imposed under the Finance Act, 1994:
The Tribunal did not specifically address the penalties in detail but set aside the impugned orders, which included the penalties imposed. Consequently, the penalties were also annulled as part of the overall relief granted to the assessee.

Conclusion:
The Tribunal concluded that the demand for service tax was without legal basis, as the construction activity conducted by the assessee was self-service and not subject to service tax prior to 1.7.2010. The amendment effective from 1.7.2010 could not be retrospectively applied. The appeals filed by the assessee were allowed, and the appeal filed by the Revenue was dismissed.

← Previous Next →