2018 (9) TMI 1066 - AT - Service Tax

Construction Services - Commercial or Industrial Construction Service - Construction of Residential Complex Service - demand of service tax. Commercial or Industrial Construction Services - it is submitted that the said building was constructed for the appellant s own use as an office - Held that - The period involved is from 10.09.2004 to 30.06.2008. The demand for the period prior to 01.06.2007 cannot sustain as per the decision laid by the Hon ble Apex Court in the case of Larsen and Toubro Ltd. 2015 (8) TMI 749 - SUPREME COURT - demand set aside. Construction of Residential Complex Services - appellant has constructed two complexes, namely, Nelson Square and Krishna Sarathy - Held that - In the present case, the appellant has not engaged any other person for construction and construction activity was carried out on his own. The land belonged to him as he had purchased the right/share of the land from M/s. Nelson Type Foundry Pvt. Ltd. Similar is the situation in the case of the Krishna Sarathy Residential Complex also. By the joint development agreement entered by the appellants with the land owners, part of the undivided share in the land was handed over to the appellants and, in turn, it was agreed to hand over certain portions of constructed area (flats) to land owner - Though the appellants may have received payments prior to completion of the flats from prospective buyers, these amounts do not attract service tax prior to 01.07.2010 for the reason that the explanation to Section 65(105)(zzzh) was added only on 01.07.2010 - demand set aside. Maintenance and repair services - Held that - The appellants are not contesting the demand in respect of maintenance and repair services and the same is upheld. Appeal allowed in part.

Summary

Issues:
1. Demand for service tax on Maintenance and Repair Services, Commercial or Industrial Construction Service, and Construction of Residential Complex Service.

Analysis:

1. Maintenance and Repair Services: The appellant did not contest the demand for maintenance and repair services, which was upheld by the Tribunal.

2. Commercial or Industrial Construction Service: The appellant argued that the building was constructed for self-use as an office, and therefore, no liability for service tax exists. The Tribunal agreed with the appellant, setting aside the demand for this service.

3. Construction of Residential Complex Service: The Department alleged that the undivided share of land had been transferred to prospective buyers, making the construction subject to service tax. However, the Tribunal found that the agreements were only agreements to sell, not transfers of ownership. The appellant had not engaged any other person for construction, and construction was carried out on their own land, as clarified by relevant Board Circulars. The Tribunal held that the demand for service tax on construction of residential complexes could not be sustained and set it aside.

4. Legal Precedents: The Tribunal referred to various legal precedents, including the case of M/s. Creations and Vijay Shanthi Builders Ltd., to support their decision that no service tax is payable when the developer constructs on their land.

5. Operative Order: The Tribunal modified the impugned order, setting aside the demands for Commercial or Industrial Construction Service and Construction of Residential Complex Services, while upholding the demand for Maintenance Services. The appeal was partly allowed with consequential benefits.

6. Miscellaneous Application: The Tribunal allowed the Miscellaneous Application filed by the Department for a change of Cause Title.

In conclusion, the Tribunal ruled in favor of the appellant regarding the demands for Commercial or Industrial Construction Service and Construction of Residential Complex Services, based on the legal principles and factual circumstances presented during the proceedings.