2019 (5) TMI 145 - AT - Service Tax

Construction services - construction of residential complexes of more than 12 flats/dwelling units - composite contracts - HELD THAT - The issue as to whether the demand of service tax can sustain under the categories of ECIS, CICS and RCS has been considered by the Tribunal in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI 2018 (9) TMI 1149 - CESTAT CHENNAI - The Tribunal in the said decision held that after 01.06.2007, in the case of composite contracts, the demand can sustain only under WCS - the demand of service tax under Residential Complex Service then cannot sustain. For the period prior to 01.06.2007, the decision in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT would apply since it is held therein by the Apex Court that the demand of service tax on contracts which are of composite nature cannot sustain prior to the introduction of Works Contract Service w.e.f. 01.06.2007. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether demand of service tax under Construction of Residential Complex Services is sustainable.
2. Application of abatement benefit in case of composite contracts.
3. Applicability of previous judgments on demand of service tax.

Analysis:
1. The appellants were involved in construction of residential complexes without discharging service tax, leading to a show-cause notice for the period Oct.’06 to Mar.’11. The original authority confirmed the demand, interest, and penalties. The Tribunal initially dismissed the appeal, but the High Court remanded the matter for fresh consideration.

2. During the hearing, the appellant's counsel argued that the demand under Construction of Residential Complex Services cannot be sustained for the disputed period as the contracts were composite in nature involving both supply of material and services. Citing the case of M/s. Real Value Promoters (P) Ltd., the counsel sought to set aside the demand, interest, and penalties.

3. The Revenue's representative supported the findings in the impugned order. The Tribunal considered the issue of demand of service tax under various categories and referred to the decision in the case of M/s. Real Value Promoters (P) Ltd. The Tribunal held that for composite contracts post-01.06.2007, the demand can only be sustained under Works Contract Service. The counsel for the appellants highlighted the denial of abatement benefit, indicating the composite nature of the contracts involving both material supply and services. The Tribunal concluded that the demand of service tax under Residential Complex Service cannot be sustained. For the period pre-01.06.2007, the decision in the case of M/s. Larsen & Toubro was deemed applicable, stating that demand of service tax on composite contracts is not sustainable before the introduction of Works Contract Service. Consequently, the impugned order was set aside, and the appeal was allowed with any consequential reliefs.