2019 (5) TMI 147 - AT - Service Tax

Classification of services - construction of residential complexes - whether classified as works contract service or not - benefit of abatement - HELD THAT - For the period up to 01.07.2010 this Bench in the case of KOLLA DEVELOPERS BUILDERS VERSUS CCCE ST, HYDERABAD-II 2018 (11) TMI 164 - CESTAT HYDERABAD has held that construction of residential complex by the builder prior to 01.07.2010 is not chargable to service tax as has been clarified by the CBEC Circular No. 151/2/2012-ST dated 10.02.2012 -The same ratio was also adopted in the case of MEHTA MODI HOMES VERSUS CCT, SECUNDERABAD - GST 2019 (2) TMI 476 - CESTAT HYDERABAD - there are no reason to deviate from the decisions already taken - the demand of service tax prior to 01.07.2010 is liable to be set aside. Period post 01.07.2010 - HELD THAT - The appellant has raised a doubt regarding the classification of the services, claimed that they are entitled to abatement of 75%/70% in terms of Notification No. 26/2012-ST dated 20.06.2012 and that there was a duplication of the amounts received by counting them first as advances under current liabilities and thereafter as sales income, and the re-computation of the tax liability is required based on milestone payments. Needless to say the liability of interest accordingly needs to be re-calculated as well - these issues need to be examined by the adjudicating authority along with the liability of the appellant to penalty for the period post 01.07.2010. Appeal allowed in part and part matter on remand.

Summary

Issues:
Classification of services for service tax liability, abatement entitlement, duplication of payment calculation, point of taxation rules application, limitation period for demand, penalty imposition for classification dispute.

Analysis:
The appellant, engaged in construction of residential complexes, challenged the service tax demand issued by the Department covering the period 2007-08 to 2011-12. The Department contended that the services should be classified as works contract service instead of under a different section. The appellant argued that construction services provided prior to 01.07.2010 were not taxable based on previous judgments and circulars. They also claimed entitlement to abatement and raised concerns about duplication of payment calculation and the application of point of taxation rules. The appellant further argued that the demand was issued beyond the limitation period and that penalty imposition was unwarranted due to a mere classification dispute.

The appellant cited Circulars clarifying the specific description of activities by builders under certain sections of the Finance Act. The Department reiterated the findings of the lower authorities.

The Tribunal referred to previous decisions where it was held that construction of residential complexes by builders before 01.07.2010 was not subject to service tax. For the period post 01.07.2010, the Tribunal found merit in the appellant's arguments regarding classification, abatement entitlement, duplication of payment calculation, and point of taxation rules application. The matter was remanded back to the original authority for further examination, including the liability of the appellant to penalty for the post-01.07.2010 period, after considering the submissions and principles of natural justice.

In conclusion, the Tribunal partly allowed the appeal by setting aside the demand prior to 01.07.2010 and remanding the matter concerning the post-01.07.2010 period back to the original authority for a detailed review and decision-making process while ensuring procedural fairness.