2019 (12) TMI 641 - AT - Service Tax

Refund of service tax - appellant entered into agreement with the developer of residential complex for purchase of flat - declared services or not - refund denied by the lower authorities on the ground that the appellant s agreement with the Developer was on 13.03.2015 whereas occupation certificate was given by the competent authority i.e. BMC on 07.09.2015, the service was declared service, and refund cannot be granted. HELD THAT - The definition of declared services lays down the criteria of issuance of completion certificate by the competent authority. There is no powers or jurisdiction vested with the service tax authorities to dilute the said definition and to go the reasons for delay in issuance of completion certificate - As such the appellant s contention that the said certificate was not issued on account of non-functioning or delayed functioning of the State Environment Appraisal Committee cannot be appreciated. As such on the said ground, there are no merit in the contention of the appellant. Appellant also relies upon the Hon'ble Supreme Court judgement in M/S. LARSEN TOUBRO LIMITED ANOTHER VERSUS STATE OF KARNATAKA ANOTHER 2013 (9) TMI 853 - SUPREME COURT , holding that the activity of construction undertaken by the developer would be works contract only from the stage the developer enters into a contract with the flat purchaser. The value addition made to the goods transferred after the agreement is entered into with the flat purchaser can only be made chargeable to tax by the State Government - However, Learned counsel fairly agrees that the said decision was not referred to before the Commissioner (Appeals) or the adjudicating authority and as such their comments on the same are not available. Matter remanded to the original adjudicating authority for consideration of the said decision of the Hon'ble Supreme Court and to re-decide the matter accordingly - appeal allowed by way of remand.

Summary

Issues:
1. Whether service tax is payable on the purchase of a flat in a residential complex before the issuance of a completion certificate.
2. Whether the appellant is entitled to a refund of service tax paid.

Analysis:
1. The appellant entered into an agreement with the developer for the purchase of a flat before the issuance of a completion certificate. The service tax was charged by the developer and deposited with the exchequer. The lower authorities denied the appellant's refund claim, stating that the services were to be considered as declared services under Section 66E, making the service tax payable due to the absence of a completion certificate.

2. The appellant contended that the building was fully complete and ready for possession and use, except for the issuance of the completion certificate. However, the definition of declared services requires the issuance of a completion certificate by the competent authority. The tribunal found no merit in the appellant's argument that the certificate was delayed due to the State Environment Appraisal Committee's non-functioning.

3. The appellant argued that since the agreement was entered into before the issuance of the completion certificate, the services could only be considered provided from the agreement date until the certificate issuance date. The appellant cited a Supreme Court judgment to support this argument. The tribunal acknowledged this argument and remanded the matter to the original adjudicating authority for reconsideration in light of the Supreme Court decision.

In conclusion, the tribunal set aside the impugned order and directed a re-decision by the adjudicating authority considering the Supreme Court judgment cited by the appellant.