2019 (12) TMI 856 - AT - Service Tax

Recovery of service tax - construction of residential flats - renting of immovable property service - HELD THAT - Considering the fact that there is no stay has been granted by the Hon ble Apex Court in the case of SURESH KUMAR BANSAL ANUJ GOYAL ORS. VERSUS UNION OF INDIA ORS. 2016 (6) TMI 192 - DELHI HIGH COURT wherein it has been held that there is no mechanism of recovery of service tax from the appellant; in that circumstance, the service tax is not payable by the appellant - the appellant is not liable to pay service tax under the category of construction of residential complex - Demand as well as penalty set aside. Further, the appellant has conceded the demand of service tax of ₹ 3,24,992/-. The same is confirmed along with interest and penalty under Section 78 of the Finance Act, 1994 is also confirmed on the said demand as per law. Appeal allowed in part.

Summary

Issues:
Appeal against demand of service tax on construction of residential flats and renting of immovable property service.

Analysis:
The appellant was involved in constructing residential flats without paying service tax, leading to an investigation and issuance of a show cause notice for service tax demand. The adjudicating authority partially dropped the demand on construction of residential flats but confirmed it for renting of immovable property service. The Commissioner (Appeals) set aside the dropping of demand for residential flats, resulting in a total demand of ?74,98,182. The appellant contested the demand of ?71,73,190, arguing the absence of a mechanism for service tax recovery on construction of residential flats, citing a Tribunal case. The respondent countered with a High Court decision, pending appeal in the Apex Court, challenging the Tribunal case's relevance.

The Tribunal analyzed the issue, considering the High Court's stance on following its orders until overturned by the Apex Court. Referring to a similar case, the Tribunal concluded that service tax was not payable due to the absence of a recovery mechanism, aligning with the Tribunal's previous decision. Consequently, the demand of ?71,73,190 was set aside, with no penalty imposed. However, the appellant accepted a demand of ?3,24,992, which was confirmed along with applicable interest and penalty under the Finance Act, 1994.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand related to construction of residential flats due to the absence of a service tax recovery mechanism. The decision was based on legal precedents and the absence of a stay on the High Court's order pending appeal in the Apex Court. The appeal was disposed of accordingly, with the confirmed demand subject to interest and penalty, while the major demand was set aside.