2023 (4) TMI 1135 - AT - Service Tax

Levy of Service Tax - Classification of service - Construction of Complex Service - Works Contract Service - construction of flats was for the service recipients per se - period from 01.02.2007 to 30.06.2010 - HELD THAT - It is a matter of record, as observed from the Show Cause Notice, that the appellant, who is a developer, was rendering typical works contract service, for which reason they had started paying Service Tax with effect from December 2007, thereby availing the benefit under the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007. The fact however remains, by virtue of the construction agreements entered into with their prospective buyers, that, in essence, they were rendering works contract service in the construction of flats and this aspect has not been denied by the Revenue either in the Show Cause Notices or in the impugned order. The CESTAT, Chennai Bench 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 has, following the dictum of the Hon ble Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT , held that in respect of projects executed prior to 01.06.2007, being in the nature of composite works contract, could not be brought within the fold of commercial or industrial construction service or construction of complex service and for the period post 01.06.2007, the liability to Service Tax could be fastened only if the activities were in the nature of services simpliciter - The period of dispute is from February 2007 to June 2010 and from July 2010 to March 2011, and there is no dispute that from December 2007, the appellant is remitting the Service Tax under works contract service. Thus, the position of law is that there is no Service Tax liability as and when the construction of flat is for the personal use of the service recipient. Admittedly, in the case on hand, by virtue of agreements entered into by the appellant with the prospective buyers, which is reflected in the Show Cause Notice, it appears that there is no dispute that the construction of flats was for the service recipients per se. Demand do not sustain - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are related to the liability of Service Tax under Construction of Complex Service (CCS) for the periods from February 2007 to June 2010 and July 2010 to March 2011.

Issue 1: Observations in Show Cause Notices
The Internal Audit Group noticed that the appellant had not been paying Service Tax under CCS for the construction of 128 flats. The Show Cause Notice highlighted the agreement for construction of flats and stages of payment towards construction, indicating liability under CCS from February 2007 onwards.

Issue 2: Demand of Service Tax
The proposal in the Show Cause Notice demanded Service Tax for the periods from 01.02.2007 to 30.06.2010 and from July 2010 to March 2011, along with applicable interest and penalties under the Finance Act, 1994. The Order-in-Original upheld these demands, leading to the filing of appeals.

Issue 3: Legal Arguments and Precedents
The appellant argued that the demand under CCS does not stand as per the judgment of the Hon'ble Apex Court and various CESTAT benches. They cited precedents where judgments were followed, emphasizing the settlement of similar demands.

Issue 4: Tribunal's Analysis and Decision
The Tribunal observed that the appellant was rendering works contract service and paying Service Tax under Works Contract rules. It was noted that the construction of flats was for the service recipients per se, exempting it from Service Tax liability. Relying on legal precedents, the Tribunal set aside the demand confirmed in the impugned order and allowed the appeals.

Separate Judgement Delivered:
No separate judgment was delivered by the judges in this case.