2008 (1) TMI 186 - AT - Service Tax

Service of construction of residential complex refund filed on ground that impugned service do not come under service tax net As per the provisions of Service Tax a person who construct a new residential complex or a building or having more than 12 residential units are liable to pay Tax - sale deed entered with their customer also mentions the Service Tax will be paid by the purchasers of the flat hence refund is also rejectable on ground of unjust enrichment appeal dismissed

Summary

Issues involved:
1. Refund of Service Tax on construction of residential complex
2. Liability to pay Service Tax
3. Unjust enrichment

Refund of Service Tax on construction of residential complex:
The appellants, registered as providers of construction services for residential complexes, filed refund applications after paying Service Tax, claiming they were not liable for the tax. The adjudicating authority rejected the refund claim, which was also dismissed on appeal. The appellant's argument was based on the premise that they were not obligated to pay the Service Tax. However, it was established that the appellants had entered into agreements with customers for flat sales before completing the construction, making them liable for Service Tax under the relevant provisions. The finding that the appellants were constructing multi-storied buildings and had agreements mentioning the payment of Service Tax by the purchasers supported the rejection of the refund claim. Therefore, the appeals were dismissed on this issue.

Liability to pay Service Tax:
The key contention in the appeal was the appellant's assertion that they were not required to pay Service Tax. However, the tribunal found that as per the Service Tax provisions, individuals constructing new residential complexes or buildings with over 12 residential units are liable for the tax. In this case, the appellant had constructed a multi-storied building and initiated agreements with customers before commencing construction, establishing their liability for Service Tax. The tribunal upheld the adjudicating authority's decision in this regard, emphasizing that the agreements with customers explicitly stated that the purchasers would bear the Service Tax burden. Consequently, the tribunal found no fault in the rejection of the refund claim based on the liability to pay Service Tax.

Unjust enrichment:
Regarding the issue of unjust enrichment, the tribunal noted that the sale deeds with customers explicitly mentioned that the purchasers would be responsible for paying the Service Tax. This aspect further reinforced the tribunal's decision to dismiss the refund claim. The tribunal found no deficiency in the impugned order that rejected the refund claim, as the agreements clearly indicated that the purchasers were aware of and agreed to bear the Service Tax burden. Consequently, the tribunal concluded that there was no unjust enrichment in this case and upheld the decision to dismiss the appeals based on this issue.