2024 (3) TMI 351 - AT - Service Tax

Levy of service tax - row houses constructed in a gated community - scope of residential complex - HELD THAT - There is no significant change in the definition of residential complex as defined in Section 65(91a) of the Act both before and after 01.07.2012. Admittedly, the Respondent have sold developed plots to the buyers. Thereafter they have entered into agreement with the buyer/owner of plot to construct single house or residential unit. The house plan is also approved in the name of owner/buyer of the plot. Thus the activity is excluded or exempt both before and after 01.07.2012. Further, it is found that the said issue is no longer res integra, in view of the ruling of this Tribunal in MACRO MARVEL PROJECTS LTD. VERSUS COMMR. OF SERVICE TAX, CHENNAI 2008 (9) TMI 80 - CESTAT, CHENNAI and which have been approved by the Apex Court - it was held by Tribunal that construction of residential complex/building having not more than 12 residential units, is not sought to be taxed under service tax. For the levy it should be a residential complex comprising of more than 12 residential units. It is evident that the law makers did not want construction of individual residential units to be subject to levy of service tax. There are no merit in these appeals by Revenue - appeal dismissed.

Summary

Issues Involved:
1. Liability to pay service tax on row houses in a gated community.
2. Interpretation of "residential complex" under Section 65(91a) and Notification No. 25/2012-ST.
3. Applicability of service tax exemption for single residential units.
4. Validity of common facilities influencing the taxability of residential units.

Summary:

1. Liability to Pay Service Tax on Row Houses in a Gated Community:
The respondent assessee engaged in construction and sale of flats, villas, and plots was issued a show cause notice demanding service tax under the head Works Contract Service for row houses in a gated community. The Learned Commissioner dropped the demand, concluding that the construction activities were exempt from service tax.

2. Interpretation of "Residential Complex" Under Section 65(91a) and Notification No. 25/2012-ST:
The Commissioner observed that the construction of single residential units, as part of a gated community, does not constitute a "residential complex" comprising more than 12 units, thus exempting them from service tax. The definition under Section 65(91a) and Notification No. 25/2012-ST was interpreted to exclude such individual units from the tax net.

3. Applicability of Service Tax Exemption for Single Residential Units:
For the period prior to and after 01.07.2012, it was held that the construction of single residential units for personal use by the buyer, after the transfer of ownership of the plot, is exempt from service tax. Reliance was placed on Board Circular No. 108/2/2009 and the ruling in Macro Marvel Projects Ltd., which clarified that such activities fall outside the purview of service tax.

4. Validity of Common Facilities Influencing the Taxability of Residential Units:
Revenue's appeal argued that the presence of common facilities like gardens, swimming pools, and clubhouses in the gated community should render the construction taxable as a "residential complex." However, the Tribunal found no merit in this argument, upholding that the individual residential units, even with shared amenities, do not qualify as a taxable residential complex.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming that the construction of single residential units in the gated community is exempt from service tax both before and after 01.07.2012. The ruling in Macro Marvel Projects Ltd. and Baba Construction Pvt Ltd., upheld by the Apex Court, was deemed applicable, reinforcing the exemption for such constructions.