2024 (5) TMI 1448 - AT - Service Tax

Non-payment of service tax - amounts received towards the ensuing projects - Construction of Residential Complex Services - period prior to 01.07.2010 - HELD THAT - The appellant being a Promoter/Developer/Builder of residential projects has entered into Joint Development agreement with land owners where the parties agree to jointly promote and develop a construction project. It is very much clear that the appellant is a promoter of residential projects. The Board vide Circular dated 29.01.2009 has clarified that a Promoter/Developer/Builder is not liable to pay service tax for Construction of Residential Complex Services prior to 01.07.2010. The Tribunal in the case of M/s. Krishna Homes Vs. Commissioner of Central Excise 2014 (3) TMI 694 - CESTAT AHMEDABAD held that the demand of service tax against a Promoter/Builder/Developer cannot sustain for the period prior to 01.07.2010. Moreover, in the present case the contracts are composite in nature. The demand raised under Commercial or Industrial Construction or Construction of Residential Complex Services cannot sustain. The Tribunal in the case of Real Value Promoters Pvt Ltd 2018 (9) TMI 1149 - CESTAT CHENNAI had held that the demand of service tax for composite contracts can only be made under Works Contract Services. Therefore, the demand raised under the above categories of Services cannot sustain. The impugned order is set aside - appeal allowed.

Issues:
1. Whether demand of service tax for Construction of Residential Complex Services is sustainable for the period prior to 01.07.2010.
2. Whether demand raised under Construction of Commercial Complexes can sustain.
3. Whether demand for composite contracts can be made under Works Contract Services only.

Issue 1:
The appellant, engaged in Construction of Residential and Commercial projects, was issued a Show Cause Notice for non-payment of service tax. The appellant argued that as per a Board Circular, Promoter/Developer/Builder is not liable to pay service tax for construction of residential projects before 01.07.2010. The Tribunal referred to a similar case where it was held that the demand of service tax against a Promoter/Builder/Developer cannot be sustained for the period before 01.07.2010. The Tribunal clarified the definition of "residential complex" and emphasized that the appellant, being a promoter, is not liable to pay service tax for Construction of Residential Complex Services before the specified date. Thus, the demand for Construction of Residential Complex Services was deemed unsustainable.

Issue 2:
Regarding the demand raised under Construction of Commercial Complexes, the Tribunal noted that the contracts were composite in nature, involving both supply of material and services. Citing a previous case, it was held that demand for composite contracts can only be made under Works Contract Services. Therefore, the demand raised under Construction of Commercial Complexes was deemed unsustainable based on the nature of the contracts being composite.

Issue 3:
The Tribunal further referenced a case where it was established that for composite contracts, the demand of service tax cannot be under Commercial or Industrial Construction or Construction of Residential Complex Services. The Tribunal reiterated that demand for composite contracts can only be made under Works Contract Services. Another case was cited to support this position, where the Tribunal maintained that demand of service tax for composite contracts cannot be under specified categories. Consequently, the demand for composite contracts under Construction of Residential Complex Services and Construction of Commercial Complexes was found unsustainable.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs. The judgment clarified the liability of the appellant regarding service tax demands for Construction of Residential Complex Services and composite contracts, ensuring alignment with legal provisions and precedents.

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