2024 (6) TMI 17 - AT - Service Tax

Liability of promoter / builder / developer to pay service tax - Construction of residential complexes - Benefit of CBEC circular No.108/2/2009-ST dt. 29.01.2009 - Whether the demand raised under Works Contract Service against the appellant for the period prior to 1.7.2010 for construction of residential complexes is sustainable or not - HELD THAT - The Board vide its Circular No.108/2/2009-ST dt. 29.01.2009 has clarified that the promoter / builder / developer is not required to pay service tax for the construction of residential complexes. The Board s circular has been considered by the Tribunal in the case of Krishna Homes Vs CCE 2014 (3) TMI 694 - CESTAT AHMEDABAD wherein it has been held that the demand cannot sustain. The Tribunal in the case of vide Final Order 2024 (5) TMI 1197 - CESTAT CHENNAI had occasion recently to consider a similar issue and set aside the demand holding that the promoter / builder / developer is not required to pay service tax prior to 1.7.2010. The Tribunal had also referred to the Explanation added to Section 65 (105) (zzzh) which was introduced w.e.f. 1.7.2010 which stated that the builder / promoter / developer is not liable to pay service tax for construction of residential complex for the period prior to 1.7.2010. Following the said decision we are of the considered opinion that the demand of service tax cannot sustain. The impugned order is set aside. The appeal is allowed with consequential reliefs if any.

Summary

Issues:
1. Whether the demand raised under 'Works Contract Service' against the appellant, a promoter/developer engaged in construction of residential complexes, for the period prior to 1.7.2010 is sustainable.

Analysis:
The appellant, engaged in construction services, stopped paying service tax from February 2009 following a CBEC circular. The Department issued a show cause notice demanding service tax for the period from 1.2.2009 to 30.09.2009. The original authority confirmed the demand, interest, and penalties. The appellant argued that as per Circular No. 108/2/2009-ST, promoter/builder/developer is not liable to pay service tax until 1.7.2010. They cited a Tribunal decision in Krishna Homes Vs CCE Bhopal, where demand against promoters/builders for construction of residential complexes was set aside based on the circular. The appellant contended that the demand cannot sustain due to the circular exempting them from service tax obligations.

The issue before the Tribunal was whether the demand raised under 'Works Contract Service' against the appellant, a promoter/developer, for the period before 1.7.2010 was sustainable. The Tribunal considered Circular No. 108/2/2009-ST, which clarified that promoter/builder/developer is not required to pay service tax for construction of residential complexes. Referring to the decision in Krishna Homes case, the Tribunal held that the demand could not be sustained. The Tribunal highlighted the explanation added to Section 65(105)(zzzh) from 1.7.2010, deeming builder/promoter/developer as a service provider to the buyer for construction of residential complexes. Relying on a recent decision, the Tribunal set aside the demand, concluding that the appellant was not liable to pay service tax prior to 1.7.2010. The impugned order was overturned, and the appeal was allowed with consequential reliefs, if any.