2010 (1) TMI 343 - AT - Service Tax

Stay Construction of residential complex- The appellant is a developer engaged in construction of residential complex and is registered with the department as provider of services under the category Construction of Residential Complex Services . Held that- the appellants already discharged the liability confirmed against them to the extent of about 83%. Payment towards service tax made already sufficient as pre-deposit. Pre-deposit of amounts waived.

Summary

Issues:
1. Liability of service tax on construction of residential complex services.
2. Applicability of CBEC Circular on tax liability.
3. Pre-deposit waiver and stay on recovery of dues pending appeal.

Analysis:
1. The appellant, a developer engaged in constructing residential complexes, was found liable for service tax amounting to Rs. 2,03,24,226 for the period from 16-6-2005 to 31-12-2006. The liabilities confirmed included service tax, interest, and various penalties under different sections of the Finance Act, 1994. The appellant failed to follow statutory formalities, leading to the imposition of these liabilities.

2. The appellant argued for waiver of pre-deposit and stay on recovery, contending that the work was done before service tax on 'works contract' was imposed. Referring to CBEC Circular No. 108/02/2009-S.T., the appellant claimed that builders/developers constructing residential flats were not providers of 'Construction of Residential Complex' service. Additionally, the appellant highlighted that a significant portion of the work was completed before 15-6-2005 and had already paid 83% of the total liability.

3. The respondent, however, countered that the CBEC Circular did not cover the activity in question as the developer had a joint venture agreement with the landowner, and the construction was part of the consideration for the land received. The respondent argued that the impugned activity fell under the 'Construction of Residential Complex' category, justifying the tax liabilities imposed.

4. After considering both sides' arguments, the tribunal acknowledged that the appellant had already paid 83% of the total liability and that 15% of the work was completed before 15-6-2005. Consequently, the tribunal deemed the payment made towards service tax sufficient as a pre-deposit for the appeal hearing. As a result, the tribunal granted a waiver of pre-deposit for the remaining dues and stayed the recovery pending the appeal's decision, providing relief to the appellant.