2012 (8) TMI 814 - AT - Service Tax

Demand of service tax - business of real estate development and construction residential houses - appellant in terms of their agreement with their customers for construction of residential units on a plot of land owned by them construct the duplex type houses for their customers Held that - It is only w.e.f. 1-7-2010, that explanation was added to Section 65(zzzh) of the Finance Act, 1994 providing that for the purpose of this sub-clause - for the period prior to 1-7-2010, the appellant s activity cannot be treated as service provided by them to their customers

Summary

Issues:
1. Whether the appellant's activity constitutes "construction of complex services" under the Finance Act, 1994.
2. Validity of the service tax demand, interest, and penalties imposed on the appellant.
3. Consideration of the appellant's appeal against the order-in-original and the Commissioner (Appeals).

Analysis:
1. The appellant, engaged in real estate development, sold plots of land and constructed residential houses on them. The department alleged that the appellant provided "construction of complex" services taxable under specific sections of the Finance Act, 1994. A show cause notice was issued for non-payment of service tax, interest, and penalties. The Jurisdictional Deputy Commissioner confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld this decision, leading to the current appeal.

2. The appellant argued that their activity did not fall under the definition of "construction of complex services" as per the Act. They contended that the transaction was for the sale of immovable property, not a service, citing a Tribunal judgment and Board Circulars. The Senior Departmental Representative opposed the stay application, referring to the Commissioner (Appeals) findings and a High Court judgment. The Tribunal noted the agreements between the appellant and customers for constructing residential units on owned land.

3. The Tribunal analyzed the legal interpretations provided by the Gauhati and Punjab & Haryana High Courts regarding the nature of construction activities in real estate development. It highlighted that the explanation added to the Finance Act in 2010 did not have retrospective effect, thus not applying to the period in question. Referring to Board Circulars, the Tribunal held that the appellant's activity could not be considered a service provided to customers before 1-7-2010. Consequently, the Tribunal waived the pre-deposit requirements for the appeal and stayed the recovery of the demanded amounts until the appeal's disposal. The stay application was allowed, indicating a prima facie view that the impugned order was incorrect.