2013 (11) TMI 762 - AT - Service Tax

Taxability of service - Construction of residential complexes for sale - Relationship between assessee and buyers - Bar of limitation - Held that - there is a relationship of service provider and service recipient between the applicant and the prospective buyers of the individual residential units as it is evidenced by the contract between the two parties. The contract is not for sale of flats but for providing construction service - residential complex was not for the residence of the applicant but the individual residence units were constructed for residential use of the persons for whom such units were constructed. The fact that individual residential units were for residential use of the purchaser of UDS cannot take the complex outside the definition. Any interpretation to the contrary will make the entry otiose. Adjudicating authority has not extended abatement as per the Notification No. 1/06-ST towards the value of the materials used in the construction activity which the applicant is prima facie eligible for. Since the demand is based on information unearthed during investigation and not voluntarily disclosed we are prima facie not in agreement with the argument that the demand is time barred - Assessee directed to make a pre deposit - Stay granted partly.

Issues:
1. Whether the construction activities carried out by the appellant for a certain period were subject to service tax.
2. Whether the demand for service tax on the construction activities is sustainable.
3. Whether the exclusion clause in the definition of "residential complex" under Section 65(91a) applies to the case.
4. Whether the appellant is eligible for abatement towards the value of materials used in the construction activity.
5. Whether the demand for service tax is time-barred due to suppression of facts by the appellant.

Analysis:

1. The appellant was engaged in the construction of residential complexes and did not pay service tax for the period in question. The Revenue contended that the activities amounted to taxable services. Two show cause notices were issued, demanding unpaid service tax. The Tribunal considered the arguments presented by both sides and noted the existence of a service provider-service recipient relationship based on the contracts for construction services.

2. The appellant argued that there was no service provider-service recipient relationship at the construction stage as the land was still in their name. The appellant also claimed that the constructed flats were for personal use, falling under an exclusion clause. However, the Tribunal found the arguments unconvincing, emphasizing the contractual nature of the construction services provided to prospective buyers.

3. The exclusion clause in the definition of "residential complex" was examined. The Tribunal clarified that the clause applies when a complex is constructed by one person for their own residence. In this case, the individual residential units were constructed for the buyers' residential use, not for the appellant's residence. Therefore, the exclusion clause did not exempt the construction activities from service tax liability.

4. The Tribunal acknowledged the appellant's eligibility for abatement towards the value of materials used in the construction activity. However, the adjudicating authority had not extended this abatement, which the appellant was prima facie eligible for. The Tribunal found this as a valid point in favor of the appellant.

5. The Revenue argued that the demand was not time-barred due to suppression of facts by the appellant. The Tribunal agreed, considering the investigation process and voluntary disclosure. The Tribunal directed the appellant to make a pre-deposit within a specified timeframe, balancing the financial hardship claimed by the appellant and the interest of the Revenue.

This detailed analysis of the judgment covers the key issues involved, the arguments presented by both parties, and the Tribunal's reasoning and decision on each issue.

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