2013 (12) TMI 919 - AT - Service Tax

Construction of residential complexes - appellant under Joint Development Agreements with land owners assigned portion of the constructed area, in the form of flats / houses, in favor of the land owners and sold remaining constructed area, in the form of flats/houses, to various buyers - dispute in the nature of non-payment of tax in respect of flats handed over to land owners - Held that - Relationship of service provider and service receiver - In instant case, since UDS is registered in name of land owners and then the Developer constructs flats for the original Land Owner, becoming UDS holder after registering UDS in his name. Hence it is clearly outside the scope of the clarification given by CBEC and there is a service provided to the UDS holders including the original Land Owners. Also, residential complexes in question were not constructed for personal use of the owners of the land. It was predominantly for sale to individual buyers and was thus covered by the definition of the service. Time bar - Since there has been persistent resistance on the part of the appellant in providing the required information, hence appellant cannot claim benefit of bonafide belief and argue that demand for a period of one year from relevant date only will apply - Following decision of LCS City Makers Pvt. Ltd. Versus Commissioner of Service Tax, Chennai 2012 (6) TMI 363 - CESTAT, CHENNAI - Prima facie case not in favour of assessee - Stay granted partly.

Summary

Issues:
- Whether service tax is payable on the sale of undivided portion of land for construction of residential complex?
- Whether the demand for service tax is sustainable in a situation involving interpretation of law and invoking the extended period?
- Whether the appeal can be admitted without further predeposit due to substantial time-barred demand?

Analysis:

1. The applicant, engaged in constructing residential complexes, sold undivided portions of land to prospective buyers without paying service tax on eight projects from October 2008 to June 2010. The Revenue issued a show-cause notice for recovery of service tax amounting to Rs.1,18,59,227/- along with interest and penalties. The applicant appealed against this order, seeking waiver of pre-deposit for admission of their appeal.

2. The applicant's counsel argued that there was confusion regarding the tax liability in such situations, especially with unclear clarifications from CBEC. They contested the levy during the final hearing and questioned the sustainability of the demand due to the extended period invoked. Additionally, they highlighted a previous show-cause notice for the period 2005-08, invoking the extended period, making the subsequent notice questionable.

3. The counsel further mentioned payments made by the applicant, including Rs.3.44 lakhs already paid and Rs.25,54,907/- for services rendered to landowners. They argued that any tax on services to landowners should be paid upon delivery of flats, which they were doing. The remaining balance to be paid was approximately Rs.89 lakhs. The counsel requested admission of the appeal without additional pre-deposit due to the substantial time-bar on the demand.

4. The Revenue's representative opposed the waiver, pointing out a misrepresentation by the applicant regarding the construction of flats on their own land. Referring to a previous Tribunal decision in LCS City Makers Pvt. Ltd. case, the AR argued for the taxability of services in such situations.

5. After considering arguments from both sides and the LCS City Makers case, the Tribunal ordered a pre-deposit of Rs.44,50,000/- within eight weeks for admission of the appeal. Upon this deposit, the pre-deposit of the remaining dues was waived, and recovery stayed during the appeal's pendency.

6. The Tribunal directed compliance with the stay order to be reported by a specific date, concluding the judgment pronounced in open court by Mathew John, J.