2014 (1) TMI 402 - AT - Service Tax

Construction of complex service - Interest u/s 75 - Penalty 77 & 78 - Tax liability for a period prior to 1-7-2010 - Held that - constructions on behalf of the assessee were during the period prior to 1-7-2010 when the explanation was not yet appended to Section 65(106)(zzzh) of the Act, there is no liability on the assessee to remit tax under the then extant legislative regime - Following decision of Maharashtra Chamber of Housing Industry v. Union of India 2012 (1) TMI 98 - BOMBAY HIGH COURT - Decided against Revenue.

Summary

Issues:
1. Liability of service tax on construction of complex service.
2. Interpretation of the legislative regime pre and post the insertion of the explanation to Section 65(106)(zzzh) of the Act.
3. Applicability of the Board's Circular and judicial precedents in determining service tax liability.

Analysis:

1. Liability of service tax on construction of complex service:
The case involved a dispute over the liability of service tax on the construction of a complex service provided by the assessee. The Revenue contended that the assessee had collected a substantial amount from buyers for constructions made on its property and was required to remit service tax for providing "construction of complex" service. The adjudication order determined the service liability, invoking the extended period of limitation and imposing penalties. The appellate authority allowed the appeal based on the Board's Circular, which clarified the tax liability in cases where a builder undertakes construction work without engaging other services. The appellate authority also relied on other decisions to support its conclusion.

2. Interpretation of the legislative regime pre and post the insertion of the explanation to Section 65(106)(zzzh) of the Act:
The appellant relied on a decision of the Punjab & Haryana High Court to challenge the constitutionality of the provision regarding the levy of service tax for construction of complex service. The High Court rejected the challenge, stating that Parliament had the competence to enact such provisions. The judgment highlighted that the issue of whether the explanation appended to Section 65(105)(zzzh) was retrospective or prospective was not decided in the referenced case. The judgment also referenced a Bombay High Court decision that ruled the explanation to be prospective, expanding the scope of taxable services provided by builders to buyers.

3. Applicability of the Board's Circular and judicial precedents:
The appellate authority relied on the Board's Circular and various judicial precedents to determine the service tax liability in the case. The Circular clarified the tax liability in cases where a builder engages a contractor for construction services or undertakes construction work independently. The authority also cited decisions from other cases to support its conclusion regarding the tax liability of the assessee. The judgment concluded that based on the legislative regime and the factual situation, the assessee was not liable to remit tax for the period before the insertion of the explanation to Section 65(106)(zzzh) of the Act. The appeal was dismissed, and cross objections were disposed of accordingly.