2014 (7) TMI 1017 - AT - Service Tax

Development of land activity - Construction of complex - Held that - The development of land for township is not covered by the definition of construction of complex service as given in Section 65 (105) (zzzh) readwith Section 65 (39a) and 65 (91a) or by the definition of Works Contract Service in Section 65 (105) (zzzza) w.e.f. 01/06/2007. It is not even disputed that the construction of residential complexes was undertaken by other contractors and not by the appellant. In view of this, the service tax demand from the appellant firm by treating their activity as taxable under Section 65 (105) (zzzh) as construction of complex service upto 30/05/2007 and under Section 65 (105) (zzzza) as Works Contract Service w.e.f. 01/06/2007 is not sustainable - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellant's activity qualifies as "construction of complex service" under the Finance Act, 1994.
2. Whether the appellant's activity falls under "works contract service" as per the Act.

Analysis:

Issue 1:
The appellant, a partnership firm engaged in land development for housing projects, entered into agreements with another party for various development works. The department issued a show cause notice for service tax on the appellant's activities, considering them as "construction of complex service." The Commissioner upheld the tax demand, imposing penalties. The appellant contended that their work involved land development activities like leveling, boundary construction, road development, etc., not falling under the definition of "construction of complex service." The Tribunal examined the agreements and specified works undertaken by the appellant, concluding that the activities were related to developing land for a township and not constructing residential complexes. As the residential construction was carried out by other contractors, the Tribunal held that the tax demand under "construction of complex service" was unsustainable. The impugned order was set aside, and the appeal was allowed.

Issue 2:
The appellant argued against being classified under "works contract service" as well, emphasizing that their scope of work focused on land development activities. The Tribunal's analysis of the agreements and the specified development works supported the appellant's position that their activities did not align with the definition of "works contract service" under the Act. As the appellant was not directly involved in constructing residential complexes and primarily engaged in land development for the township, the Tribunal found the tax demand under this category also unsustainable. Consequently, the impugned order was set aside, and both the appeal and stay application were allowed, with the miscellaneous application disposed of.

This detailed analysis of the judgment highlights the key arguments presented, the examination of relevant agreements, and the Tribunal's decision regarding the appellant's tax liability under the Finance Act, 1994.