2015 (7) TMI 759 - AT - Service Tax

Waiver of pre deposit - Construction of commercial complex - whether construction of a complex intended for sale to prospective buyers and where the builder receives any advance was liable to service tax was the subject matter of regnant litigation - Held that - Explanation to Section 65(105)(zzzh) is prospective and development/ construction on one s own property for raising a residential complex even where advances are collected from third party purchasers would not amount to the taxable service of construction of residential complex nor would such advances be liable to tax under this category. - Prima-facie inasmuch as the definition of construction of complex in sub-clause (c) to Explanation (ii) to Section 65 (105)(zzzza) borrows this integer from construction of complex a taxable service defined in Section 65(91a) read with Section 65(105)(zzzh) of the Finance Act we are of the view that development or construction on one s own property would not constitute a taxable service prior to 01.07.2010 the date on which the Explanation was introduced in Section 65(105)(zzzh). - Stay granted.

Summary

Issues:
Confirmation of demand for works contract service on construction of residential complexes for sale. Interpretation of relevant clauses under the Finance Act, 1994. Application of retrospective explanation in tax liability for construction services.

Analysis:
The judgment revolves around the confirmation of a demand for works contract service related to the construction of residential complexes for sale, with a specific focus on the interpretation of key clauses under the Finance Act, 1994. The demand was confirmed by the Commissioner based on the assumption that the petitioner's development of its property for sale to prospective purchasers falls under works contract service. The Commissioner relied on sub-clause (c) of Explanation (ii) of Section 65(105)(zzzza) of the Finance Act, 1994, introduced in 2007. This sub-clause encompasses the "Construction of a new Residential Complex or part thereof" as a taxable service.

The judgment highlights the insertion of an explanation in Section 65(zzzh) effective from July 1, 2010, expanding the scope of taxable construction of complex service to include transactions where construction is done for sale and advances are received from prospective buyers before the grant of a completion certificate. The issue of tax liability for construction services executed before June 1, 2007, was previously a subject of litigation. The Tribunal referred to precedents like Maharashtra Chamber of Housing Industry vs. Union of India and Magus Construction Pvt. Ltd. vs. Union of India to establish that development or construction on one's property for a residential complex, even when collecting advances from third-party purchasers, does not constitute a taxable service under the relevant clause.

The judgment emphasizes that the retrospective application of the explanation to Section 65(105)(zzzh) from July 1, 2010, clarifies that development or construction on one's property did not constitute a taxable service before this date. Consequently, the Tribunal granted a waiver of pre-deposit in full and stayed further proceedings for the realization of the assessed liability pending the appeal's disposal. The stay application was thus disposed of in favor of the appellant.