2016 (2) TMI 71 - AT - Service Tax

Construction of residential complex services and renting of immovable property services - applicant is a Rajasthan Housing Board and Constructing residential flats / complex on behalf of State Government and lease out the said flats to the intended buyers and charging lease rent on yearly basis - Held that - independent units have been constructed in a colony are not covered in construction of residential complex - for the demand raised under the category of Construction of Residential complex the applicant has made out a case but for the lease rent collected by the applicant we find that lease rent is recovered by the applicant yearly from the intended buyer of the flats and lease has been granted for a limited period. In that circumstances the applicant has failed to make out a case for waiver of pre-deposit. - Stay granted partly.

Summary

Issues:
1. Demand of service tax under construction of residential complex services and renting of immovable property services.
2. Interpretation of whether the construction activity falls under the residential complex service.
3. Determination of liability for service tax on lease rent collected for immovable property.

Analysis:
The judgment addresses the confirmation of service tax demand against the applicant for construction of residential complex services and renting of immovable property services, along with interest and penalties. The applicant, a Rajasthan Housing Board, constructs residential flats on behalf of the State Government and leases them out to buyers, collecting lease rent annually. The revenue contends that the construction activity and lease rent collection make the applicant liable for service tax. The applicant argues they do not fall under the residential complex service definition as they have not constructed 12 flats in a building, citing relevant tribunal decisions. Additionally, they claim the lease money collected is on behalf of the State Government and thus not their income, exempting them from service tax.

The opposing view is that the applicant's construction of more than 12 residential units qualifies as a construction of residential complex service, making them liable for service tax. Regarding lease rent, it is argued that the annual collection from buyers for a limited period falls under renting of immovable property service, necessitating service tax payment. The Tribunal, after hearing both parties and considering the submissions, grants a waiver of pre-deposit for the construction of residential complex service based on previous case law. However, for the lease rent collected, the Tribunal finds the applicant has not made a case for waiver of pre-deposit, directing them to make a specified pre-deposit amount within a set period. Compliance with the pre-deposit requirement would result in the waiver of the remaining service tax, interest, and penalty during the appeal's pendency.

In conclusion, the Tribunal's decision involves a nuanced analysis of the applicant's liability for service tax under construction of residential complex services and renting of immovable property services. The judgment emphasizes the distinction between the construction activity and lease rent collection, providing specific directions for pre-deposit and compliance to resolve the service tax dispute effectively.