2017 (4) TMI 226 - AT - Service Tax

Recovery of service tax - works contract - the case of appellant is that the Department has wrongly confirmed the demand of service tax on works contract service when they were rendering services of Construction of Residential Complex which is under the provisions of Section 65 (105)(zzzh) of the FA 1994 - Held that - The appellants were rendering construction of complex service as they were designing planning developing and clearing site on their own land for construction activities for buyers/clients and were not doing any execution of works contract and elements of definition of works contract therefore are not found present - paragraph 3 of C.B.E.C. Circular No. 108/2/2009-S.T. dated 29.1.2009 says that the persons who are providing services of construction of residential complex in the form of designing planning developing and so on will not be subject to service tax as such services would fall under the exclusion provided under definition of residential complex - demand set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Recovery of service tax on Works Contract Service from January 2009 to March 2009.
2. Classification of services as construction of residential complex service or works contract service.
3. Interpretation of C.B.E.C. Circular No. 108/2/2009-S.T. dated 29.1.2009.
4. Applicability of service tax on construction of residential complex service.

Analysis:
1. The judgment concerns the recovery of service tax on Works Contract Service for the period from January 2009 to March 2009. The appellants, M/s Vinayaka Homes, contested the demand of service tax, claiming that the Department wrongly confirmed it. They argued that they were providing services for the construction of a Residential Complex, falling under the provisions of Section 65(105)(zzzh) of the Finance Act, 1994.

2. The appellants asserted that during the relevant period, there was no service tax applicable to the construction of residential complex services they provided. They contended that the Revenue could not levy service tax under the works contract service category since they had already paid VAT for the materials used in the services provided.

3. The Revenue, represented by the learned A.R., maintained that the service in question fell under works contract service and was liable for service tax recovery from January 2009 to March 2009. However, upon careful consideration of the facts and submissions from both sides, the Tribunal found it unclear how the appellants' services, involving the construction of a residential complex on their land for buyers/clients, were classified as works contract service. The Tribunal highlighted that the appellants' activities, including designing, planning, and developing the complex, did not align with the elements of a works contract.

4. The Tribunal referenced C.B.E.C. Circular No. 108/2/2009-S.T. dated 29.1.2009 to support its decision. The circular clarified that services related to the construction of residential complexes, such as designing and planning, were excluded from service tax liability until the completion of the sale deed transferring ownership to the ultimate owner. The Tribunal emphasized that the appellants' services fell under the category of construction of residential complex service and were not subject to service tax for the period in question. Additionally, it noted that the services became taxable only after 1.7.2010, following an amendment to the definition of construction of complex service by the Finance Act, 2010.

5. In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The judgment clarified the distinction between construction of residential complex service and works contract service, emphasizing the non-taxable nature of the former during the relevant period based on the provided circular and legal provisions.

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