2017 (9) TMI 79 - AT - Service Tax

Construction service or girls hostel - construction of Residential Complex Service - Held that - the impugned order considered the said hostel as residential complex having more than 12 units. We find that such inference, based on the number of rooms in hostel, is fallacious. The hostel for girls can neither be covered under the category of Commercial Construction nor under the category of Residential Complex - the individual room in the said hostel cannot be equated to a residential house or a flat which are covered under the category of Construction of Complex service for the purpose of service tax - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Demand of service tax under construction service
2. Reduction of demand by the Commissioner (Appeals)
3. Classification of hostel construction as Residential Complex Service

Issue 1: Demand of service tax under construction service
The appellants were providing construction services to Government departments, leading to the initiation of proceedings for demanding service tax under construction service. The Original Authority confirmed a demand of &8377; 3,24,250 and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Upon appeal, the Commissioner (Appeals) reduced the demand to &8377; 2,68,740 specifically related to the construction of Residential Complex Service, and modified the penalties imposed on the appellant.

Issue 2: Reduction of demand by the Commissioner (Appeals)
During the proceedings, the ld. AR for Revenue presented arguments, while no representation was made on behalf of the appellant. However, a letter from a Chartered Accountant on behalf of the appellant requested a decision based on earlier submissions. Upon reviewing the case records and appellant's submissions, it was found that the hostel constructed by the appellants for the M.P. Government's Adim Jati Kalyan Vibhag was considered a residential complex with more than 12 units in the impugned order. The Tribunal noted that this inference was erroneous as the hostel, being a composite building for girl students' accommodation, did not fit the definition of a residential complex or commercial construction. The definition of "residential unit" as a single house or apartment intended for residence did not apply to hostel rooms. The Tribunal found no legal basis for the lower authorities' interpretation and set aside the impugned order, allowing the appeal.

Issue 3: Classification of hostel construction as Residential Complex Service
The Tribunal's decision rested on the understanding that a hostel, despite having multiple rooms, cannot be equated to a residential house or flat for the purpose of service tax under Construction of Complex service. The Tribunal emphasized that the hostel's purpose was accommodation for girl students during their studies, not as individual residential units. Therefore, the Tribunal concluded that the hostel construction could not be classified under the category of Residential Complex Service for service tax purposes, leading to the allowance of the appeal.

This detailed analysis of the judgment highlights the issues involved, the legal arguments presented, and the Tribunal's decision based on the interpretation of relevant laws and definitions.