2018 (3) TMI 1010 - AT - Service Tax

Construction of residential complex - whether construction of residential complex will come within the definition of personal use figuring in the Explanation under section 65(91a) of the Finance Act, 1994? - Held that - It is evident from the facts of the case that M/s.Lanco has engaged the assessee with the specific purpose of construction of such residential units which are meant for personal use of the employees of M/s. Lanco. The statutory definition of section 65(91a) of the Finance Act, 1994 specifically excludes construction undertaken for personal use and such personal use includes permitting the complex for use as residence by another person - the above exclusion clause covers the construction activity undertaken by the assessee. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Appeal against Order-in-Appeal No. 127/2011 dated 17.6.2011
2. Appeal against Order-in-Appeal No. 164/2010 dated 20.10.2010
3. Construction of residential complex for personal use of employees
4. Refund of service tax paid by the service provider
5. Interpretation of the definition of residential complex under section 65(91a) of the Finance Act, 1994

Analysis:
1. The appeals were filed by Revenue against two separate Order-in-Appeal decisions. In Appeal No. ST/541/2011, the issue revolved around the construction of quarters by M/s. Senthil Constructions for M/s. Lanco Tanjore Power Co. Ltd. The Commissioner (Appeals) set aside the service tax demand, stating that since the residential complex was constructed for the personal use of M/s. Lanco's employees, it fell within the exclusion clause of the definition of residential complex. Revenue challenged this decision. In Appeal No. ST/45/2011, M/s. Lanco sought a refund of service tax paid by the service provider for constructing quarters for its employees. The Commissioner (Appeals) allowed the refund subject to Section 11B provisions, which Revenue contested.

2. The core issue in both appeals was the construction of a residential complex for personal use. The respondents argued that the construction falls within the definition of personal use under section 65(91a) of the Finance Act, 1994. They cited a Tribunal decision in a similar case to support their stance. On the other hand, the Revenue referred to a Board Circular stating that service tax is not applicable to construction by NPCC for Central Government officers, but subcontractors would be liable for service tax. After hearing both sides and examining the records, it was established that the construction was indeed meant for personal use, as per the statutory definition of a residential complex.

3. The statutory definition of a residential complex under section 65(91a) of the Finance Act, 1994 was crucial in determining the outcome. The definition excluded construction intended for personal use, which includes allowing the complex to be used as a residence by another person. The exclusion clause covered the construction activity undertaken by the assessee. Additionally, a previous Tribunal decision was cited, aligning with the current case's circumstances, leading to the rejection of Revenue's appeals. The Tribunal found no grounds to interfere with the impugned orders, thereby upholding the decisions in favor of the respondents.

In conclusion, the judgment by the Appellate Tribunal CESTAT CHENNAI upheld the exclusion of service tax liability on the construction of residential quarters meant for personal use, as defined under the Finance Act, 1994. The decision was based on a thorough analysis of the statutory provisions and relevant case law, ultimately dismissing the Revenue's appeals.