2018 (6) TMI 670 - AT - Service Tax

Construction of Complexes Service - Composite Contracts - The Commissioner (Appeals) found that though the appellants contended that they were not liable for service tax on services rendered prior to 15-6-2005 but amount was received later, the lower authorities have apportioned the amount correctly as per Board s circular F.No.B1/6/2005-TRU dated 27-7-2005 - whether the activities undertaken by the appellants were taxable during the relevant time? Held that - The appellants enter into contracts with individual buyers for sale of undivided interest in the land and apartment, such prospective buyers do not enter into individual itemized contracts with the appellants or others for the work of construction, labour or material etc.; the value of such individual items are not mentioned in the agreements. Under these circumstances, it would be fair to consider such contracts as composite work contacts. Reliance placed in the case of CCE vs. Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT wherein it was held that works contract services were taxable only from 1.6.2007. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the activities undertaken by the appellants were taxable during the relevant time period.

Analysis:
The case involved M/s. Pee Cee Associates engaged in constructing residential apartments/flats in Mangalore, facing a demand for service tax and penalties for services rendered under 'Construction of Complexes Service.' The Assistant Commissioner confirmed a demand, which was upheld by the Commissioner (Appeals) in part, leading to the current appeal.

The appellants argued that the levy of service tax prior to the amendment was illegal and that the services rendered prior to the introduction date of payment should not be taxed. They cited Rule 6 of Service Tax and circulars to support their contention. They emphasized that their work constituted composite contracts, as per the Supreme Court's decision in the case of CCE vs. Larsen & Toubro, making works contract services taxable only from 1.6.2007.

The Tribunal examined the nature of the appellants' contracts, noting that they engaged various contractors for construction activities and entered into agreements with buyers without itemizing the value of individual components. Referring to CBEC Circular No.108/02/2009, the Tribunal clarified that until the execution of a sale deed, services provided by the seller in connection with the construction of residential complexes would not attract service tax, considering it as 'self-service.' The Tribunal found the appellants' case aligned with the Supreme Court's decision in CCE vs. Larsen & Toubro, and other relevant judgments, leading to the allowance of the appeal with consequential relief.

In conclusion, the Tribunal ruled in favor of the appellants, providing relief based on the clarification in the circular and the legal precedence established by the Supreme Court's decision.