2018 (8) TMI 1009 - AT - Service Tax

Construction of Residential Complexes - joint development of land and building of residential /commercial complexes - It was also alleged that the services rendered by appellants also included maintenance of immovable property service and appellants are also liable to service tax on reverse charge mechanism for the services they have utilized from overseas architects - Whether the construction of residential complex (including the construction of villa is liable for service tax before 1.7.2007? - Whether the maintenance deposit collected is taxable under the maintenance or repair service? - Whether the architect service is liable for service tax under reverse charge mechanism for the period 16.8.2002 to 31.1.2007? Held that - The appellants were not required to pay any service tax for the construction services before 1.7.2010 and they were also not liable to pay any service tax on the deposits received for management, maintenance or repair services and they are not liable to pay any service tax on reverse charge mechanism basis for the services they have utilized from the overseas architects for the period prior to 18.4.2006 - the appellants are required to pay service tax of ₹ 3,52,102/- on this count for the period 18.4.2006 to 31.1.2007. Refund claim - unjust enrichment - Held that - The matter needs to go back to the original adjudicating authority to examine the documents that may be submitted by the appellants and to sanction the refund while appropriating the amount of ₹ 3,52,102/- which is held to be payable by the appellants. Appeal allowed by way of remand.

Summary

Issues Involved:
1. Liability of service tax on construction of residential complexes before 1.7.2007
2. Taxability of maintenance deposits under maintenance or repair service
3. Service tax liability under reverse charge mechanism for services obtained from overseas architects

Analysis:

Issue 1: Liability of service tax on construction of residential complexes before 1.7.2007
The appellants argued that as developers, they were not liable for service tax before 1.7.2010 for construction services. They cited Circular No.151/2/2012-ST, Tribunal decisions, and the Bombay High Court judgment in Maharashtra Chambers of Housing Industry vs. UOI to support their claim. The Tribunal held in favor of the appellants, stating that no service tax was payable by builders before 1.7.2010, as clarified by the circular and supported by legal precedents.

Issue 2: Taxability of maintenance deposits under maintenance or repair service
The appellants contended that the amounts collected from buyers were merely deposits and not for services rendered. They referred to a Mumbai High Court judgment in Green Valley Developers' case to support their argument. The Tribunal agreed with the appellants, ruling that builders were not liable to pay service tax on one-time maintenance charges collected from flat buyers.

Issue 3: Service tax liability under reverse charge mechanism for services obtained from overseas architects
Regarding the service tax on services obtained from overseas architects, the appellants argued that the demand was for a specific period before the introduction of the reverse charge mechanism. They cited the Bombay High Court judgment in Indian Ship Owners Association vs. UOI to support their stance. The Tribunal held that the service tax liability on services from overseas architects was applicable only for a specific period, and the appellants were required to pay a specified amount for that period.

The Departmental Representative reiterated the findings of the Commissioner but failed to provide sufficient evidence to counter the appellants' arguments. The Tribunal examined all issues raised and settled them in favor of the appellants. It was concluded that the appellants were not liable for service tax on construction services before 1.7.2010, maintenance deposits were not taxable, and the service tax liability for services from overseas architects was limited to a specific period. The refund issue was remanded to the adjudicating authority for further examination based on the documents submitted by the appellants. Ultimately, the appeals were allowed in favor of the appellants, with specific directions regarding the service tax liability and refund process.