2018 (8) TMI 1223 - AT - Service Tax

Refund of service tax paid - refund claimed on the ground that service do not constitute a residential complex chargeable to service tax - whether the construction activity relating to villas undertaken by the appellants comes under the construction of residential complex service? - Held that - It is clear that construction of residential complex having not more than 12 residential units is not to be taxed. For the levy to be applicable it should be residential complex comprising of more than 12 residential units - In the instant case, the appellants constructed individual residential house, each being a residential unit - It is also brought on record that the plan of each of the building has been approved by the municipal authorities separately. The residential units constructed by them were individual independent houses not covered by the definition of residential complex - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the construction activity of independent villas constitutes a residential complex service for service tax purposes.

Analysis:
The appellants, a construction company, paid service tax under 'construction of residential complex' service but claimed it was due to coercion. They filed refund claims, arguing that the individual villas they built did not constitute a residential complex chargeable to service tax as each villa was a single unit with less than 12 units. The agreements with purchasers indicated works contract tax under the Karnataka Value Added Tax Act, not service tax, thus avoiding unjust enrichment. The High Court precedent stated that tax paid due to a misunderstanding of the law is not a tax, allowing refunds without limitation. The Department relied on a different case. The Tribunal analyzed the definition of a residential complex under the Finance Act, stating that complexes with more than 12 units are taxable, which did not apply to the appellants' case. The Tribunal found similarities with a previous case and emphasized the absence of contracts mentioning service tax, leading to the appeal being allowed.

In conclusion, the Tribunal allowed the appeal, determining that the construction of individual villas by the appellants did not fall under the definition of a residential complex for service tax purposes, as each villa was a single unit with less than 12 units and lacked common areas or layouts approved by authorities. The decision was based on the interpretation of relevant legal provisions and precedents, distinguishing the case from previous rulings and emphasizing the absence of specific clauses regarding service tax in agreements.