2018 (9) TMI 1518 - AT - Service Tax

Classification of services - construction of the residential apartments - appellant s claim is that the activity undertaken will fall under the category of construction of complex service under Section 65 (105) (zzzh) readwith Section 65 (30a) - whether classified under Works contract service or under construction of complex service? Held that - The key to the decision is in the fact that the construction activity has been carried out by the appellant on the land which is acquired and owned by the appellant. The appellant has carried out design planning development of their own land and carried out the construction and transferred the completed flats to the buyers. To our minds the activities undertaken do not merit classification under works contract services. The activity will be covered under works contract service only when the contract is entered into by the appellant only for construction of residential complex on land owned by someone else. The CBEC Circular dated 29/01/2009 bring out the position clearly that in the activity undertaken by the appellant in building a residential complex there will be no liability to pay service tax under the category of construction of complex service. The position changed only w.e.f. 01/07/2010 when an explanation was added to sub-Section (zzzh) making such activity to be a deemed service - Thus the activity of the appellant covered by the construction of complex service is liable to be set aside for the period upto 01/07/2010. Period from 01/07/2010 to March 2011 - Held that - The Adjudicating Authority has upheld the payment of service tax under the category of works contract services but as discussed above the activity is liable for payment of service tax only under the category of construction of complex service. The appellant has also submitted during the course of argument that they have discharged the service tax for the period w.e.f. 01/07/2010 after availing applicable abatements. The Adjudicating Authority is directed to verify such claim. Subject to such verification the demand for service tax under works contract service raised in the show cause notice is set aside for the period 01/07/2010 to March 2011 - matter on remand. The issue of time bar need not be discussed since the appeal itself is being allowed on merit. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Classification of construction activity as works contract service or construction of complex service
2. Liability for service tax prior to and after 01/07/2010
3. Time bar for raising demand

Analysis:
1. The appellant engaged in construction of residential units on its own land, transferring them to buyers after completion. The dispute was over classification under works contract service or construction of complex service. The Adjudicating Authority classified it as works contract service, involving supply of material and labor. However, the Tribunal found that the activity did not merit classification under works contract services as the construction was on the appellant's own land, not under a contract for construction on someone else's land.

2. The appellant argued that prior to 01/07/2010, no service tax was payable as per CBEC Circulars. The Tribunal agreed, citing precedents and clarifications that no service tax was due for such activities before the legal fiction deeming them as services was introduced. For the period after 01/07/2010, the Tribunal directed the Adjudicating Authority to verify if the appellant had paid the service tax under construction of complex service after availing abatements.

3. The appellant contended that the demand raised was time-barred. However, since the appeal was allowed on merit, the Tribunal did not delve into the time bar issue. The demand for service tax was set aside for the period up to 30/06/2010, and for the period from 01/07/2010 to March 2011, the demand under works contract service was also set aside pending verification of the appellant's claim of payment under construction of complex service.

Therefore, the Tribunal allowed the appeal, setting aside the service tax demand for the specified periods based on the classification of the construction activity and the applicable legal provisions.