2019 (1) TMI 500 - AT - Service Tax

Construction of complex services - demand of service tax on construction and sale of the apartments - case of appellant is that they are mere builder/developer of the property and construction services are in fact, under taken by the contractor - CBEC vide Circular No. 108/2/2009-ST dated 29.01.2009 - Held that - Any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of self-service and consequently would not attract Service Tax. Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to Service Tax, because this case would fall under the exclusion provided in the definition of residential complex . Appeal allowed - decided in favor of appellant.

Issues:
1. Liability of Service Tax on construction services provided by a developer/builder.
2. Applicability of Circulars and judicial precedents regarding Service Tax liability.
3. Barred by limitation for imposing penalties.
4. Applicability of Section 80 of the Finance Act, 1994 for penalty imposition.
5. Interpretation of Circular No. 108/2/2009-ST regarding service tax on construction of residential complexes.
6. Applicability of Service Tax on services provided by contractors, designers, or similar service providers in construction activities.

Detailed Analysis:
1. The judgment dealt with the issue of the liability of Service Tax on construction services provided by a developer/builder, specifically in the context of M/s. Akshay Eminence Developers Pvt. Ltd. The Commissioner of Customs had issued a Show Cause Notice (SCN) demanding a Service Tax amount for a specified period, which led to an appeal by the appellants against the demand and penalties imposed.

2. The appellant's counsel argued that Circulars issued by the CBEC and various judicial decisions supported the contention that developers/builders were not liable to pay Service Tax on construction and sale of apartments, especially before a certain date. The counsel cited multiple cases to strengthen the argument, emphasizing that the construction activities were undertaken by contractors, and the residential units were primarily for personal use, hence falling outside the tax net.

3. The issue of limitation for imposing penalties was raised, asserting that there was no deliberate intention to evade payment, and given the settled legal position that composite works contracts were not taxable before a specific date, no penalty should be imposed. The appellant relied on relevant case laws to support this argument.

4. The Appellate Tribunal, after hearing both sides and examining the records, referred to Circular No. 108/2/2009-ST, which clarified the nature of agreements between developers and owners regarding construction activities. The Tribunal noted that service provided by the seller until the execution of the sale deed was considered as "self-service" and not liable for Service Tax. The judgment also highlighted that if services were provided by contractors or designers, those service providers would be liable to pay Service Tax.

5. Based on the above analysis and considering the legal provisions, circulars, and judicial precedents cited, the Tribunal set aside the impugned order, allowing the appeal with consequential relief. The judgment was pronounced in open court on a specified date.

This detailed analysis covers the various issues addressed in the judgment, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Appellate Tribunal in the case.

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