2019 (2) TMI 87 - AT - Service Tax

Works Contract - Construction of Residential Complex Service - period from February 2006 to February 2008 - whether construction of quarters for police personnel would fall within the taxable service of construction of complex service under section 65(30a) r/w section 65(105)(zzzh) of Finance Act, 1994? - Held that - Undisputedly, the appellants have entered into an agreement with TNPHCL for providing services in relation to construction of residential complex. However, these are meant for use of police personnel. The said issue was considered by the Tribunal in the case of Nithesh Estates 2015 (11) TMI 219 - CESTAT BANGALORE , where it was held that that for the period after 1.6.2007, the levy cannot sustain. The levy of service tax cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the construction of quarters for police personnel falls under the taxable service of construction of complex service.
2. Whether the demand for service tax prior to 1.6.2007 is sustainable.

Analysis:
1. The appellant was engaged in executing works contract for the Tamil Nadu Police Housing Corporation Ltd. for constructing police quarters. A show cause notice was issued proposing service tax under 'Construction of Residential Complex Service' for the period from February 2006 to February 2008. The original authority confirmed the demand, interest, and penalties, which was upheld by the Commissioner (Appeals). The appellant argued that the construction was for police personnel's use, which falls outside the definition of residential complex as per the Finance Act, 1994. The Tribunal referred to relevant case laws and held that the demand for the period prior to 1.6.2007 is not sustainable and set it aside.

2. For the period after 1.6.2007, the appellant contended that the construction was not for commercial purposes and was meant for the personal use of police personnel. The Tribunal analyzed the definitions of 'construction of complex' and 'residential complex' under the Finance Act, 1994. Referring to previous judgments, including Nithesh Estates Ltd., the Tribunal concluded that the construction undertaken for personal use, which includes permitting the complex for use as residence by another person, is excluded from service tax liability. The Tribunal found the facts similar to previous cases and held that the levy of service tax cannot sustain. Consequently, the impugned order was set aside, and the appeal was allowed with consequential reliefs.

Judgment:
The demand for service tax prior to 1.6.2007 was found unsustainable and set aside. For the period after 1.6.2007, the construction of quarters for police personnel was deemed to fall outside the taxable service of construction of complex service, leading to the allowance of the appeal and consequential reliefs.