2019 (12) TMI 180 - AT - Service Tax

Classification of services - works contract service or construction of residential complex service? - development agreements for construction of residential complexes involving the land owner, developer and third parties - period prior to 01.07.2010 - HELD THAT - The issue is no more res-integra and decided in the case of M/S KRISHNA HOMES VERSUS CCE, BHOPAL AND CCE, BHOPAL VERSUS M/S RAJ HOMES 2014 (3) TMI 694 - CESTAT AHMEDABAD where it was held that Such contracts are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with prospective customers for construction of residential units in a residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65 (105) (ZZZh) w.e.f. 01/7/10, and therefore, it has to be held that such contracts were not covered by Section 65 (105) (ZZZh) during the period prior to 01/7/2010. As the present demand pertains entirely to period prior to 01.07.2010, the demands are not sustainable and need to be set aside - the demands of interest and imposition of penalties also need to be set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Taxability of services rendered in construction of residential complexes prior to 01.07.2010.

Analysis:
1. The appeal challenged an Order-in-Original regarding the appellant's construction of residential complex services. The appellant argued no liability for service tax prior to 01.07.2010 based on settled case laws. The appellant also contended that no service tax could be levied on composite services pre-01.06.2007. The appellant further argued that the demand should fail on merits and limitation grounds, and penalties should be set aside.

2. The appellant cited various case laws supporting their position. They highlighted the addition of an explanation to the Finance Act in 2010, indicating service tax liability only when a complex is intended for sale, and some amount was received before the completion certificate. The appellant emphasized that demands in question were pre-01.07.2010 and no service tax could be charged for construction of residential complex services.

3. The departmental representative supported the lower authority's findings, urging rejection of the appeal. However, the tribunal reviewed both sides' arguments and records. They noted that taxability of services in construction of residential complexes pre-01.07.2010 had been extensively discussed in prior cases. Referring to a specific case, the tribunal concluded that demands for the period pre-01.07.2010 were not sustainable. Therefore, they set aside the demands, interest, and penalties, allowing the appeal and providing consequential relief.

4. The tribunal's decision was based on the interpretation of the Finance Act and relevant case laws. They clarified the scope of taxable services in construction of residential complexes, emphasizing the legislative intent and the timing of the amendment. By following established legal principles and precedents, the tribunal ruled in favor of the appellant, setting aside the demands and associated penalties.

5. In conclusion, the tribunal allowed the appeal, setting aside the impugned order and providing consequential relief. The decision was pronounced in open court at the conclusion of the hearing, bringing closure to the taxability issue related to services rendered in construction of residential complexes prior to 01.07.2010.