2021 (8) TMI 796 - AT - Service Tax

Levy of Service Tax - construction of complex and work contract service - period April, 2005 to February, 2008 - HELD THAT - It is fact on record that for the period April, 2005 to February, 2008 the model of work by the appellant is that they executed sale deed to the allottees/customer after completion of flats. They were not providing any service to the allottees/customers prior to execution of sale deed by the appellant. Any service rendered by the appellant prior to the sale of the flats is self-service in terms of CBEC‟s Circular No.108/2 of 2009-ST dated 29.1.2009 and hence is not chargeable to service tax. This issue has been examined in detail by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH VERSUS SKYNET BUILDERS, DEVELOPERS, COLONIZER OTHERS 2012 (4) TMI 427 - CESTAT, NEW DELHI wherein this Tribunal clarified. Further, the same view was taken by this Tribunal in the case of M/ BAIRATHI DEVELOPERS PVT. LTD. VERSUS CCE, JAIPUR 2016 (3) TMI 715 - CESTAT NEW DELHI . Further, in the case of INDO GLOBAL ESTATES VERSUS COMMISSIONER OF C. EX., CHANDIGARH 2014 (1) TMI 407 - CESTAT NEW DELHI , this Tribunal held that when construction of residential complex is for sale of flats and same is ultimately sold to customer under agreement, it cannot be held that there were any service being provided by builders to their customer, even if, a part amount of cost of flats is being received in advance. The impugned order confirming a demand of service tax under construction of complex services is not sustainable - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against confirmed demand on construction of complex and work contract service for the period April 2005 to February 2008.

Analysis:
The appellant, engaged in construction of complex services, was registered with the Central Excise department. The appellant constructed multiple apartments in a common area and sold them to allottees/customers. A show cause notice was issued to demand service tax under construction of complex services. The demand was confirmed, but penalty was dropped. The appellant contended they were not providing services to allottees/customers but were engaged in selling flats. The Circular No.108/2 of 2009-ST clarified that until the sale deed is executed, the builders are considered owners. The appellant argued that no service tax was payable. They cited precedents like Skynet Builders and Bairathi Developers Pvt. Ltd. to support their case.

The respondent argued that the activity of building flats for customers falls under works contract, not sale. Referring to the Raheja Developers Corporation case, it was stated that builders constructing flats for customers fall under works contract. The Tribunal considered the submissions and found that the appellant executed sale deeds to allottees/customers after completing the flats, indicating no service was provided before the sale. Precedents like Skynet Builders and Bairathi Developers Pvt. Ltd. supported this view. The Circular No.108/2 of 2009-ST clarified that any service by a builder before the sale of flats is self-service and not subject to service tax. The judgment in the Raheja case was deemed irrelevant due to the circular and subsequent Supreme Court cases.

The Tribunal noted that even if the contract was considered a works contract, service tax could only be demanded under Works Contract Service from a later date. The demand under Construction of Complex Services was found unsustainable due to the nature of works contracts being distinct. The judgment concluded that the impugned order confirming the service tax demand was not sustainable and allowed the appeal with consequential relief.