2021 (11) TMI 282 - HC - Service Tax

Levy of service tax - Residential Complex or not - construction of individual house/villas in residential complex having common areas, common address, common facilities etc. - doctrine of unjust enrichment - HELD THAT - The provision of Section 65(91a) of the Finance Act, 1994 which contemplates about a building or buildings having more than 12 residential units. In the present case, each building is not having more than 12 residential units. On the other hand, individual sanction plan has been given by the local authority. Each being the residential unit, the attention drawn to the explanation by the learned counsel for the revenue also would be of little assistance to the revenue, even if we consider the residential unit in the background of the building or buildings, the residential units constructed by the respondent/assessee would not certainly fall under Section 65(91a) of Finance Act, 1994. Doctrine of unjust enrichment - HELD THAT - As regards the doctrine of unjust enrichment plea raised by the assessee/respondent that only 40% of tax was collected under Karnataka Value Added Tax and not Service Tax on the purchase value as per the agreement entered into with the purchasers and limitations under Section 11B of the Central Excise Act would not be applicable to the facts of the case has been extensively analysed by the CESTAT and a finding has been recorded that no contracts were entered with respect of collection of service tax and there is only mention of 40% VAT collection in the agreements. Accordingly, it has been held that the principles of unjust enrichment and the limitations under Section 11B of the Central Excise Act would also be not applicable. The substantial question of law in favour of the assessee and against the revenue - appeal dismissed.

Summary

Issues:
1. Interpretation of the definition of "residential complex" under Section 65(91a) of the Finance Act, 1994.
2. Application of the doctrine of unjust enrichment in the context of service tax collection.

Interpretation of "Residential Complex":
The case involved an appeal by the revenue challenging an order passed by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The respondent was engaged in constructing independent villas and had paid service tax under the category of "construction of residential complex service." The main issue was whether the construction of individual houses/villas in a residential complex could be considered a "Residential Complex" under Section 65(91a) of the Finance Act. The revenue argued that the respondent's construction constituted a residential complex, while the respondent contended that it did not fall under the definition. The Court examined the definition of "residential complex" under Section 65(91a) and referred to a previous judgment by the CESTAT which clarified that constructions of individual residential units were not subject to service tax.

Doctrine of Unjust Enrichment:
The respondent raised the doctrine of unjust enrichment, claiming that only 40% VAT was collected and not service tax as per agreements with purchasers. The Court analyzed this claim and found that the principles of unjust enrichment and limitations under Section 11B of the Central Excise Act did not apply in this case. The CESTAT had already examined this issue extensively and concluded that the doctrine of unjust enrichment was not applicable. The Court upheld this finding and dismissed the appeal, citing the confirmation of a previous decision by the Hon'ble Apex Court.

Conclusion:
After considering the arguments and the relevant legal provisions, the Court upheld the decision of the CESTAT, finding no grounds to interfere with the order. The substantial question of law was answered in favor of the assessee and against the revenue. Consequently, the appeal was dismissed, affirming the decision of the CESTAT.