2023 (3) TMI 638 - AT - Service Tax

Levy of service tax - appellants constructed houses for Essar Limited. and the said houses were used by Essar Limited for their own staff - appellant argued that the service provided by them is not covered under the construction of complex service since the residential construction was for personal use - HELD THAT - It is not in dispute that the residential house constructed by the appellant were used by Essar Limited for its own staff. The appellants have claimed that the said use amounts to the personal use as defined in the definition of residential complex and therefore the service provided by them is not covered under the definition of construction of complex service. The appellants are making residential properties for the use of Essar Group for their employees - The identical service has been defined by Tribunal in the case of CR PATEL VERSUS C.C.E. S.T. -SURAT-I 2023 (3) TMI 570 - CESTAT AHMEDABAD where it was held that service provided by the appellant is to be treated as service provided to Govt. of India directly and end use of the residential complex by Govt. of India is covered by the definition Personal Use in the explanation to definition of residential complex service the other aspects need not be considered. Appeal allowed - decided in favour of appellant.

Summary

Issues Involved:

1. Demand of service tax on construction of complex service.
2. Definition and applicability of "personal use" in residential complex construction.
3. Classification of the service provided as "Works Contract Service."

Issue-wise Detailed Analysis:

1. Demand of Service Tax on Construction of Complex Service:

The appellant contested the demand for service tax on the construction of houses for Essar Limited, arguing that these houses were for the personal use of Essar Limited's staff. The appellant referenced multiple decisions, including CR Patel, Khurana Engineering Ltd., and others, to support their claim that the service does not fall under the construction of complex service. The tribunal acknowledged that the residential houses were used by Essar Limited for their staff, which aligns with the definition of "personal use" as per the residential complex definition. Consequently, the tribunal found merit in the appellant's argument and set aside the impugned order.

2. Definition and Applicability of "Personal Use" in Residential Complex Construction:

The tribunal examined the definition of "personal use" within the context of residential complex construction. According to the definition, a complex constructed by a person directly engaging another for design and intended for personal use as a residence is excluded from service tax. The tribunal referenced several cases, including Sima Engineering and Nithesh Estates, which clarified that if a residential complex is intended for personal use, such as accommodation for employees, it falls under the exclusion clause. The tribunal concluded that the residential complex constructed for Essar Limited's employees qualifies as "personal use" and is therefore not subject to service tax.

3. Classification of the Service Provided as "Works Contract Service":

The tribunal also addressed whether the service provided could be classified as "Works Contract Service." The appellant argued that their contract included all materials and goods, which aligns with the definition of works contract. The tribunal referenced the case of CR Patel, where it was determined that works contract service was not taxable before 01.06.2007. For the period after this date, the tribunal examined the definition of works contract and concluded that the service provided by the appellant did not fall under this category. Therefore, the demand for service tax under works contract service was not applicable.

Conclusion:

The tribunal found that the residential complex constructed by the appellant for Essar Limited's employees qualifies as "personal use" and is excluded from the definition of construction of complex service. Additionally, the service provided does not fall under the category of works contract service. Consequently, the impugned order was set aside, and the appeal was allowed.