2023 (4) TMI 432 - AT - Service Tax

Classification of services - works contract service or construction services? - joint development agreement for the construction of residential complexes consisting of 176 units / flats, contractor was engaged - period from October 2007 to April 2010 - HELD THAT - On going through the orders of the various CESTAT Benches which have been considered by the Hyderabad Bench of the CESTAT in COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, VISAKHAPATNAM - I VERSUS M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) 2019 (9) TMI 792 - CESTAT HYDERABAD , it has been categorically held that no Service Tax could be levied on construction of residential complexes prior to 01.07.2010 even when the service is rendered either as service simpliciter or as a works contract - Admittedly, the period of dispute, as noted, in the first paragraph, is from October 2007 to April 2010 and hence, the above ruling is squarely applicable to the present case. In view of the fact that no distinguishing / contrary order is placed on record, the demand raised in the impugned order cannot sustain - Appeal allowed.

Summary

Issues:
The judgment involves determining the liability of Service Tax under 'works contract' service for the period from October 2007 to April 2010 in a case where a developer entered into a joint development agreement for the construction of residential complexes.

Summary:

Issue 1: Liability of Service Tax under 'works contract' service

The appellant, a developer, entered into a joint development agreement for constructing residential complexes and engaged a contractor. The Revenue issued a Show Cause Notice proposing to demand Service Tax, interest, and penalties under 'works contract' service for the period in question. The Commissioner confirmed the proposals in the impugned Order-in-Original, leading to the appeal.

Issue 2: Legal Position on Taxability of Construction Services

The appellant argued that the taxability under 'composite works contract service' or 'construction of complex services' has been clarified in various CESTAT orders following the decision of the Hon'ble Apex Court in a specific case. Referring to a case before the Hyderabad Bench of the CESTAT, it was emphasized that no Service Tax could be levied on the construction of residential complexes prior to July 1, 2010, regardless of whether the service was rendered as a works contract or service simpliciter.

Judgment:

After considering the relevant legal precedents, including the Hyderabad Bench's decision, the Tribunal found that no Service Tax could be levied on the construction of residential complexes before July 1, 2010, for the period in question (October 2007 to April 2010). As no distinguishing or contrary order was presented, the impugned order demanding Service Tax was set aside, and the appeal was allowed with consequential benefits as per law.

Conclusion:

The Tribunal ruled in favor of the appellant, holding that the demand for Service Tax under 'works contract' service for the period from October 2007 to April 2010 was not sustainable based on the legal position established by previous decisions.