2025 (2) TMI 104 - AT - Service Tax

Levy of service tax on construction activities completed before the imposition of service tax on 01.07.2010 - non-payment of service tax on provision of taxable services of construction of residential complex - HELD THAT - On perusal of the legal provisions of sub-sections (30a) (91a) of Section 65 of the Finance Act 1994 and clause (zzzh) of Section 65(105) ibid which provide for definition of various terms and itemized the scope of the entry of taxable service respectively it seen that any service provided in relation to construction of a complex which is intended for sale wholly or partly by a builder was subject to levy of service tax w.e.f. 01.07.2010. Exception made from such levy relate to those cases where no sum or amount was received from any buyer before grant of completion certificate by the authority competent to issue it under the law. Construction of residential complexes having more than twelve residential houses or apartments together with common areas and other appurtenances were subjected to levy of service tax in the Union Budget for the year 2005. Further in the definition of the taxable services of Construction of Complex service itself an explanation was provided that unless the entire consideration for the property is paid after the completion of construction (i.e. after issuance of completion certificate by the competent authority) the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly. The certificate issued by MCGM on completion of building under the Mumbai Municipal Corporation Act is not only termed as occupancy certificate but also completion certificate with title FULL OCCUPANCY CERTIFICATE Under Regulation 6(7) and BUILDING COMPLETION CERTIFICATE Under Regulation 6(6) . However the appellants have not provided any such certificate issued by the competent authority i.e. MCGM. There is no Full Occupancy Certificate or Building Completion Certificate issued by MCGM under Section 353A of the Mumbai Municipal Corporation Act 1888. Therefore it cannot be reasonably concluded that the construction of the residential complex in the present case was completed before 01.07.2010 in the absence of requisite Completion Certificate issued by MCGM to substantiate the same. The appellants have selectively relied upon word is completed in the certificate issued by the Chief Fire Officer Mumbai Fire Brigade and Brihan Mumbai Mahanagar Palika to emphasize that the building has been completed on or before 25.01.2010 but has conveniently ignored the word part development work of building used while initiating the sentence which is clearly indicative that it is only a part and not the whole building which is completed. Further in any case the fact of the case clearly indicate that no occupancy certificate has been issued by the competent authority (MCGM) authorized by law (Mumbai Municipal Corporation Act 1888) as is clearly required under the provisions of Finance Act 1994. Further the advance/sum of money received towards sale of flats/shops even though was shown to have been accounted during the year 2020- 2021 in the appellants books of accounts to the extent that such sum was relatable to the flats/shops for whose completion certificate was issued subsequent to the levy of service tax and is not covered by the exclusion part of the explanation to Section 65(105)(zzzh) ibid. Conclusion - The letter dated 25.01.2010 does not qualify as a completion certificate for service tax purposes and the appellants failure to maintain separate accounts for deposits as required by the Maharashtra Ownership Flats Act resulted in service tax liability on such deposits. The appellant is liable to pay service tax. The impugned order dated 29.03.2019 is upheld and the appeal filed by the appellants is dismissed.

Summary

The appeal before the Appellate Tribunal, CESTAT Mumbai, involves M/s Falsa Constructions, a proprietorship firm engaged in providing taxable services related to the construction of residential complexes. The core issue revolves around the applicability of service tax on construction activities completed before the imposition of service tax on 01.07.2010, as per the provisions of the Finance Act, 1994.

The Tribunal considered whether service tax is liable on the construction of flats, residential complexes, and shops that were not completed before 01.07.2010. The relevant legal framework includes Chapter V of the Finance Act, 1994, which defines taxable services and outlines the conditions under which service tax is applicable. According to Section 65(30a) and Section 65(91a), construction services provided for sale, wholly or partly, are subject to service tax unless no sum is received from the buyer before the completion certificate is granted by the competent authority.

The appellants claimed that the construction of certain wings of their project was completed before the service tax became applicable and presented documents, including a letter dated 25.01.2010, from the Brihan Mumbai Mahanagar Palika, indicating partial completion. However, the Tribunal found that the appellants did not provide a valid "Completion Certificate" or "Occupancy Certificate" issued by the Municipal Corporation of Greater Mumbai (MCGM) under the Mumbai Municipal Corporation Act, 1888, which is necessary to substantiate the claim of completion before the tax imposition date.

The Tribunal noted that the appellants selectively relied on the wording in the documents to claim completion but failed to produce the requisite certificates from MCGM. The Tribunal emphasized that the absence of a full completion certificate meant the construction was not deemed complete before 01.07.2010, thereby subjecting the appellants to service tax liability.

The Tribunal also addressed various financial transactions and advances received by the appellants. It concluded that amounts received for incomplete projects or those lacking a valid completion certificate were subject to service tax. The Tribunal upheld the findings of the Commissioner (Appeals), which included the rejection of the appellants' claims regarding non-taxable advances and deposits due to insufficient documentary evidence.

Significant holdings from the Tribunal include the affirmation that the letter dated 25.01.2010 does not qualify as a completion certificate for service tax purposes, and the appellants' failure to maintain separate accounts for deposits as required by the Maharashtra Ownership Flats Act resulted in service tax liability on such deposits.

In conclusion, the Tribunal upheld the impugned order dated 29.03.2019, dismissing the appeal filed by the appellants. The Tribunal found no grounds to interfere with the decision of the Commissioner (Appeals), which was based on the absence of a valid completion certificate and the appellants' failure to substantiate their claims with appropriate documentation.