Case Law Details
Jamals Vs Commissioner of Service Tax (CESTAT Chennai)
The Learned Advocate for the appellant would submit, at the outset, that the appellant, being a developer, is engaged in the development of residential projects and the contracts entered into with its customers were in the nature of composite contract involving both service and transfer of property in goods.
She would further submit that during the relevant period under dispute, the Show Cause Notice was issued with respect to one of the appellant’s projects viz. ‘Palazzo’. She would also contend that the completion certificate of the above project was obtained on 09.06.2010 and that there was no Service Tax liability on a developer of residential projects for the period prior to 01.07.2010 since developers were brought under the tax net vide the Finance Act, 2010 with effect from 01.07.2010 by way of insertion of Explanation to Section 65(105)(zzzh).
In the light of the above discussions and the order of the Hyderabad Bench, it is clear that no Service Tax could be levied on construction of residential complex on the appellant. The period of dispute here, as observed by us in the earlier paragraphs, is from April 2009 to June 2010 and hence, we are of the view that no Service Tax was exigible on the appellant.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief undisputed facts, which are relevant for our consideration, are that the appellant had provided construction service and were paying Service Tax on the residential complexes built by them under works contract service till December 2008. It appears that from January 2009 onwards, they did not pay Service Tax.
2.1 Entertaining a doubt that the appellant having received an amount of Rs.14,94,37,760/- for the construction service provided by them for the period from April 2009 to June 2010, a Show Cause Notice dated 13.10.2010 came to be issued proposing to demand Service Tax on the ground that the construction work undertaken by the appellant did not come within the exclusion definition of “residential complex” under Section 65(91a) of the Finance Act, 1994, apart from applicable interest and penalty.
2.2 The appellant appears to have filed a detailed reply defending its stand, but however, not satisfied with the same, the Adjudicating Authority, vide Order-in-Original No. 13/2013 dated 20.06.2013, has confirmed the demands proposed in the Show Case Notice. It is against this order that the present appeal has been filed before this forum.
3. Heard Smt. Radhika Chandrasekhar, Learned Advocate for the appellant and Smt. Anandalakshmi Ganeshram, Learned Superintendent for the respondent. After hearing both sides, we find that the only issue to be decided by us is: whether the Revenue is justified in demanding Service Tax from the appellant for the construction service provided by them for the period from April 2009 to June 2010?
4.1 The Learned Advocate for the appellant would submit, at the outset, that the appellant, being a developer, is engaged in the development of residential projects and the contracts entered into with its customers were in the nature of composite contract involving both service and transfer of property in goods.
4.2 She would further submit that during the relevant period under dispute, the Show Cause Notice was issued with respect to one of the appellant’s projects viz. ‘Palazzo’. She would also contend that the completion certificate of the above project was obtained on 09.06.2010 and that there was no Service Tax liability on a developer of residential projects for the period prior to 01.07.2010 since developers were brought under the tax net vide the Finance Act, 2010 with effect from 01.07.2010 by way of insertion of Explanation to Section 65(105)(zzzh).
4.3 She would place reliance on the orders of coordinate Benches of the CESTAT in the following cases: –
(i) M/s. Krishna Homes v. Commissioner of Central Excise [2014 (34) S.T.R. 881 (Tri. – Del.)];
(ii) Commissioner of Customs, Central Excise and Service Tax, Visakhapatnam-I v. M/s. Pragati Edifice Pvt. Ltd. [2019 (31) G.S.T.L. 241 (Tri. – Hyd.)]
(iii) M/s. South India Shelters Pvt. Ltd. v. The Commissioner of Central Excise, Chennai [Final Order Nos. 4012340124/2023 dated 07.03.2023 – CESTAT, Chennai]
5. Per contra, the Learned Superintendent for the respondent relied upon the findings of the lower authority.
6. We have heard the rival contentions and have perused the impugned Order-in-Original.
7. We find that, at paragraph 19 of the impugned order, the Learned Commissioner has observed, after scrutinizing the agreements, that (i) the appellants are the builders of the concerned flats; (ii) the appellants are only constructing the flats to the respective allottees, etc., which, per se, makes it clear that the activity undertaken by the appellant in the capacity of a developer was in the nature of ‘works contract service’.
8. We find that the above issue has been laid to rest by various co-ordinate Benches of the CESTAT wherein the decision of the Hon’ble Apex Court in the case of Commissioner of C.Ex. & Cus., Kerala v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)] has been followed. We find that the co-ordinate Hyderabad Bench, in the case of M/s. Pragati Edifice Pvt. Ltd. (supra), has held as under: –
“(n) To sum up, as far as construction of ‘residential complexes’ by the builders are concerned :
(i) Prior to 1-6-2007, if it is a composite works contract, no Service Tax is leviable in view of the judgment of the Hon’ble Apex Court in the case of Larsen & Toubro (supra).
(ii) After 1-6-2007, it is chargeable as ‘works contract’ only if it is a composite contract and under ‘construction of complex services’ if it is a service simpliciter.
(iii) However, after 1-6-2007 but prior to 1-72010, whether it is a service simpliciter or a works contract, if the service is rendered prior to issue of completion certificate and transfer to the customer, it is not taxable being in the nature of self service.
(iv) Further, whenever the service is rendered for completion or construction of a flat for personal use of the service recipient, no Service Tax is payable in view of the exclusion in the definition of residential complex service.
(v) After 1-7-2010, Service Tax is chargeable under the head of ‘construction of complex services’ if it is service simpliciter and under ‘works contract service’ if it is a composite works contract.”
9. In the light of the above discussions and the order of the Hyderabad Bench, it is clear that no Service Tax could be levied on construction of residential complex on the appellant. The period of dispute here, as observed by us in the earlier paragraphs, is from April 2009 to June 2010 and hence, we are of the view that no Service Tax was exigible on the appellant.
10. For the above reasons and following the ratios laid down, we set aside the impugned order and allow the appeal with consequential benefits, if any, as per law.
(Order pronounced in the open court on 26.04.2023)
