Priyadarshini Constructions Vs Commissioner of Central Goods and Service Tax, Excise and Customs (CESTAT Delhi)
Summary: The Customs, Excise and Service Tax Appellate Tribunal, New Delhi, Principal Bench, comprising Judicial Member Dr. Rachna Gupta and Technical Member Shri P. Anjani Kumar, allowed the appeal filed by Priyadarshini Constructions against rejection of its refund claim of ₹8,73,180, comprising service tax of ₹5,65,980 and interest of ₹3,07,200. The dispute concerned the appellant’s residential project named “Pleasure”, consisting of independent duplex houses in Bhopal. The principal issue was whether construction of more than twelve independent residential buildings within a common development, having shared amenities, constituted taxable Construction of Residential Complex Service under Section 65(91a) of the Finance Act, 1994. The Tribunal held that separate duplex houses, each containing a single residential unit, did not meet the statutory definition merely because the colony contained more than twelve houses and common facilities.
The controversy arose during a departmental audit covering 1 July 2010 to 30 June 2012. The audit team concluded that the “Pleasure” project constituted a residential complex because it contained more than twelve duplex houses and common amenities. The Department quantified service tax liability at ₹5,65,980, together with interest of ₹3,07,200. The appellant deposited both amounts while expressly protesting the levy and asserting that no service tax had been charged to its customers. A refund claim for the entire amount was filed on 11 September 2015. The Department rejected the claim through Order-in-Original No. 17/2016-17 dated 16 May 2016, and the Commissioner (Appeals) upheld that rejection through Order-in-Appeal dated 28 September 2017.
Before the Tribunal, the appellant contended that the construction of individual duplex houses could not be treated as construction of a residential complex within the meaning of Section 65(91a). It argued that the first statutory requirement was the existence of a building or buildings having more than twelve residential units, whereas each duplex house in the project contained only one residential unit. The appellant further submitted that it had paid the disputed amount under protest, no independent show cause notice adjudicating the underlying service tax liability had been issued, and the Department had improperly used the refund proceedings to sustain the levy. In support, it relied on Macro Marvel Projects Ltd. Vs Commissioner of Service Tax, A.S. Sikarwar Vs CCE, and several subsequent decisions concerning independent residential units.
The Department opposed the claim, pointing to common gardens, playgrounds, a community hall, common water supply arrangements and pavement roads within the development. It argued that such facilities brought the entire project within the statutory definition of a residential complex. It further contended that the appellant had failed to demonstrate that the burden of service tax had not been passed on to customers and that the refund was therefore barred by unjust enrichment. The Department relied upon Modi & Modi Constructions Vs Commissioner, 2021 (45) G.S.T.L. 398 (Tri.-Hyd.), in support of its position.
The Tribunal examined the statutory definition of a residential complex under Section 65(91a), which requires a building or buildings having more than twelve residential units, a common area and specified common facilities. It interpreted the provision to mean that independent buildings containing twelve or fewer residential units were outside the definition, even where a developer constructed more than twelve such buildings within a larger compound. As each duplex house in the appellant’s project contained only one residential unit, the first statutory condition remained unsatisfied. Shared amenities did not independently convert those houses into a taxable residential complex.
The Tribunal followed the ruling in Macro Marvel Projects Ltd., which had held that construction of individual residential units was not intended to be taxed under the relevant statutory entry and whose appeal had been dismissed by the Supreme Court. It also reproduced the reasoning in A.S. Sikarwar, which held that even fifteen separately constructed houses within one compound did not attract service tax under Section 65(105)(zzzh) where each building had no more than twelve residential units. The Tribunal considered Madhukar Mittal, a decision distinguishing independently constructed houses from buildings meeting the statutory residential complex definition, and rejected the Department’s reliance on the contrary factual position in Modi & Modi Constructions.
On the refund issue, the Tribunal observed that the appellant had consistently disputed taxability from the time it deposited the amount under protest. The appellant had specifically stated that service tax was not charged to its purchasers, yet the Department had applied the doctrine of unjust enrichment without supporting evidence that the tax burden was actually passed on. The Tribunal referred to Quality Builders & Contractor Vs Commissioner of CGST, Final Order No. 50809/2022 dated 5 September 2022, which had similarly considered the taxability of independently constructed residential buildings and the rejection of a refund claim. The Tribunal held that the Commissioner was not justified in refusing the refund.
Accordingly, the Tribunal held that Priyadarshini Constructions had not rendered taxable construction of residential complex services when building independent residential duplex houses. The service tax collected during audit was therefore not legally payable, and the refund of the amount deposited under protest could not be refused on the grounds adopted by the Department. By Final Order No. 50419/2025 dated 20 March 2025, the Tribunal set aside the impugned Order-in-Appeal and allowed the appeal with consequential relief. The decision is significant for clarifying that the relevant unit-count test applies to each building in the circumstances considered, and that the mere presence of common facilities in a development does not establish liability under the former construction-of-residential-complex service entry.
Cases Discussed
1. Macro Marvel Projects Ltd. Vs Commissioner of Service Tax, Chennai — 2008 (12) S.T.R. 603 (Tri.-Chennai); also reported as (2008) 17 STT 479. Affirmed by Supreme Court’s dismissal of the Revenue’s appeal on 07/07/2009, reported as 2012 (25) S.T.R. J514 (SC) in the order. Relied upon for excluding independent residential houses from the statutory definition.
2. A.S. Sikarwar Vs Commissioner of Central Excise, Indore — 2012 (28) S.T.R. 479 (Tri.-Delhi); (2012) 27 taxmann.com 296. The judgment quotes this case and records the appellant’s submission that the decision was affirmed by the Madhya Pradesh High Court on 01/08/2013.
3. Shri Prakash Wadhwani Vs Commissioner of Central Excise, Customs and Service Tax, Bhopal — Final Order No. 50617/2020; CESTAT New Delhi. Relied upon by the appellant on the taxability of independent residential units.
4. J.R. Construction Vs Commissioner of Central Excise, Customs and Service Tax, Bhopal — Final Order No. 50618/2020; CESTAT New Delhi. Relied upon by the appellant for the same issue.
5. Quality Builders & Contractor Vs Commissioner of Central Goods and Service Tax — Service Tax Appeal No. 53481 of 2018; Final Order No. 50809/2022 dated 05/09/2022; CESTAT New Delhi. Relied upon regarding residential-complex interpretation and the rejection of refunds.
6. Alliance Infrastructure Projects Private Limited Vs Commissioner of Central Excise & Service Tax, Bangalore Service Tax-I — Service Tax Appeal ST/507/2008; CESTAT Bangalore, Final Order of 2018. Cited by the appellant as a supporting decision.
7. Beriwal Constructions Co. Vs Commissioner of Central Excise & Service Tax, Agra — (2018) 65 GST 186; CESTAT Allahabad, as cited in the original order. Relied upon by the appellant.
8. Madhukar Mittal Vs Commissioner of Central Excise, Panchkula — 2015 (40) S.T.R. 969 (Tri.-Delhi). Discussed and quoted for its distinction between independent houses and a taxable residential complex.
9. Modi & Modi Constructions Vs Commissioner of Customs, Central Excise & Service Tax, Hyderabad-II — 2021 (45) G.S.T.L. 398 (Tri.-Hyderabad). Relied upon by the Department but distinguished on the facts by the Tribunal.
FULL TEXT OF THE ORDER OF CESTAT NEW DELHI
Present appeal is filed to assail the Order-in-Appeal No. 292-17-18 dated 28.09.2017 vide which the refund claim for amount of tax paid by the appellant has been rejected. The facts in brief relevant for the purpose are as follows:
1.1 The appellant herein is registered under the service tax regime under category of ‘Construction of Residential Complex Service’. During the course of the audit for the period 01.07.2010 to 30.06.2012, it was objected that the appellant’s project ‘Pleasure’ is a construction of colony of individual residential duplexes, but being more than 12 in number and having common facilities, the activity for such construction is taxable under ‘Construction of Residential Complex Service’ towards which the appellant was liable to pay the tax. The auditors quantified the said liability at Rs.5,65,980/- along with the interest of Rs.3,07,200/-. The appellant deposited the same, however, under protest vide its letter dated 19.09.2015 mentioning that the appellants have not charged service tax on the amounts received from their customers during the said disputed period. Later, the appellant filed the refund claim of Rs.8,73,180/- (565980 + 307200) on 11.09.2015. However the claim was initially rejected vide Order-in-Original No. 17/2016-17 dated 16.05.2016. Appeal against the said order has been rejected vide the impugned Order-in-Appeal. Being aggrieved the appellant is before this Tribunal.
2. We have heard Shri Rajagopal Chandrashekhar, learned Chartered Accountant for the appellant and Shri Aejaz Ahmad, learned Authorized Representative for the respondent.
3. Learned Chartered Accountant for the appellant has submitted that the present case relates to refund of amount of tax and interest paid under protest. No show cause notice to adjudicate the issue of taxability of services provided by the appellant was issued, in spite of having being filed a letter of protest. The impugned show cause notice was issued proposed the rejection of refund claim on the ground that the services provided by the appellant were taxable. Since no service tax return was filed, it is not the case of self-assessment also. It is further submitted that the project ‘Pleasure’ constructed by the appellant is not covered under the definition of ‘Residential Complex’ given in Section 65 (91a) of the Finance Act, 1994 (hereinafter referred as the Act) for the reason that each residential house/duplex in the said project does not has more than 12 residential units. Also project has no common area.
3.1 It is submitted that the issue involved is otherwise no more res integra. Learned Chartered Accountant has relied upon the following decisions:
(i) Macro Marvel Projects Ltd. Vs. Commissioner of Service Tax, Chennai reported as (2008) 17 STT 479 (Chennai-CESTAT). Affirmed by the Hon’ble Supreme Court vide Order dated July 07, 2009, by way of dismissal of the Revenue’s appeal – [2012] 37 STT 358 (SC)
(ii) A.S. Sikarwar vs. Commissioner of Central Excise, Indore reported as (2012) 27 taxmann.com 296 (New Delhi – CESTAT). Affirmed by the Hon’ble Madhya Pradesh High Court by Final Order dated 01.08.2013
(iii) Shri Prakash Wadhwani Vs. Commissioner of Central Excise, Customs and Service Tax, Bhopal (New Delhi – CESTAT) vide Final Order No. 50617 of 2020
(iv) J R Construction Vs. Commissioner of Central Excise, Customs and Service Tax, Bhopal (New Delhi – CESTAT) vide Final Order No. 50618 of 2020
(v) Quality Builders & Contractor Vs. Commissioner of Central Goods and Service Tax (New Delhi – CESTAT) vide Final Order No. 50809 of 2022.
(vi) Alliance Infrastructure Projects Private Limited Vs. C.C.E. & C.S.T. Bangalore Service Tax-I (Bangalore-CESTAT) vide Final Order of 2018 in Service Tax Appeal ST/507/2008.
(vii) Beriwal Constructions Co. Vs. Commissioner of Central Excise & Service Tax, Agra reported as (2018) 65 GST 186 (Allahabad CESTAT)
Since there was no tax liability, the refund of amount of service tax as deposited under protest has wrongly been rejected. Accordingly, order under challenge is prayed to be set aside and appeal is prayed to be allowed.
4. While rebutting these submissions, learned Departmental Representative has mentioned that project ‘Pleasure’ has common garden, common play area, community hall and common water supply arrangement and common pavement road. All these are well covered under the term ‘common area’. Several facilities are also common for the residential duplex houses in project ‘Pleasure’. The project constructed is therefore a residential complex in terms of Section 65(91a) of the Act. The amount of consideration received is thus taxable. The appellant has not discharged the said tax liability and has also not produced any evidence to show that the burden of tax has not been passed to the customers. Therefore, the impugned refund claim has rightly been rejected also for the reason of bar of unjust enrichment. Learned Departmental Representative has relied upon the decision of the Tribunal in the case of Modi & Modi Constructions Vs. Commr. of Cus., C.Ex. & S.T., Hyderabad-II reported as 2021 (45) GSTL 398 (Tri.-Hyd). With these submissions, the present appeal is prayed to be dismissed.
5. Having heard the rival contentions and perusing the records, we foremost peruse Section 65(91a) of the Act which defines ‘Residential Complex’ as follows:
“(91a) “residential complex” means any complex comprising of-
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.
Explanation: For the removal of doubts, it is hereby declared that for the purposes of this clause.-
(a) “ personal use” includes permitting the complex for use as residence by another person on rent or without consideration;
(b) “residential unit” means a single house or a single apartment intended for use as a place of residence;”
5.1 Perusal makes it clear that ‘Residential Complex’ would be a complex comprising of a building or buildings, having more than twelve residential units, thus, independent buildings having twelve or less than twelve residential units would not be covered by the definition of ‘Residential Complex’. In the present case, the appellant had constructed independent duplex houses having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be ‘Construction of Residential Complex’ and, therefore, the service tax cannot be levied.
5.2 This issue is otherwise no more res integra as being already decided by the Principal Bench of the Tribunal in Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai reported as 2018 (12) STR 603 (Tri. – Chennai) wherein the demand of service tax was for the period 16 June, 2005 to November, 2005 under “Construction of Complex” service under Section 65(30a) of the Act. The Bench examined the scope of ‘Construction of Complex’ and the meaning of ‘Residential Complex’ under section 65(91a) of the Act and observed as follows:-
“It is abundantly clear from the above provisions that construction of residential complex having not more than 12 residential units is not sought to be taxed under the Finance Act, 1994. For the levy, it should be a residential complex comprising more than 12 residential units. Admittedly, in the present case, the appellants constructed individual residential houses, each being a residential unit, which fact is also clear from the photographs shown to us. In any case, it appears, the law makers did not want construction of individual residential units to be subject to levy of service tax. Unfortunately, this aspect was ignored by the lower authorities and hence the demand of service tax. In this view of the matter, we are also not impressed with the plea made by the appellants that, from 1-6-2007, an activity of the one in question might be covered by the definition of ‘works contract’ in terms of the Explanation to section 65 (105)(zzzza) of the Finance Act, 1994 as amended. ‘According to this Explanation, ‘construction of a new residential complex or a part thereof’ stands included within the scope of ‘works contract’. But, here again, the definition of ‘residential complex’ given under section 65(91a) of the Act has to be looked at. By no stretch of imagination can it be said that individual residential units were intended to be considered as a “residential complex or a part thereof.”
The Civil Appeal filed by the Department to assail the aforesaid order of the Tribunal was dismissed by the Supreme Court on 7 July, 2009 reported as 2012 (25) STR J514 (SC).
5.3 We also find that the definition of ‘Residential Complex’ as per Section 65(91a) of the Act is applicable for both the entries under Section 65(105)(zzzza) for works contract. Therefore, there cannot be an argument that the expression ‘Residential Complex’ has to be interpreted in one manner for works contract and in a different manner of levy of tax on construction of a residential complex. The aforesaid decision of the Tribunal in Macro Marvel Projects was subsequently followed by the Tribunal in A.S. Sikarwar vs. Commissioner of Central Excise, Indore reported as 2012 (28) STR 479 (Tri.-Del.) and the relevant portion of the order is quoted below:-
“In this case, the Appellants have undertaken construction work of 15 residential houses under a contract with M.P. Housing Board. The Revenue was of the view that the Appellants should have paid service tax on the activity under the entry 65(105)(zzzh) for taxing ‘construction of complex’ as defined under Section 65(91a) of Finance Act, 1994. The submission of the appellant is that the entry covers only such building where each of the building has got more than 12 residential units. They have built 15 independent houses and not a complex and hence their activity was not taxable under the entry 65(105)(zzzh) which adopts definition in Section 65(91a). He relied upon the decision of the Tribunal in the case of Macro Marvel Projects Ltd. v. CST, Chennai – 2008 (12) S.T.R. 603 (Tri.-Chennai).
2. The Authorised Representative appearing for the Revenue submits that the explanation under Section 65(91a) of Finance Act, 1994 gives definition of “residential unit” to mean “a house or single apartment intended for use as a place of residence”. Even if the residential units are separate, it will be covered by the definition, according to him.
5. We further note that Revenue being aggrieved by the decision of the Tribunal in the said matter had filed appeal with Hon‟ble Supreme Court and the Hon‟ble Supreme Court has dismissed the appeal filed as reported at 2012 (25) S.T.R. J514 (S.C.). So we consider that this matter is no longer res integra and service tax can be demanded under 65(105)(zzzh) only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where in one compound has many buildings, each having not more than 12 residential units. Therefore, we set aside the impugned order and allow the appeal.”
5.4 This view is also supported by the decision of CESTAT, Delhi in the case of Madhukar Mittal Vs. Commissioner of Central Excise, Panchkula reported as 2015(40) S.T.R. 969 (Tri.-Del.), wherein it has been held –
“5. In view of above discussion, the judgments in the case of Macro Marvel Projects Ltd. v. CST, Chennai (supra) and A.S. Sikarwar v. CCE, Indore (supra) are not applicable to the facts of the present case because in those cases individual residential houses were constructed which did not satisfy the definition of residential complex reproduced above. Thus, we hold that impugned service clearly gets covered under construction of complex service liable to service tax.”
5.5 Though the department has relied upon the decision of this Tribunal in the case of Modi & Modi Constructions (supra), however, we observe that the facts of the present case are similar with the facts as in the case of Macro Marvel Projects (supra) case. Also there has been no change in the definition of ‘Residential Complex’ in Section 65(91a) of the Finance Act since the Finance Act, 2005. Even post 2012 there has not been any change. The definition has been same as has been considered in Macro Marvel (supra) case. The decision of this Tribunal in the said case stands already affirmed by Hon’ble Supreme Court in 2009 itself. We do not find any reason to differ. Otherwise also, the decision of Hon’ble Supreme Court is the law of land in terms of Article 141 of the Constitution of India. From the entire above discussion, it stands clear that the appellant has not rendered the taxable service. Resultant, was not liable to pay service tax. It has been appellant’s contention since beginning i.e. since the time of making payment of the amount demanded by the auditor’s team however in protest, that the appellants have not charged any service tax from their customers. The department has ignored the said contention and has applied the bar of unjust enrichment without having any evidence in that respect. The refund of service tax paid under protest vis-à-vis ‘Construction of Residential Complex’ also stands adjudicated by this Tribunal in an appeal titled as M/s. Quality Builders & Contractor Vs. Commissioner of Central Goods & Service Tax, in Service Tax Appeal No. 53481 of 2018 vide Final Order No. 50809 of 2022 dated 05.09.2022, wherein also it has been held –
14. The definition of a “residential complex” leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of “residential complex”.
Based on these findings, the Principal Bench of this Tribunal hold that the Commissioner was not justified while rejected the refund claim.
6. In light of the entire above discussion, we hold that appellant is entitled for claiming refund of the amount which was deposited under protest specifically for the reason that appellant is not liable to pay tax while constructing independent residential duplex houses. The order under challenge is therefore set aside. The appeal stands allowed with consequential relief.
(Order pronounced in the open court on 20.03.2025)
