VPL Projects Pvt Ltd. Vs Commissioner of Central Excise & Service Tax (CESTAT Hyderabad)
Summary: CESTAT Hyderabad allowed two appeals filed by VPL Projects Pvt Ltd. against service tax demands under Construction of Complex Service. The first appeal concerned a demand of Rs. 53,21,555 for 2011–12, with interest and penalties, while the second concerned Rs. 8,32,635 for 2010–11, with interest under Section 75 and penalty under Section 76 of the Finance Act, 1994. The Department treated the construction as residential-complex construction. The appellant maintained that it had constructed individual houses on independent plots for purchasers’ personal use, that roads and open spaces had been handed over or gifted to GVMC, and that the requirements of Section 65(91a) were not satisfied.
The Tribunal found insufficient departmental evidence establishing the common areas and common facilities contemplated by the statutory definition of a residential complex. It considered the authorities cited on independent residential houses and the need to establish the statutory ingredients before imposing liability. It also observed that the contracts involved construction together with supply or transfer of materials. To the extent that they were composite works contracts, their classification and taxability required examination under the provisions governing Works Contract Service; a demand under Construction of Complex Service could not be sustained without addressing their true nature.
The Tribunal further noted that periodical show cause notices had already been issued for the same activity, beginning with proceedings covering 2006–07 to 2009–10. The Department therefore knew the nature of the appellant’s activity, which militated against allegations of suppression or wilful misstatement for invoking the extended period, wherever invoked. An earlier refund of Rs. 11,93,276 for October 2008 to September 2009, allowed by the Commissioner (Appeals) and subsequently sanctioned, also demonstrated that the issue was capable of differing interpretations. The Tribunal found the ingredients of deliberate evasion absent, set aside both demands with interest and penalties, and allowed consequential relief, if any, in accordance with law.
Cases Discussed
- Jay Pee Enterprises Vs Commissioner of CGST, 2025 (5) TMI 405 (CESTAT Chennai). Cited among the decisions supporting examination of the statutory requirements before imposing construction-service liability.
- Priyadarshini Constructions Vs CCT, Bhopal, 2025 (3) TMI 1063 (CESTAT New Delhi). Considered in the discussion concerning independent houses and residential-complex taxability.
- CSK Realtors Ltd., 2024 (3) TMI 351 (CESTAT Hyderabad). Cited on the applicability of the residential-complex definition.
- SMS Gardens Pvt Ltd. Vs Commissioner of GST & Central Excise, Salem, 2022 (61) GSTL 33 (CESTAT Chennai). Included among the authorities considered in determining construction-service liability.
- Silver City Construction Ltd. Vs Commissioner of Central Excise, Chandigarh-I, 2022 (59) GSTL 77 (CESTAT Chandigarh). Cited in support of the need to establish the statutory ingredients of the taxable service.
- Commissioner of Central Excise, Bengaluru-I Vs Alliance Infrastructure Projects Pvt Ltd., 2022 (56) GSTL 3 (Kar). Discussed with reference to independent houses or villas and fulfilment of the residential-complex requirements.
- Commissioner of Central Excise, Visakhapatnam-I Vs Pragati Edifice Pvt Ltd., 2019 (31) GST 241 (CESTAT Hyderabad). Included among the authorities supporting the Tribunal’s discussion of construction-service taxability.
- Citilights Properties Pvt Ltd. Vs Commissioner of GST, Chennai North, 2019 (29) GSTL 355 (CESTAT Chennai). Cited in the discussion of the requirements for sustaining the demand.
- Macro Marvel Project Ltd. Vs CST, Chennai, 2018 (12) STR 2003 (CESTAT Chennai), as cited in the supplied order. Relied upon for the proposition that constructing several individual houses in a common layout does not, by itself, bring the activity within Construction of Complex Service.
- Arihant Construction Vs Commissioner of Central Excise, 2013 (30) S.T.R. 64 (CESTAT Delhi). Cited among the decisions concerning residential-complex taxability.
- A.S. Sikarwar Vs Commissioner of Central Excise, Indore, 2012 (28) S.T.R. 479 (CESTAT Delhi); Appeal No. ST/871 of 2011; 20/04/2012. Cited in support of the distinction between independent residential houses and a taxable residential complex.
- Vinod Kumar Goyal Vs Commissioner of Central Excise, 2011 (23) S.T.R. 30 (CESTAT Delhi). Included among the authorities considered on construction-service liability.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
These two appeals have been filed by M/s VPL Projects Pvt Ltd., and, since they involve the same appellant, substantially identical facts and a common issue relating to levy of Service Tax under “Construction of Complex Service”, they were heard together and are being disposed of by this common order.
2. Appeal No. ST/20569/2014 pertains to the period 2011-12 and arises out of Order-in-Original No. VIZ-EXCUS-002-COM-035-13-14 dated 29.10.2013, whereby, Service Tax demand of Rs. 53,21,555/- along with interest and penalties, was conformed under “Construction of Complex Service”.
3. The second Appeal No. ST/20189/2015 arises out of Order-in-Appeal No. 27/2014(V)-II ST dated 30.10.2014, whereby, the Commissioner (Appeals), upheld the Order-in-Original NO. 59/2012 dated 02.11.2012 confirming Service Tax of Rs. 8,32,635/- for the Financial Year 2010-11 along with interest under Section 75 and penalty under Section 76 of the Finance Act, 1994.
4. The case of the Department is that the appellant undertook construction of residential units forming part of a residential complex and was, therefore, liable to Service Tax under the taxable category of Construction of Complex Service. The appellant, on the other hand, submits that the houses were constructed on independent plots for individual purchasers for their personal use and that the essential requirements of a “Residential Complex” within the meaning of Section 65(91a) of the Finance Act, 1994 were not satisfied.
5. Learned Counsel further submits that the roads and open spaces in the layout were ultimately handed over/gifted to GVMC and there is no evidence establishing that the appellant constructed a residential complex consisting of common areas and common facilities as contemplated under Section 65(91a). It is also pointed out that, for an earlier period from October 2008 to September 2009, refund of Service Tax of Rs. 11,93,276/- paid by the very same appellant had been allowed by the Commissioner (Appeals), and subsequently sanction by the Original Authority.
6. We have considered the submissions of both sides and perused the records. Since the factual matrix as well as the nature of the construction involved in both appeals is substantially identical, the issue can be conveniently be decided together.
7. Section 65(91a), as it stood during the relevant period, contemplated a “Residential Complex” comprising more than 12 residential units, a common area and one or more specified common facilities situated within premises approved by the competent authority. Thus, mere construction of a number of residential houses by itself would be sufficient unless the requirements prescribed in the statutory definition are established.
8. In the present case, the material placed on record indicates that the construction undertaken by the appellant was of individual houses on independent plots for the respective purchasers. Further, the roads and open spaces were handed over to the Municipal Authority. We do not find sufficient evidence brought on record by the Department to establish the existence of the common area and common facilities belonging to a residential complex in the manner contemplated under Section 65(91a).
9. The issue relating to construction of independent residential houses has been considered in the case of Macro Marvel Project Ltd., Vs CST Chennai, 2018 (12) STR 2003 (Tri-Chennai), wherein, it was held that construction of individual residential houses does not fall within the taxable category merely because a number of such houses are constructed in a common layout. The said principle has subsequently been followed in several decisions.
10. We also find that in the case of Commissioner of Central excise, Bengaluru-I Vs Alliance Infrastructure Projects Pvt Ltd., 2022(56)GSTL 3(Kar), the Tribunal examined construction of independent residential houses/villas and the applicability of the definition of residential complex under Section 65(91a). The nature of the individual residential unit and fulfilment of the statutory ingredients of a residential complex were treated as material considerations for determining taxability. This issue was also examined in the case of CSK Realtors Ltd., 2024(3) TMI 351 – CESTAT Hyderabad, Priyadarshini Constructions Vs CCT, Bhopal, 2025(3) TMI 1063-CESTAT New Delhi, Jay Pee Enterprises Vs Commissioner of CGST, 2025 (5) TMI 405-CESTAT Chennai, A.S Sikarwar Vs Commissioner of Central Excise, Indore, 2012 (28) S.T.R 479 (Tri-Del), Arihant Construction Vs Commissioner of Central Excise, 2013 (30) S.T.R 64 (Tri-Del), Vinod Kumar Goyal Vs Commissioner of Central Excise, 2011 (23) S.T.R 30 (Tri-Del), besides the decision in Commissioner of Central Excise, Visakhapatnam-I Vs Pragati Edifice Pvt Ltd., 2019(31) GST 241 (Tri-Hyd), Citilights Properties Pvt Ltd., Vs Commissioner of GST, Chennai North, 2019(29) GSTL 355 (Tri-Chennai), SMS Gardens Pvt Ltd., Vs Commissioner of GST & Central Excise, Salem, 2022 (61) GSTL 33 (Tri-Chennai) and Silver City Construction Ltd., Vs Commissioner of Central Excise Chandigarh-I, 2022(59) GSTL 77 (Tri-Chan). The ratio emerging from these decisions supports the proposition that the Department must establish the statutory ingredients of a residential complex before fastening liability under Construction of complex service.
11. There is another aspect. The contracts involved construction together with supply/transfer of material. To the extent that such contracts are in the nature of composite Works Contract, the classification and demand have to be examined in accordance with the statutory provisions governing Works Contract Service. A demand raised simpliciter under Construction of Complex Service cannot be sustained without first addressing the truth nature of the composite contracts.
12. We further notice that the Department had been issuing periodical Show Cause Notices to the same appellant on the same activity. The first proceedings covered the period from 2006-07 to 2009-10, followed by the present proceedings for 2010-11 and another proceeding for 2011-12. The nature of activity of the appellant was thus within the knowledge of the Department. This circumstance also militates against any allegations of suppression or wilful mis-statement for invoking the extended period, wherever such extended period has been invoked.
13. The fact that the Commissioner (Appeals), himself had granted refund to the appellant for an earlier period in respect of the same activity further demonstrates that the issue was capable of differing interpretation. Consequently, the ingredients necessary for imposition of penalties on the ground of deliberate evasion are also absent.
14. In view of the forgoing discussion, we hold that the Department has not established that the individual residential houses constructed by the appellant satisfied the statutory ingredients of a “Residential Complex” under Section 65(91a) so as to attract Service Tax under Construction of Complex Service. The demands in both appeals, therefore, cannot be sustained.
15. Consequently, the demands in both appeals together with interest and penalties are set aside.
16. Accordingly, both the appeals are allowed with consequential relief, if any, in accordance, with law.
(Pronounced in the open court on 25.08.2026 )
