- R V Nirman Pvt Ltd. Vs Commissioner of Customs (CESTAT Hyderabad)
- Facts and Procedural History
- Submissions of the Appellant
- Taxability of Construction Completed Before 01.07.2010
- Classification and Extended Period
- Department's Submissions
- Tribunal's Findings on Construction Before 01.07.2010
- Demand on Land Owner's Share
- Reclassification from Construction of Complex Service to Works Contract Service
- Extended Period and Penalty
- Final Decision
- Cases Discussed
R V Nirman Pvt Ltd. Vs Commissioner of Customs (CESTAT Hyderabad)
M/s R V Nirman Pvt Ltd. appealed against Order-in-Original No. HYD-EXCUS-002-COM-041-16-17 dated 31.10.2016 concerning service tax on construction of residential complexes undertaken under development agreements with land owners. The appellant had undertaken four projects, namely R.V. Brindavanam, R.V. Padma Laxmi, R.V. Avaneendra and R.V. Manyatha. According to the supplied order, all four projects were completed before 01.07.2010 and occupancy certificates were obtained before that date. The appellant had discharged service tax under Construction of Complex Service for certain projects and under the Works Contract Service composition scheme for others.
Following an audit, the Department issued a show cause notice dated 22.06.2012 proposing reclassification under Works Contract Service, demand of service tax on the land owner’s share of flats by invoking the extended period, and penalty under Section 78 of the Finance Act, 1994. The demand was confirmed by the impugned order.
Before the Tribunal, the appellant submitted that construction of residential complexes completed before 01.07.2010 was not taxable and relied upon settled law and CBEC circulars. It also submitted that construction undertaken before execution of sale deeds was in the nature of self-service, that the Department had accepted the classification under Construction of Complex Service in the returns, and that the extended period was not invokable because the relevant facts had been disclosed in ST-3 returns. The learned AR supported the findings of the Commissioner (Appeals) and submitted that service tax was payable on the land owner’s share.
The Tribunal identified the core issue as the taxability of construction of residential complexes undertaken prior to 01.07.2010. Relying on the judicial decisions cited in the order, including M/s Aditya Construction Company India Pvt Ltd., Vs CCT, Hyderabad [2025 (1) TMI 1376 (CESTAT – Hyd)], Larsen & Toubro Ltd., & Another Vs State of Karnataka [2014 (34) STR 481 (SC)], M/s Aruna Constructions Vs CCE and ST, Visakhapatnam [2026 (3) TMI 753 (CESTAT – Hyd)] and CCE Vs Krishna Homes Vs CCE, Bhopal [2014 (34) STR 881 (Tri-Del)], the Tribunal held that no service tax was leviable on construction of residential complexes completed prior to 01.07.2010.
The Tribunal also considered the demand relating to flats allotted to the land owner under the development agreement. Relying on Vasantha Green Projects Vs CCT [2018 (5) TMI 1889 (CESTAT – Hyd)], it held that flats given to land owners were not taxable as service. The order further dealt with the Department’s reclassification from Construction of Complex Service to Works Contract Service and referred to Section 65(A) of the Finance Act, 1994.
On limitation, the Tribunal noted that the appellant was registered and regularly filed ST-3 returns disclosing the classification. Relying on Pushpam Pharmaceutical Company Vs CCE [1995 (78) ELT 401 (SC)], it held that the extended period was not invokable in the circumstances. Since the demand itself was unsustainable and suppression was not established, the Tribunal held that penalty under Section 78 of the Finance Act, 1994 was not imposable.
The Tribunal consequently held that no service tax was leviable on the construction completed prior to 01.07.2010 and that the demand relating to the land owner’s share was also unsustainable. The appeal was allowed and the impugned order was set aside.
Facts and Procedural History
M/s R V Nirman Pvt Ltd. was engaged in construction of residential complexes under development agreements entered into with land owners. The appellant undertook construction of four projects: R.V. Brindavanam, R.V. Padma Laxmi, R.V. Avaneendra and R.V. Manyatha.
The supplied order records that the appellant discharged service tax under Construction of Complex Service for certain projects and under the Works Contract Service composition scheme for others. All four projects were completed prior to 01.07.2010 and occupancy certificates were obtained before that date.
After an audit, the Department issued a show cause notice dated 22.06.2012 proposing reclassification of the services under Works Contract Service. The notice also proposed service tax demand on the land owner’s share of flats by invoking the extended period, together with penalty under Section 78 of the Finance Act, 1994.
The demand was confirmed through the impugned Order-in-Original No. HYD-EXCUS-002-COM-041-16-17 dated 31.10.2016. The appellant thereafter approached the CESTAT.
Submissions of the Appellant
Taxability of Construction Completed Before 01.07.2010
The appellant submitted that all the projects had been completed before 01.07.2010. It relied upon settled law and CBEC circulars to contend that construction of residential complexes prior to 01.07.2010 was not taxable.
The supplied material is consistent with TaxGuru publications discussing the same legal position concerning residential construction before 01.07.2010. For example, TaxGuru has published No Service Tax on work contract for construction of residential complexes prior to 01.07.2010.
Classification and Extended Period
The appellant submitted that services rendered prior to execution of the sale deed were in the nature of self-service. It further submitted that the Department had accepted the classification under Construction of Complex Service in the returns and that reclassification under Works Contract Service was without legal basis.
The appellant also contended that the extended period was not invokable because all relevant facts had been disclosed in the ST-3 returns.
Department’s Submissions
The learned AR reiterated the findings of the Commissioner (Appeals) and submitted that service tax was payable on the land owner’s share.
Tribunal’s Findings on Construction Before 01.07.2010
The Tribunal observed that the issue was no longer res-integra. It recorded that Tribunals and Higher Courts had consistently held that, prior to 01.07.2010, there was no levy of service tax on construction of residential complexes by a builder/developer in respect of their own projects.
The Tribunal relied upon the decisions referred to in the supplied order, including M/s Aditya Construction Company India Pvt Ltd., Vs CCT, Hyderabad [2025 (1) TMI 1376 (CESTAT – Hyd)], Larsen & Toubro Ltd., & Another Vs State of Karnataka [2014 (34) STR 481 (SC)], M/s Aruna Constructions Vs CCE and ST, Visakhapatnam [2026 (3) TMI 753 (CESTAT – Hyd)] and CCE Vs Krishna Homes Vs CCE, Bhopal [2014 (34) STR 881 (Tri-Del)].
The Tribunal also referred to CBEC Circular No. 108/02/2009-ST dated 29.01.2009, which, according to the supplied order, clarified that construction undertaken by a builder until execution of the sale deed was in the nature of self-service and was not taxable.
On that basis, the Tribunal held that no service tax was leviable on construction of residential complexes completed prior to 01.07.2010. TaxGuru has also published material specifically addressing the same pre-01.07.2010 position, including No Service Tax on Residential Projects construction services Prior to 01.07.2010.
Demand on Land Owner’s Share
The Tribunal separately considered the demand relating to flats allotted to the land owner under the development agreement.
Relying on Vasantha Green Projects Vs CCT [2018 (5) TMI 1889 (CESTAT – Hyd)], the Tribunal held that flats given to land owners were not taxable as service. It further observed that such arrangements involved transfer of immovable property and not provision of service tax.
TaxGuru has published a substantive discussion of the Vasantha Green Projects ruling in GST and Service tax on redevelopment of societies, which discusses the treatment of flats given to land owners and the Tribunal’s ruling in Vasantha Green Projects.
Reclassification from Construction of Complex Service to Works Contract Service
The supplied order records that the Department had sought to reclassify construction under Construction of Complex Service as Works Contract Service.
The Tribunal referred to Section 65(A) of the Finance Act, 1994 and observed that the specific classification prevails over the general classification. It further recorded that the earlier entry prevailed where ambiguity existed prior to the introduction of Works Contract Service with effect from 01.06.2007.
The Tribunal also referred to the Supreme Court’s decision in Larsen & Toubro and observed that Works Contract Service was taxable only after its introduction. It therefore held that the reclassification was not legally sustainable, particularly where the taxability itself failed.
The broader principle concerning composite works contracts and service tax before the introduction of Works Contract Service has also been discussed in TaxGuru’s publication Composite Works Contracts Not Taxable Under ECIS Before 1 June 2007.
Extended Period and Penalty
The Tribunal noted that the appellant was registered and had regularly filed ST-3 returns disclosing the classification.
On these facts, the Tribunal held that there was no suppression or wilful misstatement. Relying on Pushpam Pharmaceutical Company Vs CCE [1995 (78) ELT 401 (SC)], it held that the extended period was not invokable when the facts were known to the Department.
The Tribunal further held that, since the demand itself was not sustainable and suppression had not been established, penalty under Section 78 of the Finance Act, 1994 was not imposable.
Final Decision
The Tribunal held that no service tax was leviable on construction of residential complexes completed prior to 01.07.2010. It also held that the demand relating to the land owner’s share was not sustainable.
The appeal was therefore allowed and the impugned Order-in-Original was set aside. The operative part of the order was pronounced in court on conclusion of the hearing.
Cases Discussed
- M/s Aruna Constructions Vs CCE and ST, Visakhapatnam [2026 (3) TMI 753 (CESTAT – Hyd)]
- M/s Aditya Construction Company India Pvt Ltd., Vs CCT, Hyderabad [2025 (1) TMI 1376 (CESTAT – Hyd)]
- Larsen & Toubro Ltd., & Another Vs State of Karnataka [2014 (34) STR 481 (SC)]
- Vasantha Green Projects Vs CCT [2018 (5) TMI 1889 (CESTAT – Hyd)]
- CCE Vs Krishna Homes Vs CCE, Bhopal [2014 (34) STR 881 (Tri-Del)]
- Pushpam Pharmaceutical Company Vs CCE [1995 (78) ELT 401 (SC)]
FULL TEXT OF THE CESTAT HYDERABAD ORDER
M/s R V Nirman Pvt Ltd., (hereinafter referred to as appellant) has filed this appeal against the Order-in-Original No. HYD-EXCUS-002-COM-041- 16-17 dated 31.10.2016 (impugned order).
2. The fact, in brief, is that the appellant is engaged in construction of residential complexes under development agreements entered with land owners. The appellant undertook construction of four projects namely (i) R.V. Brindavanam (ii) R.V. Padma Laxmi (iii) R.V. Avaneendra and (iv) R.V. Manyatha. The appellant discharged service tax und er <Construction of Complex Service (CCS)= for certain projects and under Service (WCS)= composition scheme for others. All these projects were completed prior to 01.07.2010 and occupancy certificates were obtained before the said date.
3. The Department, after audit, issued a show cause notice dated 22.06.2012 proposing the reclassification of services under WCS. Demand of service on land owner’s share of flats after invocation of extended period and also proposed imposition of penalty under Section 78 of the Finance Act 1994.
4. The demand was confirmed vide impugned Order-in-Original. Thereafter, appellant filed appeal before the CESTAT.
5. Learned Counsel for the appellant submits that all projects we re completed prior to 01.07.2010 and as per settled law and CBEC circulars, construction of residential complexes prior to 01.07.2010 is not taxable.
6. Learned Counsel for the appellant submits that the services rendere d prior to execution of sale deed are in nature of self service. Classification under CCS was accepted by the Department in returns, reclassification to WCS is without legal basis. He also submits that extended period is not invokable in all facts were disclosed in ST-3 returns.
7. Learned AR reiterates the findings of the Commissioner (Appeals) and also submits that service tax is payable on land owner share.
8. The core issue is whether construction of residential complex undertaken prior to 01.07.2010 is taxable.
9. This issue is no longer res-integra. The Tribunals and Hi gher Courts have consistently held that prior to 01.07.2010, there was no levy of service tax on construction of residential complex by builder/developer in respect of their own projects.
10. Reliance is placed on M/s Aditya Construction Company India Pvt Ltd., Vs CCT, Hyderabad [2025 (1) TMI 1376 (CESTAT – Hyd)] wherein, it was held that no tax liability prior to 01.07.2010 irrespective of classification and also in other cases like Larsen & Toubro Ltd., & Another Vs State of Karnataka [2014 (34) STR 481 (SC)], M/s Aruna Constructions Vs CCE an d ST, Visakhapatnam [2026 (3) TMI 753 (CESTAT – Hyd)] and CCE Vs Krishna Homes Vs CCE, Bhopal [2014 (34) STR 881 (Tri-Del)]. Further, CBEC Circular No. 108/02/2009-ST dated 29.01.2009 clarified that constructi on undertaken by builder till execution of sale deed is in the nature of self service and not taxable.
11. Therefore, we hold that no service tax is leviable on constructi on of residential complexes completed prior to 01.07.2010.
12. The other demands relates to flat allotted to land owner un der development agreement, the Tribunal in Vasantha Green Projects Vs CCT [2018 (5) TMI 1889 (CESTAT – Hyd)] has held that flats given to land owners are not taxable as service.
13. Further, such arrangements involve transfer of immovable property, not provision of service tax. Hence, demand on land owners share is unsustainable. The Department also admitted to reclassifying construction of CCS as WCS. As per Section 65(A) of the Finance Act 1994 specific classification prevails over general classification. Earlier entry prevails where ambiguity existed prior to WCS (with effect from 01.06.2007).
14. Hon’ble Supreme Court in the case of Larsen & Toubro, supra, has clarified that WCS is taxable only after its introduction. Therefore, reclassification is not legally sustainable, especially when taxability itself fails.
15. It is evident that appellant was registered and also regularly filed ST-3 returns and discloses classification. Hence, there is no suppression or willful mis-statement. It is a settled law that extended period cannot be invoked when facts are known to the Department. It was held by Hon’ble Sup reme Court in the case of Pushpam Pharmaceutical Company Vs CCE [1995 (78) ELT 401 (SC)]. Therefore, extended period is not invokable. Since, demand itself is not sustainable and no any suppression established there fore, penalty is not imposable under Section 78 of the Finance Act 1994.
16. In view of the above discussion, we hold that no service tax is leviable prior to 01.07.2010 and demand of land owner’s share is also n ot sustainable.
17. Therefore, appeal is liable to be allowed and the impug ned order is liable to be set aside.
18. Appeal allowed. (Operative part of this order was pronounced in court on conclusion of the hearing)
