Adani Estate Management Private Limited Vs Commissioner of C.E. (CESTAT Ahmedabad)
CESTAT Ahmedabad allowed the appeal of Adani Estate Management Private Limited, formerly known as Shantigram Estate Management Private Limited, and set aside the service tax demands arising from its residential bungalow project “The North Park”. The dispute covered 2015-16 to June 2017 and concerned classification of construction activities, exclusion of land value, valuation of balance construction work, taxability of cancellation charges and invocation of the extended limitation period. The appellant had structured transactions with buyers into sale of land, construction of framework and construction of balance work. It classified the construction components as works contract services under Section 66E(h) of the Finance Act, 1994 and determined their taxable value under Rule 2A of the Service Tax (Determination of Value) Rules, 2006. Revenue instead treated the framework construction as construction of residential complex under Section 66E(b), included land value and applied the abatement mechanism applicable to construction services.
The Tribunal found that the construction activities involved transfer of property in goods, that the appellant used its own goods in construction, and that VAT had been discharged. Relying on the Supreme Court’s works-contract jurisprudence, including Larsen & Toubro and K. Raheja Development Corporation, it held that sale of a building before completion of construction constitutes a works contract. The adjudicating authority’s attempt to treat the transaction as sale of a villa while simultaneously classifying it as construction service was held to be self-contradictory. Consequently, the appellant’s classification under Section 66E(h) was upheld.
