Commissioner of Central Tax Vs Abhilash Synergetic Constructions & Exports Pvt Ltd (CESTAT Hyderabad)
Summary: The CESTAT Hyderabad considered cross-appeals arising from a common adjudication order concerning service tax on construction of residential flats under development agreements with landowners and separate agreements with individual purchasers. A Show Cause Notice dated 20.06.2013 had proposed service tax of Rs. 2,20,23,119/- for the period from 01.10.2007 to 31.03.2013. The adjudicating authority confirmed Rs. 80,27,853/- under Works Contract Service with interest and penalty and dropped the remaining demand of Rs. 1,39,95,266/-. The assessee challenged the confirmed demand, while Revenue challenged the portion dropped. The Tribunal held that although contracts involving supply of goods and construction services were composite works contracts, taxability of residential construction still depended upon satisfaction of the statutory definition of “Residential Complex” under Section 65(91a) of the Finance Act, 1994.
A building or independently identifiable project containing twelve or fewer residential units and not otherwise satisfying that definition could not be taxed merely by describing the activity as a works contract. The Tribunal further held that the Explanation to Section 65(105)(zzzh), deeming construction by a builder taxable where consideration was received from a prospective purchaser before completion certificate, operated only from 01.07.2010 and could not retrospectively sustain the demand for the earlier period. Construction undertaken under separate agreements with individual purchasers for completion of residential units intended for their personal use was also covered by the statutory exclusion.
