Demand not tenable for advances taken from prospective buyers for construction of flats for period prior to addition of explanation.

PJ/Case Laws/2012-13/1505

Case:-COMMR. OF C.EX., CHANDIGARH Versus GREEN VIEW LAND & BUILDCON LTD.

Citation:- 2013 (29) S.T.R. 527 (TRI.-DEL.)

Brief Facts:- Therespondents were engaged in construction of residential complexes and selling the same to prospective buyers. During the period October, 2005 to July, 2006 they did not pay any Service Tax on such activity under Section 65(105) (zzzh) of Finance Act, 1994. A Show Cause Notice was issued in this regard and adjudicated confirming a demand for tax amount of Rs. 14,50,311/- along with interest and penalty. Aggrieved by the order, respondents filed an appeal with the Commissioner (Appeals). The Commissioner (Appeals) set aside the adjudication order on the ground that the respondents were engaging their own labour and constructing buildings in land owned by them and in such situation there was no service provided by the respondents to the prospective buyers. He relied on the clarificatory letter issued by C.B.E.&C. vide F.No.332/35/2006- TRU, dated 1-8-2006. Aggrieved by the order of the Commissioner (Appeals), Revenue has filed this appeal.

Appellant Contentions:- The appellant submission is that the respondents were taking advances from the prospective buyers for construction of flats and therefore there was a service being rendered by the respondents to the prospective buyers of the flats. He argues that this position has been clarified by the explanation added under Section 65(105)(zzzh) by Finance Act, 2010. He also relies on the decision of Punjab & Haryana Hugh Court in case of G. S. Promoters v. UOI-2011 (21) S.T.R.1000 (P&H).

Respondent Contentions:- The counsel of respondent submits that the explanation added at by Finance Act, 2010 cannot have retrospective effect and this issue has already been decided by the Tribunal vide Final Order No. S.T./463/2008 (Delhi) and Others in the case of CCE, Chandigarh v. M/s. Skynet Builders, Developers, Colonizer and Others -2012(27) STR 388(T).

Reasoning of Judgment:-Wehave considered arguments on both sides, We find that the decision of Punjab & Haryana High Court in the case of G.S. Promoters was about constitutional validity of the explanation added by Finance Act, 2010. That decision did not examine Service Tax liability for the period prior to the date on which the explanation was added. The Tribunal has taken a view in Appeal No. S.T./463/2008(Delhi)= 2012(27) S.T.R.388(T) and other appeals that the explanation cannot be have retrospective effect and that in view of the various clarifications issued by C.B.E.&C. during the relevant time, no Service Tax liability can be imposed on the respondent for this type of activity.

Decision:-The appeal filed by the Revenue was rejected.

Comment:-The crux of this case is that the explanation added by the Finance Act clarified that the advances taken from prospective buyers for construction of flats was also liable to service tax under construction service and the said explanation cannot be considered to have retrospective application so as to tax services prior to insertion of this explanation.

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PJ/Case Laws/2012-13/1505

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