Whether construction of 17 residential quarters distributed in different buildings in same compound liable to service tax?

PJ/Case Laws/2012-13/1524

Case:-ARIHANT CONSRUCTION Versus COMMISSSIONER OF CENTRAL EXCISE, JAIPUR-II

Citation:-2013(30) S.T.R. 64(Tri.-Del.)

Brief Facts:-The appellants were registered for rendering the services of construction of complex. They constructed several quarters for Kendriya Vidyalaya. These residential quarters were distributed in different buildings in the same compound. None of the buildings had more than 12 flats in each building. However, Revenue was of the view that the word 'complex' has to be interpreted to mean the entire compound and if the entire compound is considered as one complex, there were 17 flats constructed in the complex and therefore, they had to pay service tax under the entry of construction of complexes. A show cause notice was issued and adjudicated confirming duty to the extent of Rs. 2,47,598/- along with interest and penalties under Sections 76 and 78.

Appellant Contentions:- The submission of the Counsel is that as per the definition of 'residential complex' as given at sub-section (91a) of Section 65, only building having more than 12 residential units in a building will be considered a residential complex. He submits that this issue was under dispute and it was decided by the Tribunal in the case of Macro Marvel Projects Ltd. v. CST, Chennai [2008 (12) S.T.R. 603 (Tri.-Chennai)] holding that only those buildings of more than 12 residential units in the same building will be covered by the definition of residential complex. Revenue being aggrieved by the said decision, had filed an appeal with the Hon'ble Supreme Court and the same was dismissed by the Supreme Court as reported at 2012 (25) S.T.R. J154. Therefore, the Counsel submits that there is no merit in the arguments of Revenue and appeal should be heard without any pre- deposit.

Respondent Contentions:- Learned AR for Revenue is reiterating the submissions which were argued in the case of Macro Marvel Projects, that is the compound of Kendriya Vidyalaya has to be taken as one complex and in this complex, the appellants have constructed more than 12 residential units and therefore, the complex will be covered by the definition at 65(91a) inasmuch as, approval was given by CPWD and Ministry of Human Resources Development for the complex as a whole. He also draws our attention to Explanation-I under sub-section (91a) which defined 'residential unit' stating the residential unit for a single unit for a single apartment for the place.

Reasoning of Judgment:-We have considered the submission from both the party and examined the record, the definition of residential complex reads as under:
(91a) "residential complex" means any complex comprising of —
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system,
located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person.
Explanation — For the removal of doubts, it is hereby declared that for the purposes of this clause, —
(a)"personal use" includes permitting the complex for use as residence by another person on rent or without consideration;
(b)"residential unit" means a single house or a single apartment intended for use as a place of residence;
This definition is applicable for taxable entry 65(105)(zzzh) the entry relevant for deciding this appeal as also 65(105)(zzzza) covering works contract which was the entry in the case of Macro Marvel Projects (supra).
We find that the explanation pointed out by the AR has nothing to do with the dispute in hand because that explanation defines 'residential unit' and the definition in dispute is that of 'residential complex'. The explanation can mean only that the building should have 12 residential units. So the explanation is not for interpreting the meaning of 'residential complex'.
Since the Hon. Supreme Court has already confirmed the interpretation in favour of the appellant, we find it proper to waive the requirement of pre- deposit of dues arising from the impugned order and stay collection of such dues during the pendency of the appeal.

Decision:-Stay application allowed.

Comment:-The essence of this case is that as residential complex means building should have 12 residential units, construction of 17 residential quarters distributed in different buildings in same compound is not liable to service tax.

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PJ/Case Laws/2012-13/1524

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