Whether the assessee as a builder is liable for the service tax on Construction of Residential Complexes when there is no intermediary in between.

PJ/Case Laws/2012-13/1244

Case: - SKYLINE CONSTRUCTION AND HOUSING PVT LTD. Vs COMMISSIONER OF CENTRAL EXCISE, BANGLORE

Citation: -2012-TIOL-1078-CESTAT-BANG

Brief Facts: -The present appeal was filed by the appellant seeking the stay of operation of the impugned order. Hence, the application is for waiver of pre-deposit and stay of recovery in respect of the total dues. The lower authorities have demanded service tax of Rs. 2711334/- for the period from 16.6.2005 to 31.3.2006 in respect of “Construction of Residential Complexes” undertaken by the appellant. They have also demanded interest on tax.

Appellant Contention:-The Appellant contended that there is no provision for the pre-deposit for the purpose of service tax appeal and therefore, they has sought only stay of operation of the impugned order. Further it is submitted that an amount of Rs. 1096409/- was paid by them and the same stands appropriated towards the impugned demand. They only seeks pre-deposit and stay of recovery in respect of the balance amount claiming a strong prima facie case against the said amount. They further submit that they as a builder were not rendering any such service to the ultimate buyer of the residential flats. They are only doing self service which was not taxable. In this connection they placed reliance upon a stay order passed by the Bench viz Mohtisham Complexes (P) Ltd. vs. Commissioner of C. Ex., Mangalore [2011 (21) STR 551 (Tri.-Bang.)] wherein a prima facie view was taken to this effect that the builder did not have tax liability prior to 1.7.2010. In the present case the demand is for a prior period and the same is not sustainable.

Respondent Contention:-The Respondent argues thatthe service tax is a levy on the activity constituting service and, therefore, the constructionactivity carried out by the appellant is certainly taxable in their own hands. In this connection they placed reliance on the decision of the Hon’ble High Court of P & H viz. G.S. Promoters vs. UOI [2011 (21) STR 100 (P&H)] wherein a contention that there was no element of service in a builder selling a flat was rejected and it was held that what was sought to be taxed under the head ‘Construction of residential complex service’ was a service in relation to construction and that the service was taxable. They also placed reliance upon the Circular no. 151/2/2012-ST dt. 10.02.2012.

Reasoning of Judgement:-The CESTAT held that they did not find any third agency having carried out the construction work. Contention that there was no element of service in a builder selling a flat was rejected and it was held that what was sought to be taxed under the head “Construction of Residential Complexes” undertaken by the appellant. The terms & conditions of the agreement between the appellant as a builder and the ultimate buyer of the flat clearly indicates that the construction activity was carried out by the appellant and the property was retained in their possession till it was sold and handed over to the ultimate buyer. There is nowhere in the agreement any reference to any intermediary. The Board’s Circular relied on by the appellant also cannot ne relied on for the present case.

Decision:- Pre-deposit ordered.

Comment:- This decision of stay matter only. Earlier the CBEC has clarified that when the flats are constructed by builder in installments to buyer but the ownership is transferred in the end then it cannot be held as service. As it will be termed as “self service”. Hence the service tax is not payable on the same.
From 1.7.2010, an explanation was added to “Residential construction” and “Commcercial construction” service and the service tax was imposed on the same. But it was settled that there is no liability for prior period. But this decision has held that service tax is imposable on the same also.

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PJ/Case Laws/2012-13/1244

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