The Hyderabad bench of the Customs Excise and Service Tax Appellate Tribunal (CESTAT) has determined that the construction of a residential complex is properly classifiable under the head “Works Contract Service”( WCS) under Section 65(105).
The Appellant – M/s Aparna Constructions & Estates Pvt Ltd is engaged, amongst others, in the activity of development and construction of flats and Vilas and are registered with the service tax department under the category of ‘Construction of Residential Complex service’, ‘Works Contract service’ and some other services. Based on the audit of the records, vide SCN dt.22.09.2014 read with Corrigendum dt.03.03.2015 was issued alleging non-payment of service tax on various counts , proposing to demand service tax.
The issue was regarding mis-classification of ongoing construction of complex service under the head WCS, we find that admittedly, the work/service done by the Appellant involves both transfer of material and transfer of labour cum services. Thus, these are complex contracts. It has been held by the Supreme Court in the case of CCE & C, Kerala vs Larsen & Toubro Ltd that prior to 01.06.2007, complex contracts involving supply of labour and material are not taxable, as there was no mandate under law to bifurcate the complex contract and subject the service element to tax. It was also held that from 01.06.2007, upon introduction of the head of service – WCS, under section 65(105)(zzzza), all the complex contracts involving supply of both labour and material will be classifiable under the head works contract service.
According to Section 65(105)(zzzza) ‘taxable service’ means any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams
The two member bench of the tribunal comprising Anil Choudhary ( Judicial member) and A.K, Jyothishi ( Accountant member) uphold the classification of the work cum service involved, done by the Appellant, in the nature of construction of residential complex, etc., was rightly classifiable under the head – WCS. Thus, this ground is allowed in favour of the Appellant and against the Revenue.
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