The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observed that demand of differential service tax under commercial or industrial Construction service denying abatement is invalid.
During the course of audit of accounts of the appellant by the internal audit group and subsequent verifications done, it was noted that the appellant had provided construction services in respect of various residential complexes and commercial buildings on the basis of joint development agreement entered into with the land owners.
It was noted by the department that appellant sold the undivided share of land to the customers, on the strength of power of attorney given by the land owners and provided construction service to such customers in terms of agreements entered with customers.
The allegation in the show cause notice is that the Appellant had mis-declared the actual taxable value in ST-3 returns and the same was noticed by the audit/ SIR Group during the course of audit. Therefore, the allegation that appellant has suppressed the facts and contravened the provisions of the Act and Rules with intention to evade service tax is not tenable. Entire facts were known to the department as early as in 2010.
On behalf of the appellant the counsel Radhika Chandrasekar appeared and argued for the appellant. The Appellant is engaged in development of commercial and residential projects, which are clearly in the nature of works contract. The Appellant has entered into Joint Development Agreement with land owners for development of the property. In terms of the agreement the Appellant has handed over agreed portion of built-up area of the constructed building / structure to the land owners.
A Two-Member Bench of the Tribunal comprising Vasa Seshagiri Rao, Technical Member and Sulekha Beevi CS, Judicial Member observed that “After appreciating the facts and evidence placed before us and following the decisions cited, we are of the considered opinion, that the demands raised under construction of Residential Complex Services and Commercial or Industrial Construction Services for the disputed period cannot be sustained and requires to be set aside. The impugned order is set aside. The appeal is allowed with consequential reliefs if any.”
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