The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable on the construction of residential complexes before 01.07.2010 even when service is rendered as a works contract.
M/s. Shanmuga Construction Services, the appellant is a developer who had entered into a joint development agreement for the construction of residential complexes consisting of 176 units/flats, for which it had engaged a contractor. The Revenue entertained a doubt that the above construction services undertaken by the appellant were liable to Service Tax under the ‘works contract’ service (WCS).
A Show Cause Notice was issued proposing to demand the Service Tax, interest under Section 75 and penalties under Sections 76, 77 and 78 of the Finance Act, 1994, under WCS for the above period.
It was evident that the appellant filed a detailed reply thereby rebutting the fastening of Service Tax liability on them, however, not satisfied with the reply, the Commissioner has confirmed the proposals made in the Show Cause Notice.
It was a well-settled legal position that whether the service is rendered as a service simpliciter or as a works contract, no Service Tax can be levied on the construction of a residential complex before 1-7-2010. Learned Counsel would submit that for the period post 1-7-2010, they have been discharging Service Tax appropriately.
In M/s. Pragati Edifice Pvt. Ltd., it was held that no Service Tax could be levied on the construction of residential complexes before 01.07.2010 even when the service is rendered either as service simpliciter or as a works contract.
A Coram comprising of P. Dinesha, Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) observed that the period of the dispute was from October 2007 to April 2010 and the above ruling is squarely applicable to the case. While allowing the appeal, the CESTAT set aside the impugned order.
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