No Service Tax Liability on Developer of Residential Projects for Period Prior to 01.07.2010: CESTAT [Read Order]

The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that there is no Service Tax liability on developer of residential projects for period prior to 01.07.2010. the appellant in the present matter is M/s. Jamals.

Entertaining a doubt that the appellant having received an amount of Rs.14 crores for the construction service provided by them for the period from April 2009 to June 2010, a show cause notice came to be issued proposing to demand Service Tax on the ground that the construction work undertaken by the appellant did not come within the exclusion definition of “residential complex” under Section 65(91a) of the Finance Act, 1994, apart from applicable interest and penalty.

The Commissioner has observed, after scrutinizing the agreements, that (i) the appellants are the builders of the concerned flats; (ii) the appellants are only constructing the flats to the respective allottees, etc., which, per se, makes it clear that the activity undertaken by the appellant in the capacity of a developer was in the nature of ‘works contract service’.

The Counsel for the appellant submitted that during the relevant period under dispute, the Show Cause Notice was issued with respect to one of the appellant’s projects viz. ‘Palazzo’. She would also contend that the completion certificate of the above project was obtained on 09.6.2010.

The Counsel further argued that there was no Service Tax liability on a developer of residential projects for the period prior to 01.07.2010 since developers were brought under the tax net vide the Finance Act, 2010 with effect from 01.07.2010 by way of insertion of Explanation to Section 65(105)(zzzh) of the Finance Act.

The Coram comprising P Dinesha, Judicial Member and Vasa Seshagiri Rao, Technical Member observed that “it is clear that no Service Tax could be levied on construction of residential complex on the appellant. The period of dispute here, as observed by us in the earlier paragraphs, is from April 2009 to June 2010 and hence, we are of the view that no Service Tax was eligible on the appellant.”

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