The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Hyderabad have held that there is no service tax liability on promoters/builders/developers prior to 01.06.2010 in respect of the construction of the residential complex.
The appellant is engaged in the construction business and registered with the service tax department vide registration. The Appellant has developed and sold apartments to prospective buyers. The Appellant was paying service tax regularly on all the services and stopped making payment of tax from January 2009 in view of circular which is also intimated the same to the department.
For the composite contract (works contract) executed for M/s Manjeera Project, the service tax was paid to adopt the valuation as per Rule 2A of ‘Service Tax (Determination of value) Rules, 2006’ i.e. deduction of materials value from the gross/invoice value, and paid service tax at full rate on the labor portion of the contract.
The applicable service tax on rental incomes on a property (rents), maintenance/repair, consultancy, etc., was partly paid utilizing the CENVAT credit and partly in cash. As it appeared to Revenue that there is some short payment of service tax, show cause notice was issued.
The services rendered by M/s Manjeera Constructions to various customers as detailed in Annexure-II to this Show Cause Notice during the period from 2005-06 to 2009-10 should not be classified under “Construction of Complex Services” and short paid amount of Rs. 42,01,090/- for the period 2005-06 to 2009-10 should not be demanded from them on account of providing taxable services, under Section 73(1) of the Finance Act, 1994 read with the proviso thereto.
Further, the proposal to demand interest and imposing a penalty under Section 77 and 78 of the Finance Act. The show-cause notice was adjudicated vide Order-in-Original No.14/2013-Adjn.(ST)Commr dated 29.03.2013, on the contest, and the proposed demands were confirmed along with demand for interest and a further penalty of Rs. 2,13,45,976/- was imposed under Section 78. Considering the amount of Rs. 90,42,270/- which were already paid during the normal course under ‘business support service’. Further, the penalty was imposed under Section 77
The order was pronounced by the Judicial Member, Anil Choudary, and Technical Member P.V Subba Rao on an appeal filed by Manjeera Constructions Ltd.
On relying upon the Circular No. 108/02/2009-ST dated 29.01.2009 r/w Circular No. 151/2/2012-ST dated 10.02.2012 made by CBEC, the tribunal has clarified that for the period prior to 01.06.2010, construction(residential) provided by builder/developer will not be taxable.