The CESTAT, Ahmedabad bench has held that service tax is not leviable on builder for the construction services provided prior to 1st July 2010.
The appellant, Jagdish Pala had entered into agreement with his buyers for sale of shops during the construction of commercial complexes and residential cum commercial complexes and Service tax was demanded classifying the service as “Commercial or Industrial Construction‟ under Section 65(105)(zzq) of the Finance Act, 1994. After investigation, the department found that the Appellant had constructed residential and commercial complexes and received booking amounts as well as installments amount from his buyer but had not obtained service tax registration and also did not pay Service Tax. Proceedings were initiated against the appellant accordingly.
As per the said definition, “Construction Service” means construction of new building or civil structure or a part thereof which is used, or to be used, primarily for; or occupied, or to be occupied, primarily with; or to be engaged, primarily in, commerce or industry.
The Tribunal bench comprising Mr. Ramesh Nair, Member (Judicial) and Mr. Raju, Member (Technical) held that prior to 1-7- 2010 builders/developers are not liable to pay service tax for the Construction Service and in the present case, the period involved is from 2004-2005 to 2008-09.
“Consequently, we hold that the impugned order is not sustainable in law,” the Tribunal said.
With regard to the CBIC circular relied by the department, the Tribunal added that “In the light of above decisions, it becomes clear that the circular, is binding on the department and this circular makes it more than abundantly clear that construction service provided by the builder/developer will not be taxable for the period prior to 01.07.2010.”
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