No Service Tax on Flats handed over to Existing Members of Societies without any consideration Once Tax Liability on gross consideration is discharged: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai Bench has held that no Service Tax on flats handed over to existing members of societies without any consideration Once tax liability on gross consideration is discharged.

The respondent, M/s. Ethics Infra Development Pvt. Ltd. is providing the taxable services under the category of “Construction of residential complex” as defined by Section 65(105) (zzzh) of the Finance Act, 1994 as amended. During the course of the audit, it is noticed that appellant has provided the services of “construction of residential complex services” to Borivali Ashwini Co-op Housing Society Ltd.

The complete service tax liability was discharged on the gross amount received by him for providing the taxable services. Once he have discharged the tax liability on the gross consideration received by him by the sale of flats to new buyers, the demand of service tax for the

The coram of Judicial Member, Dr. Suvendu Kumar Pati and Technical Member Sanjiv Srivastava have noted that the gross amount charged by the builder is liable to tax. The said instructions are in force till today and have not been withdrawn by the Board. As already detailed herein above, the appellant has discharged the service tax liability on the gross amount charged i.e. consideration received from land owners in the form of kind other than cash (value of the land/development rights) + consideration received from prospective buyers in cash by way of financial arrangements on the construction services undertaken by the appellant on joint development basis.

“We also note that appellant had declared the same in the books of account like IT returns and ST-3 returns which has been certified by Chartered Accountant wherein it is stated that service tax compliance is towards the payment of gross amount of the construction undertaken on joint development basis and received from the customers has been made. This leads to conclusion that it is evident that appellant has complied with the service tax liability on the construction undertaken on joint development basis on the value of construction which is mandated in Section 67 of Finance Act, 1994, read with rules made thereunder. In our view, if once the service tax liability has been discharged on the gross amount, demand of service tax on the same amount again would amount to double taxation,” the CESTAT said.

The Tribunal while dismissing the appeal of the revenue said that in the peculiar facts and circumstances of this case, it cannot be held that there was a mala fide intention on the part of the appellant to suppress any facts or make misstatements, with an intention to evade service tax liability. Accordingly, we hold that demands are also hit by limitation and extended periods cannot be invoked for the demands received.

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