No Service Tax Payable for Construction of Residential Complexes before July 2010: CESTAT Quashes Demand [Read Order]
CESTAT ruled that no service tax is leviable on composite construction of residential complexes prior to July 1, 2010, and set aside demands
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The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that service tax cannot be levied on composite construction of residential complexes before July 1, 2010, and set aside demands raised under the wrong classification. Springfield Shelters Pvt. Ltd., the appellant, is a company engaged in providing construction services. The appellant was...
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that service tax cannot be levied on composite construction of residential complexes before July 1, 2010, and set aside demands raised under the wrong classification.
Springfield Shelters Pvt. Ltd., the appellant, is a company engaged in providing construction services. The appellant was registered under “Construction of Residential Complex Services” (CRCS) but filed returns under “Works Contract Service” (WCS) for the periods January 2010 to March 2010, April 2010 to March 2011, and April 2011 to June 2012.
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The Revenue issued show cause notices alleging that the appellant wrongly classified their services under WCS instead of CRCS, and proposed to recover service tax along with interest and penalties, and later confirmed the demand. On appeal, the Commissioner (Appeals) upheld the orders. Aggrieved, the appellant approached the CESTAT.
The appellant’s counsel argued that no service tax was leviable on the construction of residential complexes involving composite works contracts before July 1, 2010, relying on the Supreme Court’s ruling in CCE & CC Kerala v. Larsen & Toubro Ltd. They relied on recent CESTAT decisions in Hiranandani Realtors Pvt. Ltd. v. CGST & Central Excise, Chennai, and Pragati Edifice Pvt. Ltd., where it was consistently held that developers executing composite contracts prior to July 2010 were not liable to pay service tax.
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The two-member bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that, as per the Supreme Court ruling in Larsen & Toubro Ltd., no service tax was leviable on construction activities carried out under composite works contracts prior to July 1, 2010.
The tribunal observed that the appellant’s projects were composite contracts and that they had duly remitted tax under WCS post-1.7.2010, where applicable. The tribunal explained that for the periods under dispute before July 2010, no service tax liability could arise under CRCS or WCS.
The tribunal further observed that no suppression or willful misstatement could be alleged given the complex nature of classification issues and prevailing legal ambiguities. The tribunal held that penalties were also not sustainable.
The tribunal pointed out that from April 2011 to June 2012, the Revenue could recover admitted service tax dues under WCS along with applicable interest. The tribunal allowed the appeals with consequential reliefs to the appellant.
To Read the full text of the Order CLICK HERE
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