The Ahmedabad bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) has set aside the service tax demand, along with interest and penalties, stating that residential units are not liable to service tax.
Soumya Developers has developed the land of landlords and have carried out activities including construction of “Radhe Villa” comprising of 3 Buildings of total 70 Residential units by Appellant as per agreement on the land of Radhe Villa Co-Operative housing society, which is a registered Society to whom AUDA had given permission to develop totally 70 Residential units.
Residential scheme i.e. RADHE VILLA has been created by Co-Operative housing society for its Members. The Section 65(91a) of the Finance Act, 1994 reads “residential complex” means any complex comprising of a building or buildings having more than 12 residential units and excludes complex constructed by engaging any other person for designing or planning of the layout, and construction of such complex is intended for personal use as residence.
Mr. P.P Jadeja, representing the appellant reiterated grounds of Appeal and submitted written synopsis with enclosures and relied upon decisions during the PH, which is taken on record. Appellant merely developed land of land owners’ land as approved by AUDA, under the agreements with landowners and carried out activities for approved 16 residential units for individuals known as Sharnam Villa and for 70 Residential units known as Radhe Villa Co-Operative housing society for its Members only. The Appellant has not sold any Residential units, hence, there is no Service tax liability on the Appellant under Construction of Residential Complex services, as confirmed by the impugned Orders.
The bench determined that in accordance with agreements with landowners, the appellant had developed the landlords’ land, undertaking various activities such as constructing “Radhe Villa,” comprising three buildings totaling 70 residential units. This development was carried out under an agreement on the land of Radhe Villa Cooperative Housing Society, a registered society authorized by AUDA to develop a total of 70 residential units.
It was further noted that residential units are not subject to Service Tax if each building does not exceed 12 residential units. The Karnataka High Court ruled in favor of the assessee, following the Apex Court’s approval of the Tribunal decision in Macro Marvel Projects Ltd. In line with the facts of this case, each of the three buildings in the “Sharnam Villa” scheme contains no more than 12 residential units. These residential units are intended for personal use and do not fall under the category of a Residential Complex, as they are excluded under Section 65(91a) of the Finance Act, 1994.
The decisions in the similarly placed Assessee wherein service tax demands for construction of Residential Complex for the Gujarat State Police Housing Corporation Ltd have been set aside, will also equally apply in this case for scheme Sharnam Villa as well. Further since the Appellant has not sold any of these 16 residential units to anyone, Service Tax demand on the Appellant is not sustainable on taxable amount relatable to scheme known as “Sharnam Villa” under the established law.
The two member bench of the tribunal comprising Ramesh Nair (Judicial member) and C.L Mahar (Technical member) concluded that the service tax demand confirmed with interest and penalties is not sustainable in this case. The demand of Service Tax upheld by O-I-A with interest and penalties deserves to be set aside. Accordingly, the appeal filed by the appellant was allowed.
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