The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT) ruled that Service Tax cannot be levied under Construction of Complexes or Residential Complexes of Finance Act on the construction of independent buildings having one residential unit.
The appellant, Prakash Wadhwani was engaged in civil construction and undertook the works for the Bhopal Development Authority. Show cause notices were served to them mentioning that the appellant was liable to pay service tax under the category of “construction of complex” services as defined under section 65 (30a) of the Finance Act,1994 for construction of the quarters for Bhopal Development Authority.
The Principal Commissioner (respondent) argued that the definition of a “residential complex” leaves no manner of doubt that it a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of “residential complex In the present case, the appellant had constructed independent buildings having one residential unit only. Thus, even if the appellant had constructed more than 12 independent buildings, the nature of activity would not be “construction of complex” and, therefore, the service tax could be levied. Further, he relied on the decision of the Tribunal in Madhukar Mittal vs. Commissioner of Central Excise, Panchkula where it was held that service tax was liable under construction of a complex for individual residential houses constructed which did not satisfy the definition of the residential complex.
However, Justice Dilip Gupta observed that “…It is not possible to accept the reasoning given by the Principal Commissioner for the simple reason that in the present case also the appellant has not constructed a residential complex having more than 12 residential units. It has constructed independent buildings having one residential unit.”
The appeal was thus allowed and levy of service tax on the appellant under ‘construction of complex service‟ was denied.
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