Service Tax Liability Falls on Contractor, Not Promoter, for Construction Services: CESTAT [Read Order]
The tribunal found that the assessee merely sold undivided shares while the contractor handled the construction
![Service Tax Liability Falls on Contractor, Not Promoter, for Construction Services: CESTAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Service-Tax-Service-Tax-Liability-Service-Tax-Liability-Falls-on-Contractor-Not-Promoter-Construction-Services-CESTAT-taxscan.jpg "Service Tax Liability Falls on Contractor, Not Promoter, for Construction Services: CESTAT [Read Order]")
The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) ruled that the service tax liability for the construction services falls on the contractor and not the promoter. Golden Preethi Property Developers ,appellant-assessee,was a partnership firm providing Construction of Residential Complex Service. The department alleged that the appellant-assessee owed service tax...
The Chennai Bench of Customs,Excise and Service Tax Appellate Tribunal(CESTAT) ruled that the service tax liability for the construction services falls on the contractor and not the promoter.
Golden Preethi Property Developers ,appellant-assessee,was a partnership firm providing Construction of Residential Complex Service. The department alleged that the appellant-assessee owed service tax on amounts received from customers. A Show Cause Notice (SCN) dated 18.08.2010 was issued, proposing a demand of Rs. 2,47,585/- for the period from April 2009 to June 2010, along with interest and a penalty.
The demand was confirmed, and an equal penalty was imposed. The assessee appealed to the lower appellate authority, which upheld the demand, allowed the cum-duty benefit, and set aside the penalty.
The assessee appealed before the tribunal.
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The tribunal reviewed the submissions and evidence from both sides and the main issue was whether the assessee had to pay service tax under the Construction of Residential Complex Service.
The appellate tribunal found that the impugned order confirmed the service tax demand for April 2009 to June 2010 but removed the penalty. It also allowed the cum-duty benefit and asked the original authority to re-calculate the tax.
The assessee referred to an earlier Chennai Tribunal decision and other rulings, arguing that the contractor, M/s. Golden Homes Pvt. Ltd., should be liable for the service tax. The assessee stated they only sold undivided shares, while the contractor handled the construction, and supported this with Central Board of Excise and Customs(CBEC) circulars.
The two member bench comprising Ajayan T.V (Judicial Member) and Vasa Seshagiri Rao(Technical Member) found that the issue was already decided in the assessee's favor for the period from 16.06.2005 to 31.03.2009. In Final Order No. 40112/2009, the CESTAT had set aside the service tax demand on the construction of residential complexes, following the Supreme Court's decision in the Larsen & Toubro case.
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The assessee also referred to a CBEC Circular from 29.10.2009, which clarified that the service tax liability falls on the contractor, not the promoter. The tribunal noted that the construction services were provided by M/s. Golden Homes Pvt. Ltd., the contractor employed by the appellant. Therefore, the CESTAT ruled that the demand for service tax from the assessee was not legally valid.
The bench, after reviewing the facts and applying the relevant decisions, set aside the impugned Order-in-Appeal dated 16.04.2015, deeming the demand unsustainable.
To Read the full text of the Order CLICK HERE
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