Construction of Independent Residential Houses for Personal Use Not Taxable as ‘Residential Complex Service’: CESTAT [Read Order]

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that the construction of independent residential houses for personal use does not fall within the scope of “Construction of Residential Complex Service” and is not taxable.

Aakriti Construction was engaged in providing construction services. The department issued a show cause notice demanding service tax on the construction of certain residential houses built for individuals.

The adjudicating authority confirmed the demand, holding that such activity was taxable under the head “Construction of Residential Complex Service.” On appeal, the Commissioner of Central Excise (Appeals) upheld the demand. Aggrieved, the assessee approached the CESTAT.

The appellant’s counsel argued that the statutory definition of “Construction of Residential Complex Service” specifically excludes the construction of residential houses for individuals intended for their personal use.

Certificates were furnished by the respective house owners confirming that the houses were built for personal use. They submitted that the department had overlooked this explicit exclusion while confirming the demand.

The revenue’s counsel argued that the assessee was engaged in commercial construction activity and the houses built for individuals should also be considered taxable. They argued that the exemption could not apply merely because the houses were used personally.

The two-member bench comprising Binu Tamta (Judicial Member) and P. V. Subba Rao (Technical Member) observed that the definition of residential complex services under the Finance Act expressly excludes houses constructed for the personal use of individuals. The tribunal explained that the certificates filed by the house owners supported the assessee’s claim that the construction was for personal use and not for commercial exploitation.

The tribunal pointed out that the department had failed to verify or disprove these certificates before confirming the demand.

The tribunal set aside the demand and held that the construction of independent residential houses for individuals’ personal use is not taxable under “Construction of Residential Complex Service.” The appeal of the assessee was allowed.

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