Service Tax Demand raised under "Construction of Residential Complex Services" cannot be Confirmed under "Works Contract Services": CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, Principal Bench, held that service tax demand raised under “Construction of Residential Complex Services” cannot be confirmed under “Works Contract Service”.

The facts are that the appellant, M/s. Ajab Singh & Co., was registered under the taxable category of ‘Renting of Immovable Property Services’. The appellant was engaged in execution of construction works for DDA. The scope of work executed by the appellant/contractor included construction and repair of roads, construction of parking facilities, upgradation and renovation of residential houses and construction of residential complexes.

A show cause notice was served on 22.11.2013 for the Financial Year 2011-12 whereby demand along with interest under Section 75 and penalties under Section 76, 77 and 78 of the Finance Act was proposed. The Commissioner confirmed some of the demand under the taxable category of Works Contract Service.

Ajab Singh & Co were represented by A.K. Batra and Sakshi Khanna while Mihir Ranjan (Special Counsel) and Rajeev Kapoor (Authorized Representative) presented arguments for the Revenue Department.

The counsel for the appellant submitted that the Department in their show cause notice (SCN) had proposed the demand for service tax under the taxable category of ‘Construction of Residential Complex Services’ and the Adjudicating Authority confirmed the demand under ‘WCS’ going beyond the scope of the SCN. It was also submitted that the appellant had executed contracts in respect of construction of roads only.

The opposing counsel argued that the plain reading of the description of the constructions that ‘Restaurant Building’ and ‘International Centre’ did not fall under non-commercial category. Additionally, the counsel for the department stated that the findings of the Adjudicating Authority with regard to dropping of demand was erroneous.

The two-member bench comprising Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) drew support from M/s Goyal and Construction Ltd v Commissioner, ST, Ahmedabad and other relevant cases to hold that demand confirmed under WCS cannot be sustained and the same is set aside.

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