No Service Tax Leviable On Construction Of Residential Complexes Prior To 01.07.2010: CESTAT

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax could be levied on the construction of residential complexes prior to July 1, 2010, even when the service is rendered either as a service simpliciter or as a work contract.

The bench of P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) has observed that the period of dispute is from October 2007 to April 2010, and hence, no service tax could be levied on the construction of residential complexes prior to July 1, 2010.

The appellant/assessee, who is a developer, had entered into a joint development agreement for the construction of residential complexes consisting of 176 units or flats, for which it had engaged a contractor. The Revenue entertained a doubt that the construction services undertaken by the appellant were liable to Service Tax under ‘works contract’ service. Consequently, it issued a Show Cause Notice dated April 4, 2011, proposing to demand the service tax, interest under Section 75, and penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

The appellant filed a detailed reply rebutting the fastening of service tax liability on them. However, not satisfied with the reply, the Commissioner has confirmed the proposals made in the Show Cause Notice.

The issue raised was whether the authority was justified in demanding service tax from the appellant under work contract service for the period from October 2007 to April 2010.

The tribunal has set aside the demand raised in the order as the service tax leviable on the construction of residential complexes prior to July 1, 2010.

Case Title: M/s. Shanmuga Construction Services Versus The Commissioner of Service Tax

Case No.: Service Tax Appeal No. 41745 of 2013

Date: 06.04.2023

Counsel For Appellant: N. Viswanathan

Counsel For Respondent: K. Komathi

Click Here To Read The Order