The Hyderabad bench of Customs, Excise And Service Tax Appellate Tribunal (CESTAT) held that no Services tax exemption was allowable on the Construction of Residential Complex Services (CRCS) for the period before 01.07.2010. The CRCS were brought under WCS from 01.07.2010.
The Adjudicating Authority has dropped the demand of Rs.39,80,030/- against the Hi-Rise Projects, the Assessee under ‘Construction of Residential Complex Service’ (CRCS) for the period from 01.10.2006 to 31.05.2007 and Rs.8,74,10,198/- under ‘Works Contract Service’ (WCS) for the period from 01.06.2007 to 31.03.2010. In their grounds of Appeal, Revenue has relied on certain Board Circulars viz., Circular No. 128/10/2010-ST dt.24.08.2010 for their averment that the Commissioner has wrongly considered the service as falling under CRCS and not under WCS during the relevant period.
The SCN was issued to the Assessee based on certain data available in the Balance Sheet, received from the Income Tax department. The Assessee was engaged in construction/development works in four ventures/ projects viz., (i) Hi-Rise Paradise, (ii) KVR Paradise, (iii) Hi-Rise Meadows & (iv) Hi-Rise Chalapathy Residency, which the department considered as falling under CRCS for the period from 01.10.2006 to 31.05.2007.
The department, relying on the clarification given by the Board vide Circular No.128/10/2010-ST dt.24.08.2010 felt that, despite part of service being classified under a different head before 01.06.2007, the activity would fall under WCS for the period post 01.06.2007, as the same covers the activity more specifically and therefore, in terms of provisions of Sec 65A, WCS would be the more appropriate classification for the activities for the same services provided post 01.06.2007.
There is no change like service being provided pre or post-01.06.2007. What has changed is that there has been the insertion of a new category of service i.e., WCS. Therefore, what is to be seen is whether there is the possibility of classification under more than one head of service for the purpose of classification, can department switch to another head of classification or whether there is a bar from changing the classification, once having classified under one head.
A two-member bench of Mr Anil Choudhary, Member (Judicial) and Mr A K Jyotishi, Member (Technical) observed that once the service is rightly covered under WCS post 01.06.2007, the next question is whether they will be entitled to exemption under Circular No.151/2/2012-ST dt.10.02.2012.
The respondent vehemently opposed that Board Circular clarifying that no taxability on construction service for the period before 01.07.2010, would only be applicable in respect of construction services falling under clauses (zzq) & (zzzh) of Sec 65(105) and not in respect of WCS. Therefore, there is no exemption from service tax for WCS, which is the appropriate classification.
The CESTAT found that the issue has been decided by this Tribunal in favour of the Assessee in the precedent orders in the case of Krishna Homes vs CCE, Bhopal [2014] wherein it was held that though classifiable under WCS, no tax is payable for the period prior to 01.07.2010.
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