Builders not liable to Pay Service Tax for the Construction of Residential Complex Service prior to 2010: CESTAT [Read Order]

The South zonal bench Bangalore Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in C.C.E & C.S.T. versus Keerthi Estates Pvt. Ltd ruled that builders not liable to pay service tax for the construction of residential complex service prior to 2010.

In instant case Appellant engaged in the business of construction of residential complex as per the terms of development agreement entered with land owners and prospective buyers.

The sole issue started with the allegation against appellant for non-payment of service tax under construction of residential complex service for the period 16.06.2005 to 31.01.2007.

On completion of investigation show cause notice demanding rupees one crore service tax has been issued against appellant on which sixty lakhs has been paid. Aggrieved by the order of commissioner regarding the service tax along with the penalty and interest the appellant preferred an appeal before CESTAT bench including Judicial Member S.S Garg and Technical Member Anjani Kumar.

Tribunal remanded the case to the commissioner with a guidance to check the issue with Board’s Circular No. 108/2/2009-S.T. dated 29.01.2009. Thereafter commissioner held that appellant is liable to pay service tax as mentioned in show-cause notice.

Further aggrieved appellant carried the matter to this tribunal and the bench heard the rival contention and perused the documents on record.

The counsel for appellant raised a major contention that as per the aforementioned circular number construction service provided by the builder/developer for the period prior to 01.07.2010 was not taxable.

Also pressed the decision taken by tribunal in CCE, Chandigarh Vs. U.B. Construction (P) Ltd held that levy of service tax rendered by a builder prospective from 01.07.2010 by virtue of explanation added to Section 65(105)(zzzh) of the Finance Act 2010.

Finally, the bench observed the matter as “we are of the considered view that prior to 01.07.2010 builders/developers are not liable to pay service tax for the Construction of Residential Complex Service and in the present case, the period involved is from 16.06.2005 to 31.01.2007. Consequently, we hold that the impugned order is not sustainable in law and we set aside the same by allowing the appeal of the appellant with consequential relief, if any.”