By TIOL News Service

NEW DELHI, JUNE 08, 2017: REVENUE entertained a view that the appellants did not discharge proper service tax during the period 16/06/2005 to 31/03/2009, under the category of "construction of complex services" and "works contract service".

Accordingly, service tax demand of Rs.9,02,317/- was confirmed and penalties were imposed and this order was upheld by the Commissioner (Appeals).

Before the CESTAT, the appellant submitted that they have constructed individual residential houses for Rajasthan Housing Board; that in the project relating to NRI colony, they have constructed independent houses of 10 numbers; that these houses are with separate compound walls and the appellants are not involved in constructing residential complex as defined under Section 65 (91A) of the FA, 1994. Reliance is placed on the decision in Macro Marvel Projects Ltd. = 2008-TIOL-1927-CESTAT-MAD as affirmed by the Supreme Court.

The AR while reiterating the findings of the lower Authoritiessubmitted that though the appellants were involved in construction of individual houses of less than 12 numbers, but the same were a part of larger number of houses constructed sharing common facilities of road, street light, park in the close vicinity and, therefore, the service tax liability is required to be upheld.

After extracting the definition of the term "residential complex", the Bench inter alia observed that the reasoning adopted by the lower authorities is devoid of legal merit inasmuch as -

++ The statutory definition of residential complex is very clear, that there should be more than 12 residential units with common area and any one or more facilities or services such as park, lift, parking space, community hall, water supply and affluent treatment system. More importantly, the complexes should be located within a premises and layout of such premises should have been approved by an authority under any law for the time being in force. It is clear that there should be a premise sharing common facilities and common area as approved by a layout.

++ In the present case, we find that the lower Authorities stated that there were common facilities like roads, streetlights, sewerage line, park, common water supply situated in close proximity in a common area.

++ There is no finding to the effect that these common facilities are within the approved layout by the local Authorities and they are for the houses of such residential complexes within the location. In other words, various residential units built independently but sharing roads, streetlights, sewerage line, park in close proximity do not by themselves come under the taxable category of residential complex.

++ It is apparent that all housing units in any urban colony do share roads, streetlights, sewerage lines, water supply, which are provided by the local Authorities. It does not mean that any residential unit built in any colony having such common roads, street lights, water supply or nearby park will be liable to tax under construction of complex service.

++ Thecommon area and common shared facilities should be with reference to the approved layout of a particular location and the residential units should be located in such approved layout. Sharing facilities provided by local Authorities available to all residential units by way of road, streetlights, park, water supply unit does not make the residential unit covered by the tax entry under Section 65 (91a) of the Finance Act, 1994.

Furthermore,on the second issue, agreeing with the appellant that all consideration received under the said works contract should be eligible for the Composition Scheme the Bench concluded that there is no reason for denial of the said scheme for part of the works contract.

Concluding that the impugned order is liable to be set aside, the appeal was allowed.

(See 2017-TIOL-1932-CESTAT-DEL)