By TIOL News Service

NEW DELHI, SEP 01, 2017: THESE are Revenue appeals.

Alleging that the respondent had not paid service tax, demand notices were issued.

The demands were in respect of the following works carried out by the respondent:

(A) Construction of individual independent residential houses for Greater Noida, Industrial Development Authority (GNIDA) in respect of:

1. 60 separate houses in Sector Omicron-II (Part-E), 146 houses in sector XU-1(Package-I) & 48 in Sector Omicron 1A for GNIDA, and

2. Internal development work for Omicron (II) Part A including roads, drinking water, sewerage system, water supply system, cattle, etc.

(B) Construction of boys hostel in Guatam Budh University, Greater Noida. The demand for service tax was made under the category of construction of complex falling within section 65 (30a) of the Finance Act 1994 read with section 65(91a) ibid.

The findings of the adjudicating authority while dropping the demands are -

i) The respondent has undertaken construction of single storey houses in three different localities; these will not be covered within the definition of construction of complex for the reason that in one block of land only one single storey house has been constructed. [ Macro Marble Projects ltd. = 2008-TIOL-1927-CESTAT-MAD relied upon]

ii) With reference to the internal development works including construction of roads and other infrastructure, these infrastructure development works cannot be classified under the category of residential complex. These activities would fall under the commercial or industrial construction on which no service tax can be levied since these are in the nature of civic amenities provided by authority constituted under the law and are not commercial activities of GNIDA.

iii) Construction of boys hostel cannot be categorized under construction of residential complex. No service tax can be levied on such construction since it is meant for the use of Guatam Budh University which is an institution established solely for educational purpose being non-commercial in nature.

As mentioned, Revenue has challenged these orders.

After considering the submissions made by both sides, the CESTAT inter alia observed -

++ For the activity to be covered by the definition of residential complex, the complex should comprise of more than 12 residential units. From the records, we find that the respondent is engaged in the construction of individual independent residential houses. Each such house will be a residential unit for use as a place of residence. The important question to decide the issue is whether these individual independent residential units are situated as part of a complex with common area and one or more facilities.

++ We have perused the layout plan submitted of OMICRON-I layout. We find that the entire area is divided into several clusters of plots on which individual houses have been built for the respondent. We note that each house shares a wall with the houses on either side as well as the one in front / behind.

++ We also find that there are common facilities such as parks, community hall, etc. and note that the layout plan of each house is provided by the GNIDA which is also one of the requirements for governing residential complex. In view of the above, we are of the view that each of these clusters of houses will form a residential complex comprising of several individual residential houses with common area and various facilities.

++ Consequently, these will be covered within the definition of construction of complex and liable to service tax. The adjudicating authority's interpretation that more than 12 residential units should be part of one building situated in one plot of land is without any basis.

Noting that the lay out plan has to be examined to ascertain the factual position and the matter has also to be decided taking cognisance of the apex court decision in Larsen & Toubro = 2015-TIOL-187-SC-ST which lays down that composite construction are liable to service tax only w.e.f. 01.06.2007 under the category of works contract services, the matter was remanded.

In the matter of the second issue viz. internal development works constructed by the respondent including roads and other infrastructure development, the CESTAT observed that these were covered under a separate contract;were in the nature of civic amenities;such welfare activities cannot be covered by the construction of complex services and the adjudicating authority had rightly dropped the demand for service tax.

As for the demand of service tax on construction of boys hostel for Gautam Budh University, the CESTAT held that a hostel could not be considered as a residential unit and hence cannot be covered within the construction of complex services. More over, such construction activity had been done for the use of Gautam Budh University which is an institution established solely for educational purpose and, therefore, the adjudicating authority's findings that no service tax will be payable on construction of boys hostel was upheld.

The appeals were partially allowed.

(See 2017-TIOL-3180-CESTAT-DEL)