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2014 (9) TMI 152 - HC - Service TaxWaiver of pre-deposit - Levy of service tax on Development of residential projects - taxability prior to 1.7.2010 - Finance Act, 2010, with effect from 1.7.2010, introduced an explanation to Section 65(105)(zzzh) - Construction of Complex service - Held that:- The view of the Department that Circular No.108/2/2009-S.T., dated 29.1.2009 is in their favour, is, prima facie, not tenable. The applicability of the said circular can be divided into two limbs. The first limb states that ..... the initial agreement between the promoters / builders / developers and the ultimate owner is in the nature of agreement to sell . Such a case, as per the provisions of the Transfer of Property Act, does not by itself create any interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of self-service and consequently would not attract service tax. The second limb of the said circular states that if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of residential complex . However, in both these situations, if services of any person like contractor, designer or a similar service provider are received, then such a person would be liable to pay service tax. If the department accepts that the sale in favour of the ultimate owner, even then by virtue of the prior agreements for construction and sale of undivided share, it would fall under the second limb of paragraph (3) of the circular dated 29.1.2009 and to that extent the appellant has a prima facie case. The circular further makes it clear that in both the situations, if services of any profession like contractor, designer or a similar service provider are received, then such a person is liable to pay service tax. That clarifies the stand of the assessee that in the nature of the transaction entered into in the present case, there is no liability to pay service tax up to 1.7.2010. On and from 1.7.2010 the explanation to Section 65(105)(zzzh) of the Finance Act, 1994 makes the present transaction liable to service tax and we are not on that issue. At present, we are concerned with the period prior to 1.7.2010. The Tribunal has unfortunately not considered the said factor which prima facie enures to the benefit of the appellant. Stay granted - appeal restored before the tribunal. - Decided in favor of assessee.
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