2025 (5) TMI 1756 - AT - Service Tax

Demand of Service Tax on Construction of Residential Complex services and Under the classification of Manpower Supply Agency Service - demand along with interest and penalty - HELD THAT - Coming to Manpower Supply Agency Services the appellants have already paid Rs. 2, 17, 541/-. They are agreeing to pay balance amount of Rs. 6, 27, 895/-. We direct them to pay Rs. 6, 27, 895/- along with interest. We find that in terms of Board s Circular No80/30/2004 dated 17/09/2004 which has been considered by various Tribunals and High Courts to hold that no Service Tax is required to be paid till 01/07/2010 on Construction of Complex Services (Residential) . On this ground itself we set aside the confirmed demand of Rs. 16, 57, 583/- in respect of Construction of Residential Complex . It is being made clear that no refund whatsoever would accrue to the appellant on account of this decision. The appeal stands disposed of thus.

Summary

The core legal questions considered by the Tribunal in this matter are:

1. Whether the demand of Service Tax on "Construction of Residential Complex" services rendered by the appellant as a sub-contractor is sustainable, especially considering the exemption status of such services prior to 1st July 2010.

2. Whether the appellant is liable to pay Service Tax under the category of "Manpower Supply Agency Service" for the amounts claimed by the Revenue, and the extent of payment already made.

3. Whether the payments made by the main contractor can be attributed to the appellant for the purpose of discharging Service Tax liability.

4. Whether the services provided to government entities such as hospitals and courts are exempt from Service Tax under the relevant Circular No. 80/30/2004 dated 17/09/2004.

5. Whether the matter requires remand to the Adjudicating Authority for verification of facts related to payments and exemption claims.

Issue 1: Liability to pay Service Tax on "Construction of Residential Complex" services

The relevant legal framework includes the Service Tax provisions operative during the period in question and specifically Board's Circular No. 80/30/2004 dated 17/09/2004, which clarified the exemption of "Construction of Complex Services (Residential)" from Service Tax until 30th June 2010. Various Tribunals and High Courts have consistently interpreted this circular to mean that no Service Tax was payable on residential construction services rendered before 1st July 2010.

The Tribunal noted that the Show Cause Notice (SCN) alleged demand under both "Construction of Residential Complex" and "Commercial or Industrial Construction Service" but the quantification annexure imposed the entire demand under "Construction of Residential Complex". The appellant contended that the demand relating to residential construction services prior to 1st July 2010 is not sustainable due to the exemption.

The Court relied on the Board's Circular and judicial precedents which held that the exemption was valid and applicable. The Tribunal found that the confirmed demand of Rs. 16,57,583/- relating to "Construction of Residential Complex" services rendered before the exemption expiry date cannot be legally sustained. Consequently, the Tribunal set aside this portion of the confirmed demand.

The Tribunal explicitly clarified that this relief does not entitle the appellant to any refund of amounts already paid.

Issue 2: Liability under "Manpower Supply Agency Service" and payment status

The appellant acknowledged payment of Rs. 2,17,541/- towards Service Tax on manpower supply services and agreed to pay the balance amount of Rs. 6,27,895/-. The Revenue's Authorized Representative (AR) requested verification of the payments claimed to have been made and the appellant's liability.

The Tribunal directed the appellant to pay the outstanding amount of Rs. 6,27,895/- along with interest. Regarding the Rs. 2,17,541/- already paid, the Tribunal ordered verification by the Adjudicating Authority to confirm whether interest has been paid and to ensure correctness of the payment. This approach reflects the Tribunal's insistence on proper verification of payments and interest calculations before final disposal.

Issue 3: Attribution of payments made by main contractor to the appellant

The appellant contended that Rs. 9,37,083/- paid by the main contractor before March 2007 should be considered as payment made on their behalf, thereby reducing their liability. The AR argued that such facts need verification.

The Tribunal did not make a conclusive finding on this point but implicitly agreed that verification by the Adjudicating Authority was necessary to determine whether payments by the main contractor could be attributed to the appellant for Service Tax purposes. This indicates the Tribunal's cautious approach in dealing with inter-party payment attributions and the need for factual clarity.

Issue 4: Exemption claim for services rendered to Government buildings

The appellant relied on Circular No. 80/30/2004 (Para 13.2) to claim exemption from Service Tax on services provided to government buildings such as hospitals and courts. The AR submitted that this claim requires verification.

The Tribunal did not explicitly rule on this exemption claim but by ordering remand for verification, it implied that such exemption claims must be substantiated with proper evidence and scrutiny by the Adjudicating Authority.

Issue 5: Need for remand for verification of payments and exemption claims

Both parties recognized the necessity of verifying the factual matrix concerning payments made, interest paid, and applicability of exemptions. The Tribunal directed the Adjudicating Authority to verify the payments claimed by the appellant, including those made by the main contractor and the interest payments. This remand ensures that the final determination is based on a complete and accurate factual record.

Significant holdings and principles established:

"In terms of Board's Circular No80/30/2004 dated 17/09/2004, which has been considered by various Tribunals and High Courts to hold that no Service Tax is required to be paid till 01/07/2010 on 'Construction of Complex Services (Residential)'."

This statement encapsulates the core legal principle that residential construction services were exempt from Service Tax before 1st July 2010, a principle consistently upheld by judicial authorities.

The Tribunal's final determinations include:

• The confirmed demand of Rs. 16,57,583/- relating to "Construction of Residential Complex" services rendered prior to 1st July 2010 is set aside.
• The appellant is directed to pay the outstanding Service Tax of Rs. 6,27,895/- on "Manpower Supply Agency Service" along with interest.
• The payment of Rs. 2,17,541/- already made by the appellant towards manpower supply services is subject to verification by the Adjudicating Authority, including interest payments.
• The question of whether payments made by the main contractor can be attributed to the appellant requires factual verification and is remanded accordingly.
• Exemption claims for services rendered to government buildings require scrutiny and verification by the Adjudicating Authority.
• No refund shall be granted to the appellant on account of the set aside demand.