2025 (7) TMI 1139 - AT - Service Tax

Seeking payment of service tax - construction of residential complex by Rajasthan Housing Board (RHB) at Pratap Apartments and construction of Office building at Panchsheel Ajmer by Ajmer Vidyut Vitran Nigam Limited (AVVNL) - invocation of extended period of limitation - HELD THAT - The appellant had executed the work of construction of corporate office building construction for AVVNL. CBIC s Circular No.80/10/2004-ST dated 17.09.2004 clarifies the aspect of Service Tax leviability based on the nature of usage of the construction. Thus no tax as such would be payable in the aforesaid circumstances. Tax is leviable on a commercial nature of the building constructed. AVVNL being a semi-government body engaged in the provisioning of civil amenities for the citizens and this project of theirs not venturing into commercial space would not be chargeable to service tax. Further in view of Board s Notification No.11/2010-ST and 45/2010- ST dated 27.02.2010 and 20.07.2010 respectively services provided for transmission and distribution of electricity are exempt from levy of Service Tax under Section 66 of the Finance Act 1944. For the aforesaid reasons too the appellant is entitled for exemption from payment of service tax for services provided to AVVNL who are engaged in the distribution of electricity. Thus in the case of Kedar Construction 2014 (11) TMI 336 - CESTAT MUMBAI the Tribunal had held that the confirmation of Service Tax demand in respect of construction maintenance or repair activities undertaken by the appellant so far as it relates to the transmission/distribution of electricity cannot be sustained in law. - in view of the finding that the service rendered was not liable to tax and was exempted. There are no infirmity warranting any consequential action in law in the appellant s act of non-filing of the ST-3 Returns. There are merit in the stance and arguments of the appellant. The impugned show cause notice is thus not maintainable on the said ground as well - appeal allowed.

Summary

ISSUES:

Whether the show cause notices for service tax demand for the periods 2009-10 and 2010-11 are barred by limitation in view of an earlier show cause notice issued for 2005-06 to 2008-09 on the same issue.Whether construction of residential buildings comprising less than twelve independent residential units falls within the definition of "construction of residential complex" under Section 65(105)(zzzza)(ii)(c) of the Finance Act, 1994, attracting service tax.Whether service tax is leviable on construction of buildings for a semi-government entity engaged in electricity distribution, considering CBIC Circular No.80/10/2004-ST and related exemptions.Whether non-filing of ST-3 returns for the relevant period constitutes a valid ground for sustaining service tax demand when the service itself is not taxable.

RULINGS / HOLDINGS:

The show cause notices dated 01.07.2011 and 12.10.2011 for the periods 2009-10 and 2010-11 do not survive on grounds of limitation because "no ground for willful suppression can thereafter be fastened" as the department was already aware and had issued a prior show cause notice for earlier periods.Construction of residential buildings comprising less than twelve independent residential units does not fall within the definition of "construction of residential complex" under Section 65(105)(zzzza)(ii)(c), and therefore, such construction is not liable to service tax.Service tax is not leviable on construction of office buildings for a semi-government entity engaged in electricity distribution, as such services are exempt under Board's Notification No.11/2010-ST and 45/2010-ST and clarified by CBIC Circular No.80/10/2004-ST, since the buildings are not used for commercial purposes.Non-filing of ST-3 returns for the period 2009-10 does not warrant any adverse consequences where the service rendered is found to be non-taxable and exempted from service tax.

RATIONALE:

The Court applied the limitation principles as laid down in the Apex Court decision in Nizam Sugar Factory v. CCE, holding that subsequent show cause notices cannot be sustained where the department had prior knowledge and had issued earlier notices, precluding "grounds of suppression."The statutory definitions under Section 65(105)(zzzza) and Section 65(91a) of the Finance Act, 1994 were examined, emphasizing that a "residential complex" must comprise "more than twelve residential units" for service tax to be leviable. The Court relied on binding precedents including Macro Marvel Projects Ltd. v. Commr. of Service Tax, which clarified that individual residential units do not constitute a residential complex.CBIC Circular No.80/10/2004-ST dated 17.09.2004 and Board Notifications No.11/2010-ST and 45/2010-ST were applied to determine the taxability of construction services provided to government or semi-government bodies, noting that constructions not used for commercial purposes are exempt from service tax.Relevant Tribunal decisions such as Vivek Construction & Ors. v. CCE & CGST, Vraj Construction v. CCE, and Kedar Construction were cited to reinforce the exemption of service tax on construction related to transmission and distribution of electricity.The Court rejected the Revenue's reliance on non-filing of returns as a ground for sustaining the demand, given the primary finding of non-taxability and exemption of the service.