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2019 (10) TMI 171

..... o;Nilgiri Homes” - HELD THAT:- The appellant has taken a piece of land and developed that into a complex of individual residential units in the form of row houses with some common areas for parking, roads, etc. We have also seen the photographs produced by the appellant. These clearly indicate that they are row houses with some common boundaries along with roads and other facilities. Residential complex or otherwise? - HELD THAT:- The only logical understanding of the residential complex is that there should be 12 or more residential units either in the form of flats or as single houses in the entire complex. Evidently, in this particular case, the complex comprises of row houses as a gated community along with some common facilities and has more than 12 residential units. For this reason, we find that the project “Nilgiri Homes” qualifies as residential complex. It is not in dispute that the services were rendered in the form of works contract and therefore are chargeable to service tax in the works contract service. Nature of the contract on which service tax is proposed to be charged - HELD THAT:- The explanation to section 65(91a) categorically states that per .....

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..... ded portion of land together with semi finished portion of the flat/house and a separate agreement for completion of construction with customers. On execution of sale deed the right in property got transferred to the customer. There is no demand up to this stage. Thereafter, under an agreement of completion of construction was entered into which is taxable as there exists service provider and service recipient relationship between them. It is also alleged in the SCN that this construction agreement entered into by the appellant includes both transfer/deemed transfer of the property in goods and rendition of services. Therefore, these services fall under the category of works contract service and are chargeable to service tax under Section 65(105)(zzzza) of the Finance Act, 1994. It is further stated in the SCN that an optional composition scheme for payment of service tax in relation to works contract service has been provided vide notification 32/2007-ST dt.22.05.2007 effective from 01.06.2007 under Works Contract Service (Composition Scheme for payment of Service Tax) Rules, 2007. Under the said scheme, the assessee has to pay an amount equal to 2% of the gross amount charged for .....

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..... m, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause, - a. personal use includes permitting the complex for use as residence by another person on rent or without consideration; b. residential unit means a single house or a single apartment intended for use as a place of residence; 2) He would submit that unless the building or buildings have more than 12 residential units each the same cannot be called as residential complexes. For this reason, they are not liable to pay service tax on the services rendered. He relies on the law of Macro Marvel Projects Ltd v Commissioner [2008 (12) STR 603 (Tribunal)]. Para 2 and 3 of which read as follows: 2. The appeal is against demand of service tax of ₹ 15,63,145/- for the period 16-6-2005 to 30-11-2005 under the head constructio .....

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..... a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. It is abundantly clear from the above provisions that construction of residential complex having not more than 12 residential units is not sought to be taxed under the Finance Act, 1994. For the levy, it should be a residential complex comprising more than 12 residential units. Admittedly, in the present case, the appellants constructed individual residential houses, each being a residential unit, which fact is also clear from the photographs shown to us. In any case, it appears, the law makers did not want construction of individual residential units to be subject to levy of service tax. Unfortunately, this aspect was ignored by the lower authorities and hence the demand of service tax. In this view of the matter, we are also not impressed with the plea made by the appellants that, from 1-6- 2007, an activity of the one in question might be covered by the definition of works contract in terms of the Explanation to Section 65(105)(zzzza) of the Finance Act, 1994 as amended. According to this Explanation, .....

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..... es prior to 01.07.2010 and in the first demand covering the period January, 2010 to December, 2010 part of the demand is prior to 01.07.2010. He further submits that the demands were raised on the value of sale of land, VAT, registration charges under non-taxable receipts which cannot be charged to service tax. The details of which are as follows. Particulars Jan 2010 to Dec 2010 Jan 2011 to Dec 2011 Total Gross receipts 3,86,50,693 6,54,15,715 10,40,66,408 Less: Amounts received for the period January 2010 to June 2010 1,83,60,608 Not Applicable 1,83,60,608 Amount received during the period July 2010 to December 2010 2,02,9,085 Not Applicable 8,57,05,800 Less: Sale of land 80,04,000 1,31,71,000 2,11,75,000 Less: VAT, Registration Charges and other non-taxable Receipts 13,93,710 37,11,713 51,05,423 Taxable Value 1,08,92,375 4,85,33,002 5,94,25,377 ST Liability @4.12% 4,48,766 19,99,560 24,48,326 Service Tax paid 23,80,124 Payable/(Excess paid) 68,202 5) He fairly submits that the above computational dispute was agitated by them before the first appellate authority who remanded the matter back to the lower authority on this ground. He also argues as a third alternative argument that .....

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..... l in of Macro Marvel Projects Ltd (supra) the Tribunal has clearly ignored explanation to section 65(91a). The Tribunal has extracted a truncated part of the definition and came to the conclusion that the residential complex cannot mean individual houses which is contrary to the explanation in the section itself. It does not appear that this explanation was pointed out or considered either in Macro Marvel Projects Ltd (supra) or in the case of Baba Constructions Pvt Ltd (supra) either before the Tribunal or before the Hon ble Supreme Court. Therefore, there is no force in the argument that individual houses cannot form part of the residential complex. Further, he would submit that in both the above cases, there was specific finding of the Tribunal that there was no residential complex built in those projects. In the present cases, both from the records and from the agreement it is evident that a plot of land is taken by the appellants and developed into a complex of individual residential units with some common areas. Therefore, the appellant s activity qualifies as residential complex services and accordingly, demands are sustainable. Therefore, the impugned order needs to be uphe .....

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..... eration; b. residential unit means a single house or a single apartment intended for use as a place of residence; 10. It does not appear from the orders of the Tribunal that this was pointed out by the department. It also does not appear from the judgment of the Hon ble Supreme Court upholding the decisions that these lacunae were pointed out before the Hon ble Apex Court. This was also not considered in the case of Baba Constructions Pvt Ltd (supra) either before the Tribunal or before the Hon ble Supreme Court. However, in the present case, the learned DR has pointed this out and we find the explanation to section 65(91a) was not considered in the aforesaid judgments. This explanation categorically indicates that single houses also qualify as residential units. It is inconceivable that there could be 12 single houses in a single building. The only logical understanding of the residential complex is that there should be 12 or more residential units either in the form of flats or as single houses in the entire complex. Evidently, in this particular case, the complex comprises of row houses as a gated community along with some common facilities and has more than 12 residential units .....

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