Custom, Excise & Service Tax Tribunal
Vishal Projects Ltd vs Medchal - G S T on 26 June, 2025
(1) Appeal No. ST/28062/2013
& 30005/2016
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 28062 of 2013
(Arising out of Order-in-Original No.027/2013 dated 24.07.2013 passed by Commissioner
of Central Excise, Customs & Service Tax, Hyderabad)
M/s Vishal Projects Ltd., .. APPELLANT
Plot No.22, Vishal House,
Chandragiri Colony,
Tirumalagherry, Hyderabad,
Telangana - 500 015.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Medchal - GST 11-5-423/1/A, Sitaram Prasad Towers, Red Hills, Hyderabad, Telangana - 500 004.
AND Service Tax Appeal No. 30005 of 2016 (Arising out of Order-in-Original No.HYD-EXCUS-002-COM-09-15-16 dated 31.07.2015 passed by Commissioner of Central Excise, Customs & Service Tax, Hyderabad) M/s Vishal Projects Ltd., .. APPELLANT Plot No.22, Vishal House, Chandragiri Colony, Tirumalagherry, Hyderabad, Telangana - 500 015.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Medchal - GST
11-5-423/1/A, Sitaram Prasad Towers,
Red Hills, Hyderabad,
Telangana - 500 004.
APPEARANCE:
Shri Lakshman K, CA for the Appellant.
Shri B. Sangameshwar Rao, Authorised Representative for the Respondent. CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30222-30223/2025 Date of Hearing:05.03.2025 Date of Decision:26.06.2025 (2) Appeal No. ST/28062/2013 & 30005/2016 [ORDER PER: ANGAD PRASAD] Appeal No. ST/28062/2013 has been filed against the Order-in- Original No. 027/2013 dated 24.07.2013 and the Appeal No. ST/30005/2016 has been filed against the Order-in-Original No. HYD-EXCUS-002-COM-09- 15-16 dated 31.07.2015.
Appeal No. ST/28062/2013
Sl. OIO SCN Ref & Period Project Amount Total S.Tax
No Date demanded
1 SCN O.R. 16.06.2005 Prakruti 3,31,51,840 3,31,51,840
Order-in- No.241/2010 to Nivas
Original No. dt.22.10.2010 22.03.2010
027/2013
2 SCN O.R. 23.03.2010 Prakruti 1,23,88,659 1,23,88,659
dated No.151/2011 to Nivas
24.07.2013 dt.24.10.2011 31.03.2011
Appeal No. ST/30005/2016
Order-in- SCN O.R. April 2011 Prakruti 69,10,508
Original No. No.28/2013 to March 12 Nivas
3 HYD- dt.20.04.2013 1,33,14,533
Sri 51,42,172
EXCUS-002-
Vajralay
COM-09-15- am
16 dated Srinivas 12,61,853
31.07.2015 a Krupa
SCN O.R. April 2012 Prakruti 5,26,783
4 No.85/2014 to June Nivas 8,41,815
dt.16.05.2014 2012
Srinivas 3,15,032
a Krupa
Total of Both Appeals 5,96,96,847 5,96,96,847
Show Cause Notices at Serial No. 1 & 2 were adjudicated vide Order-in- Original No. 027/2013 dated 24.07.2013 and show Cause Notices at Serial No. 3 & 4 were adjudicated vide Order-in-Original No. HYD-EXCUS-002- COM-09-15-16 dated 31.07.2015. All the demands were confirmed by the Adjudicating Authority.
(3) Appeal No. ST/28062/2013
& 30005/2016
2. Aggrieved by the above Order-in-Originals, the assessee has preferred the present two appeals.
3. Brief fact of the case is that appellants were engaged in construction of residential complex including, inter alia,
a) Prakruti Nivas - Construction of houses/villas:
This project is consisting of construction of 612 individual independent houses at Annaram Village and exclusively on their own land. The Appellant obtained layout approval for the said venture on 19.11.2004. Appellants started developing the land as per layout approval with their own investment and finance grants, developed the land and constructing the houses. After constructing the houses appellant enter into agreement for sale and receive the consideration. Even though house is completed by time of sale, the customer request to execute a sale deed for the amounts paid till date of registration for the purpose of availing the loan from Banks or Financial Institutions. For the purpose of creating a charge in favour of the Bank/Financial Institution on the independent house being constructed so as to enable the buyer to avail housing loan. The appellant will execute a sale deed in favour of the buyer for sale. The said project was completed in the year 2008-09 and completion certificate from Gram Panchayat was obtained on 30.03.2019.
b) Sri Vajralayam - Sale of Commercial Complex:
The Appellant entered Development Agreement dated 21.05.2007 with the land owner for the construction of commercial complex under the name and style of "Sri Vajralayam". The complex was constructed after demolishing the existing property bearing H.No. 8-2-293/82/A/808. Constructing of commercial complex was started without obtaining any permission from the sanctioning authorities namely M/s GHMC and construction was completed in (4) Appeal No. ST/28062/2013 & 30005/2016 the year 2007. The Government of Andhra Pradesh framed the rules namely "The Andhra Pradesh Regulation and Penalization of unauthorizingly constructed buildings and buildings constructed in deviation of the sanctioned plan Rules 2007" to regulate the unauthorized constructions.
The scheme provides for regularization of unauthorized constructions which are constructed in violation of sanctioned plans or without sanctioned plans. As per Rule 1 of above rules, this option was available to the buildings completed before 15.12.2007. In the terms of Rule 10 of the above mentioned Rules, once the building is regulated M/s GHMC directly issues occupancy certificate and does not requires the furnishing of any completion certificate. The Appellant constructed commercial complex without approval and applied for regularization under aforesaid rules. Accordingly, unauthorized construction was approved and regulated. There was no advance received from customer during the construction of the said complex either for purchase of part or whole of the complex. Nearly, after expiry of more than 4 years from the completion of construction and one year from the regularization by GHMC, the appellant and land owners have jointly sold the said building. Applicable VAT has been duly paid and Stamp Duty too.
c) Srinivasa Krupa - Construction of Residential Complex:
Appellant entered into development agreement with land owners on 07.09.2010 and entitled to share of 50% of the super building area.
Appellant entered agreement for sale mentioning the total price and after receiving the partial consideration, the sale deed is executed in favour of the customer and completed the construction.
4. Department felt that service tax was leviable on said service in relation to above projects though the Appellant did not pay service tax on following grounds as mentioned:
(5) Appeal No. ST/28062/2013
& 30005/2016
i) Project Prakruti Nivas: Sale of independent houses is not a service
and not covered under the definition of Residential Complex
ii) Project Sri Vajralayam: Sale of immovable property is not liable for the service tax and
iii) Project Srinivasa Krupa: Stamp Duty has been discharged on total consideration.
5. Learned CA for the appellant submits that the builders are not liable for any service tax on the construction of services prior to 01.07.2010. It is only after amendment made with effect from 01.07.2010, they are deemed to have provided service and service tax became liable on the construction and sale of services. Further, service tax is not leviable on either Works Contract Service or Residential Complex Service prior to 01.07.2007 and the issue is no longer res-integra and in support, Learned CA for the appellant relies on the following judgments as well as Circulars:
a. Hon'ble Jurisdictional CESTAT in the case of Modi Ventures vs. Commissioner of Central Tax, Secunderabad vide Final Order No. A/30882/2020 dated 03.03.2020 b. Kolla Developers & Builders Vs CCE, Hyderabad-II [2018 (11) TMI 164 -
CESTAT Hyderabad] c. Greenwood Estates Vs CCE, Hyderabad [2019 (2) TMI 772 -CESTAT-
HYD] d. CCE, Visakhapatnam Vs Pragathi Edifices Pvt Ltd [2019 (31) GSTL 241 (Tri-Hyd)] e. Ashoka Developers & Builders Ltd. vs. Commr. of Cus., C. Ex. & S.T., Hyderabad-I [2020 (34) G.S.T.L. 550 (Tri.-Hyd)] f. Krishna Homes Vs Commissioner [2014 (34) S.T.R. 881 (Tribunal)] g. Clover Associates Pvt Ltd Vs CCE and ST, Visakhapatnam [2019 (5) TMI 147 -CESTAT Hyderabad] and h. Mehta & Modi Homes Versus CCT, Secunderabad [GST 2019 (2) TMI 476
- CESTAT Hyderabad] The same was clarified by the Government also vide various circulars:
i. CBEC Circular No. 108/2/2009-S.T., dated 29-1-2009 j. CBEC Circular No. 151/2/2012-ST dated 10.02.2012 k. CBIC vide F.No. 332/22/2015-TRU dated 05.09.2016 (6) Appeal No. ST/28062/2013 & 30005/2016
6. He also submitted that taxable event means on occurrence of which the charge is fixed in other way the event which fixed the liability to pay tax is the taxable event and the tax can be calculated at a time based on convenience, it is well settled law that applicability of levy of service tax under Section 66 of the Finance Act, the taxable event is provision of service in this regard Learned Counsel for the appellant relied on the following case laws:
(a) Association of Leasing and Financial Service Companies v. Union of India 2010 (20) S.T.R. 417 (S.C.)
(b) CST v. Consulting Engineering Services (I) Ltd. - 2013 (30) S.T.R. 586 (Del.)
(c) Commissioner v. Schott Glass India Pvt. Ltd. -- 2009 (14) S.T.R. 146 (Guj.)
(d) Vistar Construction Pvt. Ltd. v. Union of India -- 2013 (31) S.T.R. 129 (Del.)
7. Learned CA for the appellant also relied on Hon'ble Supreme Court decision in the case of Collector Vs Vazir Sultan Tobacco Company Ltd., [1996 (83) ELT 3 (SC)], wherein, it was held that "Once the levy is not there at the time when the goods are manufactured or produced in India, it cannot be levied at the stage of removal of the said goods. The idea of collection at the stage of removal is devised for the sake of convenience". The construction of houses in the project of "Prakruti Nivas" was completed and infact had received completion certificate from Gram Panchayat on 30.03.2009 itself which fortifies the fact that the alleged service of construction of houses was completed. Whereas, the levy of service tax was with effect from 01.07.2010. The taxable event for imposition of the service tax is "rendition of service" which was completed before introduction of the levy. Accordingly, no service tax can be levied. Further, the receipt of amount post 01.07.2010 also do not give the authority to impose service tax on the taxable event completed already. In other words, there cannot be any service demand made even if consideration has been received post the (7) Appeal No. ST/28062/2013 & 30005/2016 service being made taxable by the Government. In similar circumstances, the Hon'ble CESTAT, Kolkata in the case of Eden Real Estate Pvt Ltd., Vs CST, Kolkata [2021 (10) TMI 1229 - CESTAT-Kolkata] held that service tax cannot be levied. Further, the Government issued a Notification No. 36/2010-ST dated 28.06.2010 exempting the service tax liability on the amounts received prior to 01.07.2010 towards the service provided after 01.07.2010. The CBEC vide letter no D.O.F.No.334/3/2010-TRU dated 01.07.2010 clarified that service tax can be levied thereon but Government chosen to exempt. This exemption notification is wherein the sense the taxable event of provision of service is occurred post introduction of levy while the collection of event prior. Thus, essence of exemption notification also fortifies that specifically levy of service tax cannot be made on the houses completed prior to levy.
8. Learned CA for the appellant also submits that the bookings made after receipt of completion certificate is not liable for service tax as the transaction is mere sale of the immovable property where no service element is present and no service tax can be imposed in absence of any agreement for service. He also submits that the appellant constructed individual houses/villas, which do not get covered under the definition of residential complex, as defined under Section 65 (91a) of the Finance Act 1994 and hence not subject to levy of service tax. Construction of independent houses are not included within the scope of residential complex. He further submits that the common approval, common facilities and common liability to levy the service tax on independent houses, however, the only those buildings of more than 12 residential units in the same building will be covered by the definition of "residential complex". Once the entire activity of construction is not taxable on this ground, alone the entire (8) Appeal No. ST/28062/2013 & 30005/2016 demand is not sustainable. Various residential units built independently but sharing of roads, street lights, sewerage lines do not by themselves fall under the definition of residential complex. The only grounds to deny the benefit of personal use in impugned Order-in-Original was the individual houses constructed are for use of many different persons or in other words that whole of the residential complex should used by single person. The construction was done for different individuals for their personal use which falls within the ambit of exclusion portion of the definition of the residential complex. In this regard he relies on the following case laws:
a. Jurisdictional CESTAT decision in the case of Modi Ventures vs. Commissioner of Central Tax, Secunderabad vide Final Order No. A/30882/2020 dated 03.03.2020.
b. IVRCL Assets and Holdings Ltd Vs CCE, Hyderabad [2021 (52) GSTL 304 (Tri-Hyd)]
9. Learned CA for the appellant argued relating to project Shri Vajralayam and stated that the development agreement was entered in May, 2007 and total construction was completed in 2007 itself. There was certain deviation in the actual construction with sanctioned plan (G+2 was sanctioned whereas G+4 was constructed). The State Government of Andhra Pradesh has prescribed Rules vide Government Order dated 31.12.2007 for regularisation of unauthorised construction for projects completed before 15.12.2007. Accordingly, this appellant being eligible for such a claim, applied for regularisation and the Deputy Commissioner, Circle 10, GHMC issued certificate approving and regularising the same. The sale was done after around 4 years of regularisation. Learned Adjudicating Authority denied the benefit only on the ground that regularisation certificate is not akin to completion certificate as defined in explanation to Section 65(105). It is also important that the Circular No. 151/2/2012 dated (9) Appeal No. ST/28062/2013 & 30005/2016 10.02.2012 has provided clarification vide Para No. 2.5 where it is prescribed that when completion certificate is waived or not prescribed for a specified type of building, the equivalent certificate by whatever name can be produced. Accordingly, in the regular course buildings are given OC when they are as per GHMC rules. In the present case, since, the certificate given under regularisation rules can be treated as completion certificate/ occupancy certificate. It is also submitted that with respect to services completed before 01.07.2010 are not liable for service tax even though amount received after 01.07.2010 and bookings made after completion certificate is not liable.
10. Learned CA for the appellant argued relating project Srinivasa Krupa that the service tax was demanded on the total sale price of units of construction and sold. Firstly, the value of sale deed needs to be excluded since the show cause notice was issued under Section 73(1A) of the Finance Act 1994 referring to earlier show cause notices which needs the deduction. Secondly, the work is quoted which is not covered under sale deed is meant for personal use of the customers thereby it gets excluded from the definition of residential complex under Section 65(91a) of the Finance Act 1994. In this regard, he relied on the following case laws:
a. Jurisdictional CESTAT decision in the case of Modi Ventures vs. Commissioner of Central Tax, Secunderabad vide Final Order No. A/30882/2020 dated 03.03.2020.
b. IVRCL Assets and Holdings Ltd Vs CCE, Hyderabad 2021 (52) GSTL 304 (Tri-Hyd)
11. It is also argued that construction of complex essentially involving 3 components namely i) land on which the complex is constructed ii) goods which are used in construction and iii) service/labour viz: various activities (10) Appeal No. ST/28062/2013 & 30005/2016 which are undertaken by the builders directly or through other contractor. Central Government can tax only service component and two other components fall outside the purview of tax power of Central Government. The Supreme Court in Larsen & Toubro Ltd., and Another Vs State of Karnataka and Another [2014 (1) SCC 708] held that the power of Parliament to levy tax would be limited to only on the service component after excluding the value of the goods as well as the value of land from such component. Works Contracts (Composition Scheme for payment of Service Tax) Rules, 2007 do not provide for any specific mechanism or method. Since there is no Statutory Valuation Maxima on the composite services provided by the builder before, during or after the construction as held by Hon'ble CESTAT, Delhi in the case of Suresh Kumar Bansal Vs Union of India [2016 (43) STR 3 (Del)] which was followed by Hon'ble Jurisdictional High Court in the case of Vasudha Bommireddy Vs Assistant Commissioner of Service Tax, Hyderabad [2020 (35) GSTL 52 (Telangana)], hence no liability can be fixed.
12. Realising the above mistake in law Central Government vide Section 129 of Finance Act 2017 read with the Sixth Schedule thereto, retrospectively amended the Rule 2A by providing seperate abatement/deductions towards land component in ascertaining the service component of the Works contract. If the analogy that existing valuation mechanism is sufficient, there is no warranty for the aforesaid retrospective amendment. Thus, it fortifies that pre-amended law does not have valuation maxima for works contracts involving land component. Since the show cause notices and Order-in-Originals were passed before such retrospective amendment, the demand shall not sustain. Similarly, interest is not liable when there was retrospective amendment.
(11) Appeal No. ST/28062/2013
& 30005/2016
13. Learned CA argued that the impugned Order-in-Originals has
confirmed the demand of total value, that includes the land, service and materials. In case of any liability held to be sustainable, the demand needs to be re-quantified by taking 25% of total amount charged as taxable value under Rule 2a of the Service Tax (Determination of Value) Rules, 2006. Since, the transaction involves 3 components viz: land, service and material while the service tax can be levied only one component (service). It is also submitted that in absence of tax collection from the customers, the Cum-tax benefit under Section 67(2) of the Finance Act shall be given. Learned CA for the appellant submits that extended period of limitation is not invokable. Since, there was lot of confusion on the liability of builders at such point of time and there was CBEC Circular(s) clarifying that builder qua respondent is not liable prior to 01.07.2010. Taxability of contracts involving immovable property was also during such period. The issue of classification of individual contract of construction of complex service/works contract service was not in dispute. There was lot of confusion on the liability of the builders on the applicability of service tax and was challenged before various courts and courts also expressed different views. Appellants had no any intention to evade payment of tax. Therefore, extended period of limitation is not invokable.
14. Learned CA for the appellant submits once service tax is not applicable, the question of interest is also not applicable.
15. Learned AR for the Department submits that the Project Prakruti Nivas considered of 612 independent houses built on the land purchased in the name of the company M/s Vishal Projects Ltd.,, entered into 2 agreements with their customers i.e. Agreement for Sale and Sale Deed. Agreement for (12) Appeal No. ST/28062/2013 & 30005/2016 Sale which specifically mentioned the consideration for which the concerned house is being offered for sale, the initial advance being acknowledged and the number of instalments under which the balance consideration is to be paid to the developer. The agreement also mentioned about the common amenities being provided by the developer as such indicating that the concerned house is not an independent/individual. Sale deed with specifically mentioning the consideration for which a house/semi finished house/basement level duplex along with lawn on which the such unit is constructed. The fact of execution of a Sale Deed denotes the transfer of the title of the property from the developer to the customer for the consideration mentioned therein. The two agreements when examined in conjunction, shows that the initial agreement for sale is mode on the actual value of the house/unit, whereas, the Sale Deed is executed for a lesser amount thus indicating that the balance of the amount is received towards construction activity/service rendered after the passing of the title to the customer.
16. Learned AR argued that the Show Cause Notice dated 22.10.2010 was issued demanding service tax under construction of residential complex service and rest of show cause notices were issued demanding a service tax under Works Contract Service. For the period from 23.03.2010 to 19.06.2012, works contract service was introduced with effect from 01.06.2007 which is provided under Section 65(105)(zzzza) of the Finance Act 1994. The procedure for determination of value for works contract services is provided under Rule 2a of the Service Tax (Determination of Value) Rules 2006. The service tax is sought to be demanded under works contract service and not under construction of residential complex service (for the 3 show cause notices issued for later dates). The amount that is (13) Appeal No. ST/28062/2013 & 30005/2016 being sought to be taxed is the difference amount between the agreement of sale and sale deed amount which was collected from the buyers by VPL for providing services for completion. Circular No. F.No. 332/35/2006-TRU dated 01.08.2006 and Circular No. 108/2/2009-ST dated 29.01.2009 are issued to clarifying the service of construction of complex services and not works contract service.
17. Learned AR also clarified that with effect from 01.06.2007 when the new service, "works contract service" was made effective, classification of services would indicate a change in case of long term contracts, even though part of the service was classified under the respective taxable service prior to 01.06.2007. This is because, works contract describes the nature of the activity more specific and therefore as per the provision of Section 65a of the Finance Act 1994, it would be proper classification for the part of service provided after that date. The above position was clarified after considering classification of services as per the provisions of Section 65a of the Finance Act 1994. It is also submitted that in the case of Commissioner of Central Excise and Customs, Kerala Vs Larsen & Toubro Ltd., [2015 (39) STR 913 (SC)] it was held that composite contract involved transfer of property in goods is liable to service tax under works contract service only.
18. Heard both the sides and perused the records. In both the appeals, issue is same, so heard simultaneously to decide together.
19. Project Prakruti Nivas: SCN OR No. 241/2010 dated 22.10.2010 for the period 16.06.2005 to 22.03.2010, SCN OR No. 515/2011 dated 24.10.2011 for the period 23.03.2010 to 31.03.2011 and vide SCN OR No. 28/2012 dated 20.04.2013 for the period 2011 to March 2012 demands were made. As per the appellants Project Prakriti Nivas which is related to (14) Appeal No. ST/28062/2013 & 30005/2016 612 individual villas/houses on the land located at Annaram Village and completed the construction on 31.03.2009 and received completion certificate from the Competent Authority. Initially, appellant entered into agreement for sale mentioning the total sale price and after receiving partial consideration, the Sale Deed was executed in the favour of customer and completed the construction.
20. Under the Finance Act 1994 by Section 65(91a) the word 'residential complex' is defined as under:
"residential complex" means any complex comprising of--
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking
space, community hall, common water supply or effluent treatment system, 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."
21. Appellant stated that this project is not covered under the definition of residential complex and hence not liable to levy as service tax. It is clear (15) Appeal No. ST/28062/2013 & 30005/2016 from the definition that the project i) has more than 12 residences/units ii) have common area as well as iii) common facilities. The number of houses/villas are not made/constructed for the personal use as explained in the Section by explanation Rule 2A.
22. Learned CA has relied on Co-ordinate Bench, Chennai decision in the case of Marco Marvel Project Ltd., Vs Commissioner of Service Tax, Chennai [2008 (12) STR 603 (Tri-Chennai)], in which it was held that " Legislation intention not to levy service tax on construction of individual residential units" which was confirmed by Hon'ble Supreme Court in the case of Commissioner Vs Micro Marvel Project Ltd., [2012 (25) STR J 154 (SC)]. The Co-ordinate Bench decision is distinguishable since this project is not related to individual residences.
23. Learned CA also relied on Co-ordinate Regional Bench, Allahabad in the case of Baba Construction Pvt Ltd., Vs Commissioner of Central Excise and Service Tax, Ghaziabad [2018 (15) GSTL 345 (Tri-All)] which was confirmed by Hon'ble Supreme Court in the case of Commissioner Vs Baba Construction Pvt Ltd., [2018 (15) GSTL J120 (SC)]. These findings also not applicable in this matter, since in that case residential complex was below to less than 12 units.
24. Similarly, decision of Hon'ble High Court of Karnataka at Bangalore in the case of Commissioner of Central Excise and Service Tax, Bangalore-I Commissionerate Vs Alliance Infrastructure Project Pvt Ltd., [2022 (56) GSTL 3 (Kar)] is not applicable since in that case each building is not having more than 12 residential units. He has also placed reliance on Co-ordinate Bench decision in the case of Beriwal Constructions Company Vs Commissioner of Central Excise and Service Tax, Agra [2017 (5) GSTL 198 (16) Appeal No. ST/28062/2013 & 30005/2016 (Tri-All)] in which individual residential houses constructed and each block being residential unit was not under the purview of leviable of service tax.
25. Learned CA also argued that for being common approval, common facilities and common layout to levy the service tax for independent houses available as is not sufficient to impose service tax. Whereas, Learned AR argued that the project have common facilities as park, common water supply and sewerage treatment system. Therefore, this project under residential complex and liable for leviable of service tax. He also produced copy of agreement for sale in which para B to E of page 3 is important to mention as thus:
B) The Developers are engaged in the business of development of plots of land by constructing buildings thereon. C) The Developer prepared the development plans of the housing project on the said property and put up an application for Approval before the Annaram Gram Panchayath and obtained an Approval in the form of Layout Vide No. GPA/4/2004 dated 19/11/2004 (hereinafter referred to as the 'Said Plan') from Annaram Gram Panchayath, approving the development of the housing project on the said plot of land admeasuring Ac.44.321/2 Gts involving ploting of the said property in accordance with the said plan for construction of House/Bunglows thereon.
D) The Developer herein decided to construct independent houses over each of such plots in the said Layout with an intention to sell such houses to the prospective purchasers and which Layout represents the design of the said Housing project. E) The housing project involves plotting of the said property as per the said Layout and constructing a residential house or bunglow on each of such plot, developing a garden on the earmarked plot, providing infrastructure in the form of roads, water, electricity, drainage, sewerage and such other amenities and utilities necessary for development, construction and enjoyment of a housing project.
(17) Appeal No. ST/28062/2013
& 30005/2016
The above mentioned details completely covers in the definition of residential complex. Therefore, argument of Learned CA relating in this regard is not acceptable.
26. Learned CA submitted that the builders are not liable for any service tax on the consideration of houses prior to 01.07.2010. The issue is no longer res-integra cited catena of decisions in this regard.
27. Learned CA also cited Circular No. 151/21/2012/ST in which it is clearly mentioned that for the period prior to 01.07.2010 construction service provided by the builder/developer will not be taxable, in terms of Board's Circular No. 108/02/2009-ST dated 29.01.2009.
28. Learned CA also cited this Tribunal's decision in the case of Modi Ventures Vs Commissioner of Central Tax, Secunderabad-GST Commissionerate vide Final Order No. A/30882/2020 dated 03.03.2020 in which it was held as follows:
7. Thus, as far as service tax under "construction of complex services" is concerned, prior to 01.07.2010 (when the explanation was inserted), no tax could be levied. This was also clarified by the CBEC in Circular No. 108/2/2009/ST dated 29.01.2009. The question before the Tribunal Principal Bench in the case of Krishna Homes Vs CCE Bhopal [2014 (34) STR 881(Tri-
Del)] was whether this limitation on taxation prior to 01.07.2010 also extends to cases where such services were rendered not as "construction of complex services" but as "works contract services" and it was answered in affirmative. To sum up, as far as construction of residential complex by builders are concerned:
(i) Prior to 1-6-2007, if it is a composite works contract, no Service Tax is leviable in view of the judgment of the Hon'ble Apex Court in the case of Larsen & Toubro (supra).
(18) Appeal No. ST/28062/2013
& 30005/2016
(ii) After 1-6-2007, it is chargeable under 'works contract' if it is a composite contract and under 'construction of complex services' if it is a service simpliciter.
(iii)However, after 1-6-2007 but prior to 1-7-2010, whether it is a service simpliciter or a works contract, if the service is rendered prior to issue of completion certificate and transfer to the buyer, it is not taxable the service being in the nature of self service.
(iv)Further, whenever the service is rendered for completion or construction of a flat for personal use of the service recipient, no Service Tax is payable in view of the exclusion in the definition of residential complex service.
29. The construction of houses/villas in the project Prakruti Nivas was completed and received completion certificate from the Gram Panchayat on 30.03.2009, whereas service tax upto 01.07.2010, is not required to be paid in terms of Board's clarification dated 29.01.2009 and cited judgments, supra. Therefore, demand related to this project vide show cause notice dated 22.10.2010 for the period 16.06.2005 to 22.03.2010 and by show cause notice dated 24.10.2011 for the period 23.03.2010 to 30.06.2010 is not sustainable.
30. Learned CA relied on Hon'ble Supreme Court decision in the case of Collector Vs Vazir Sultan Tobacco Company Ltd., [1996 (83) ELT 3 (SC)] wherein it was held that "once the levy is not there at the time when the goods are manufactured or produced in India, it cannot be levied at the stage of removal of the said goods. The idea of collection at the stage of removal is advised for the sake of convenience." Construction of houses in the Project Prakruti Nivas was completed and received completion certificate from Gram Panchayat on 31.03.2009 whereas levy of service tax is leviable with effect from 01.07.2010. The Co-ordinate Bench, Kolkata in the case of (19) Appeal No. ST/28062/2013 & 30005/2016 Eden Real Estates Pvt Ltd., Vs CST, Kolkata [2021 (10) TMI 1229 - CESTAT
- Kolkata] it was held that "in these circumstances, service tax cannot be levied". Here, it is also important to mention that proviso of Rule 6(1) of the Service Tax Rules 1994 as it was existed upto 31.03.2011 that was "provided further that notwithstanding the time of receipt of payment towards the value of service, no service tax has been payble for the part or whole of the value of services, which is attributable to services provided during the period when such services were not taxable".
31. Learned CA also relied on Co-ordinate Bench, Allahabad decision in the case of ABA Builders Ltd., Vs Commissioner of Central Excise and Service Tax, Ghaziabad [2019 (21) GSTL 539 (Tri-All)] in which it was held that "bookings made after receipt of completion certificate is not liable for service tax as the transaction is mere sale of the immovable property where no service element is present and no service tax can be imposed in absence of agreement for service".
32. Due to above reasons as discussed, demand by show cause notices dated 24.10.2011 for the period 01.07.2010 to 31.03.2011, demand by show cause notice dated 20.10.2013 for the period April 2011 to March 2012 as well as demand by show cause notice dated 16.05.2014 for the period April 2012 to June 2012 are also not sustainable.
33. Project Sri Vajralayam: By show cause notice OR No. 28/2013 dated 20.04.2013, demand was made for the period April 2011 to March 2012. The appellant entered into Development Agreement with land owners on 21.05.2007 with sharing partition of 70% entitlement of the built up area and have sold their entire share on 23.01.2012. Learned Adjudicating Authority observed that the total amount received towards sale of such flats (20) Appeal No. ST/28062/2013 & 30005/2016 is nothing but the consideration received for developing the entire project by rendering services both to the land owner and the ultimate customers. No doubt, in this regard, conclusion given by Learned Adjudicating Authority is appropriate, but it is not correct to say that the certificate produced by the appellant is not proper as required by the authorised authority. Learned CA admitted that there was certain deviation in the actual consideration with sanctioned plan. The State Government of Andhra Pradesh has prescribed rules vide Government Order dated 31.12.2007 for regularisation of unauthorised construction for projects completed before 15.12.2007. Applicant applied for regularisation and concerned Deputy Commissioner issued certificate approving and regularising the same. Sale was done after 4 years of regularisation. He explains that Circular No. 151/2/2012 dated 10.02.2012 has provided clarification by para 2.5 where prescribed that "when completion certificate is waived or is not prescribed for a specific type of building, the equivalent completion certificate by whatsoever name can be produced". Since, concerned Government regularised this project and issued certificate, therefore it cannot be ignored and it has binding effect for all. Therefore, the certificate given under above Regularisation Rules can be treated as completion certificate or occupancy certificate. So, in this project also houses got completed before 01.07.2010, therefore, houses completed before 01.07.2010 are not liable for service tax, even though amounts were received after 01.07.2010. Therefore, demand for the period April 2010 to March 2012 by show cause notice dated 20.04.2013 is also not sustainable.
34. Project Srinivasa Krupa:This project is related to construction of residential unit at Hasmatpet. The appellant has entered Development Agreement cum General Power of Attorney vide dated 07.09.2010 with the land owners. The important terms mentioned in the Development (21) Appeal No. ST/28062/2013 & 30005/2016 Agreement cum General Power of Attorney are that the appellant had obtained necessary sanction and permission from the GHMC for the construction of complex with the appellant sale contract and build the complex at their sole cost and risk that the appellant shall be entitled to 50% super build-up area of the commercial complex, further that the appellant sold 3 flats of their share of built up area before completion of the same and paid stamp duty to the State Government on entire amount.
35. In this regard, Learned Adjudicating Authority observed that the appellant entered into agreement with land owners on 07.09.2010 and entitled to a share of 50% of the super built up area and sold 3 flats of their share receiving consideration. The construction activity of the appellant in respect of residential complex is taxable under the category of Works Contract Service. Learned CA argued that for the Project Srinivasa Krupa, the service tax was demanded on total sale price of unit of construction and sold, the value of sale deed need to be excluded, since the show cause notice was issued under Section 73(1a) of the Finance Act 1994. Referring the earlier show cause notices which gave such deduction it is also submitted that there is no statutory valuation mechanism on the composite service provided by the builder before, during and after the construction. Therefore, appellant is not liable to pay as demanded. Learned CA relied on Hon'ble Delhi High Court decision in the case of Suresh Kumar Bansal Vs Union of India [2016 (43) STR 3 (Del)] in which it was held that construction of complex intended for sale by builder before, during or after construction deemed to be service provided by builder to buyer it was ultra vires as there was no statutory mechanism to ascertain value of services component subject of levy of service tax. Service tax could not be levied on value of undivided share of land acquired by buyer of a dwelling unit or on the value (22) Appeal No. ST/28062/2013 & 30005/2016 of goods which are incorporated in project by the developer. Learned CA also relied on Jurisdictional High Court decision in the case of Vasudha Bhoomireddy Vs Asst Commissioner of Service Tax, Hyderabad [ 2020 (35) GSTL 52 (Tel-HC)]. In this case, Hon'ble High Court of Telangana held that if beneficiary not liable to pay service tax on transaction of purchase of construction area along with goods apart from undivided share of land such payment not amount to payment of service tax at all. Learned CA also argued that if impugned Order-in-Original has confirmed the demand on total value that includes the land, house and materials, in case of any liability held to be sustainable the demand needs to be re-quantified by taking 25% total amount charged as taxable value under Rule 2A of the Service Tax (Determination of Value) Rules 2006 as amended by Finance Act 2017. In view of the above submissions and cited case laws in this regard relating Project Srinivasa Krupa is to be remanded back for redetermination of service tax in accordance with Rule 2A.
36. To sum up, Project Prakruti Nivas was completed and received completion certificate before 01.07.2010 i.e. before leviable of service tax. Some payment thereafter for that project also not taxable and leviable. Project Sri Vajralayam also completed and received completion certificate before 01.07.2010 as per law/rule made by Statute. Therefore, demand related to Sri Vajralayam is not sustainable and therefore liable to be quash. Whereas, demand relating to Srinivasa Krupa by show cause notice dated 20.04.2013 and 15.05.2014 needs to be recalculated.
37. Therefore, Appeal No. ST/28062/2013 is liable to be allowed in toto and Appeal No. ST/3005/2016 is liable for partly allowed relating to Project (23) Appeal No. ST/28062/2013 & 30005/2016 Prakruti Nivas and partly remanded relating to Project Srinivasa Krupa for redetermination of service tax.
38. Appeal No. ST/28062/2013 is allowed. Appeal No. ST/30005/2016 is partly allowed and partly remanded related to the Project Prakruti Nivas for redetermination of tax liability.
(Order Pronounced in open court on__26.06.2025_) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Jaya