Macro Marvel Projects Ltd. v. Commr. of Service Tax, Chennai

[Order per : P.G. Chacko, Member (J)]. - After examining the records and hearing both sides, we are of the view that the appeal itself requires to be summarily disposed of. Accordingly, after dispensing with pre-deposit, we take up the appeal.

2. The appeal is against demand of service tax of Rs. 15,63,145/- for the period 16-6-2005 to 30-11-2005 under the head “construction of complex” service under Section 65(30a) of the Finance Act, 1994. The lower authorities have also imposed a penalty on the assessee under Section 76 of the said Act. The impugned demand is on the amount collected by the appellants from their clients as consideration for construction and transfer of residential houses. It is the case of the appellants that the work done by them fell within the ambit of ‘works contract’, which became taxable only with effect from 1-6-2007 vide Section 65(105)(zzzza) of the Finance Act, 1994. It is also submitted that service tax cannot be levied from the appellants under any other head for any period prior to 1-6-2007. We have heard the learned Jt. CDR also, who submits that the case may at best be remanded to the authorities below, who apparently did not examine all the submissions of the party. After examining the records of the case, we do not think that a remand is warranted in this case inasmuch as the authorities below chose to sustain the demand of service tax raised in the show-cause notice, regardless of the fact that construction of individual residential units was not included within the scope of “construction of complex” defined under Section 65(30a) of the Finance Act, 1994. The definition reads as follows :-

“Construction of complex” means -

(a)     construction of a new residential complex or a part thereof; or

(b)     completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or

(c)     repair, alteration, renovation or restoration of, or similar services in relation to, residential complex.

‘Residential complex’ stands defined under clause (91a) of Section 65 of the Act, which is as follows :-

“(91a) “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.”

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, ‘construction of a new residential complex or a part thereof’ stands included within the scope of ‘works contract’. But, here again, the definition of “residential complex” given under Section 65(91a) of the Act has to be looked at. By no stretch of imagination can it be said that individual residential units were intended to be considered as a ‘residential complex or a part thereof’. These observations of ours with reference to ‘works contract’ have been occasioned by certain specific grounds of this appeal and the same are not intended to be a binding precedent for the future.

3. For the reasons already noted, we set aside the impugned order and allow this appeal. The stay application also gets disposed of.

(Dictated and pronounced in open court)