Service Tax - Construction service - Constitutional Validity of FA 2010 Amendment upheld by P&H High Court
AS you will remember, the Finance Act 2010 added this explanation to Section 65(105)(zzzh)
"Explanation. - For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer;"
and the TRU clarified this, to mean as, that unless the entire consideration for the property is paid after the completion of construction (i.e. after issuance of completion certificate by the competent authority), the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly.
This was challenged and the Bombay High Court had already granted an interim relief –
Later the Madras High Court has also given an interim relief in
Now, the P&H High Court has upheld the validity and observed, "contention that there is no element of service of construction involved in a builder selling a flat cannot be accepted. Whether or not service is involved has to be seen not only from the point of view of the builder but also from the point of view of the service recipient. What is sought to be taxed is service in relation to construction which is certainly involved even when construction is carried out or got carried out before construction and before flat is sold. "
The High Court also observed that, "The legal backup was further provided by the introduction of Article 268-A in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003."
However,the fact is that Article 268 A is yet to come into force. Somehow, strangely this fact is not being effectively argued before the courts.
Please see Breaking News for more details of this case.