Construction of Staff Colony not liable to service tax - Covered by exclusion clause under definition of ‘Residential Complex' - Commissioner (Appeals)
THE assessee entered into a contract with service recipient for construction of Staff Colony Buildings to be used as staff quarters by the staff of service recipient. Department alleged that the assessee was liable to service tax under Construction of Complex Service and issued show cause notice proposing demand of service tax with interest and levy of penalties. Lower authority confirmed the demands resulting in this appeal before the Commissioner (Appeals).
The appellant primarily contended as follows:
As per the exclusion clause given under the definition of 'Residential Complex' in Section 65 (91a) of the Finance Act, 1994, the term 'Residential Complex' would 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. In this case they have constructed flats and houses for service recipient as per the drawings supplied by the latter and these are to be used as Staff Quarters by the service recipient.
After considering the submission of the appellant and the relevant statutory provision, the Appellate Commissioner observed as follows:
“…….. In the instant case there is no dispute that the residential complex was constructed for the staff ……….It is the intention of the legislators to tax only the residential complex……….It is matter of common knowledge that service tax is an indirect tax which has to be collected from the recipient and then it is to be paid by the service provider. In the instant case M/s …….(service recipient) cannot collect the value of service tax from anyone since there is no sale involved. Hence, according to the exclusion clause, complex meant for personal use is not taxable. Again, since there is no specific definition with regard to term "person" it has to be construed that term "person" includes artificial/juristic person ……………..Therefore, the exclusion clause is rightly available to service recipient. In addition to the above, the decision of Tri-Ahmedabad in the case of Khurana Engg. Ltd vs. CCE Ahmedabad is squarely available to the issue on hand. But the only difference is that in the above case the person referred is GOI whereas in the case on hand it is the company and hence the case is directly on the issue. TRU Circular dated 24.5.2010 (Supra) also supports the issue on hand.”
In fine, the Appellate Commissioner held that the appellant was not liable to service tax and allowed the appeal.