JAIN HOUSING Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE applicant is engaged in the business of Construction of Residential Complexes and the applicant registered for payment of Service Tax. On investigations conducted by Revenue, it appeared to the Revenue officers that the applicant had not paid appropriate Service Tax on different projects executed by them during the period Apr., 06 to June, 10. Three show cause notices issued in this regard have been adjudicated by a common order confirming a tax demand of Rs. 11,21,54,460/ - towards Service Tax and Rs. 7,11,365/ - towards Cenvat credit denied. Further there is demand for interest. Penalties are also imposed. Aggrieved by the order, the applicant has filed these three appeals before the Tribunal along with stay petitions which are presently under consideration in this proceeding. Arguing for the appellant, the counsel submits that the impugned construction was done on land of the applicant and hence applicant was doing activities for its own benefit and there were no service provider and service recipient in this case and hence demand for Service Tax is not sustainable. The counsel submits that the applicant has to be considered as a "Developer" of Housing project and C.B.E. & C. has clarified vide Circular 108/2/2009, dated 29 -1 -2009 and Circular 334/3/2010, dated 26 -10 -2010 and 151/2/2012 -S.T., dated 10 -2 -2012 that there was no liability on Developers to pay Service Tax. She submits that this position changed only from 1 -7 -2010 when a new explanation was added in Section 65(105)(zzzh) of Finance Act, 1994, defining the relevant taxable service, and the demands in the present appeals relate to period prior to that date.

(2.) SHE did not contest the fact that the applicant's model of business was to first enter into agreements with prospective buyers of flats for sale of Undivided Shares (UDS) of land which were first registered in the name of the buyers. Thereafter, construction was undertaken by the applicant and payments were collected from the buyers of UDS in instalments depending on the progress in construction. On completion of construction and on receipt of full payment for the cost of construction, the constructed flats were handed over. No registration was done with local authorities for sale of the flat. She pointed out that majority of the flats constructed are not yet sold. But the demand relates to cases where UDS was sold and then construction undertaken and consideration received for such construction.

(3.) FURTHER the ld. counsel submits that out of 4252 flats constructed only 843 flats have been sold. She argues that at least for the unsold flats it is very clear that there was no service receiver. Further because of the fact that the flats constructed could not be sold because of the slump in the market, the applicant is facing acute financial constraints in making any pre -deposit.