2025-VIL-2181-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax – Section 78 of Finance Act, 1994 – Providing of construction service – Tax liability – Appellant is engaged in providing Construction of Residential Complex Service – Appellant agreed to construct and hand over 33 apartments to landowners, who in turn handed over their land as consideration for construction activity – As Appellant had failed to pay service tax on consideration, department issued show cause notice – Adjudicating Authority confirmed demand along with interest and penalty – Commissioner (Appeals) affirmed order passed by Adjudicating Authority – Whether Appellant/Developer has provided any construction service to land owner and service tax is exigible on owner's share – HELD – Department issued show cause notice demanding service tax on owner's share on ground that Appellant had rendered taxable construction service to land?owner and had not discharged due service tax on value of owner's share. Prior to 1-7-2010, there is no leviability of tax on owner’s share of apartments. After 1-7.2010, Developer is liable to pay service tax on construction service provided to land owner and value of flats should ordinarily be taken as the price of similar flats charged to independent buyers at nearest point of time. Value of flats given to landowner, which was the consideration for development rights, was used to determine service tax liability. Service tax is payable by builder at time when possession or right in property was transferred to landowner. Appellant is providing construction services to land owner for a consideration (owner's share). Appellant is liable to pay service tax on owner’s share of flats constructed – Appeal partly allowed - Imposition of penalty – Sustainability – Whether penalty imposed on Appellant under Section 78 of the Act is sustainable – HELD – During disputed period, there is a lot of uncertainty as to Service Tax liability and also for its quantification by a developer in respect of joint venture agreements. As such, attributing any malafide to Appellant that there is suppression or intention to evade tax is not justified. Though it is held that Appellant is liable to pay service tax on owner’s share of flats constructed, imposing penalty is not justified. Impugned Order-in-Appeal passed by Commissioner (Appeals) is modified to extent of setting aside penalty imposed, but upholding demand of service tax along with interest due thereon.
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