2026-VIL-1541-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of construction services provided to land owners/existing tenants under redevelopment scheme where service tax already discharged on gross consideration received from independent buyers – Appellant is a builder engaged in construction of residential and commercial complex services undertaken a redevelopment project of air building property constructing 44 flats and 2 shops of which 41 flats and 1 shop were handed back to existing tenants without any consideration under redevelopment scheme and 3 flats and 1 shop were retained for independent sale. Department demanded service tax on construction services provided to existing tenants/land owners based on value of similar flats sold to independent buyers on per square feet basis citing extended period under Section 73(1) and imposed penalty and interest. Appellant contended that service tax is not levable on flats handed free of cost when service tax already discharged on consideration received from independent buyers and that no statutory mechanism exists for determining value of taxable service involving land element - Whether appellant is liable to pay service tax on construction services provided to existing tenants when it has already discharged complete service tax liability on gross consideration received from independent buyers under redevelopment scheme – HELD – Once service tax liability has been discharged on the gross amount of construction service received by the builder from both categories of service recipients i.e. land owner in the form of land or development rights and from independent buyers in the form of cash, the demand of service tax on the same construction service again based on presumed consideration to land owners cannot be sustained as it would amount to double taxation. The taxable value of services provided to land owners cannot be determined on basis of sale value of flats to independent buyers as the comparison must be made between service recipients standing on same footing and not between recipients with different economic interest. The principle established in law is that price of oranges is determined by comparing with price of oranges and not apples. Once appellant has complied with the service tax liability on the gross amount covering land owner consideration in kind and buyer consideration in cash as per CBEC instruction dated 16-2-2006 and CBEC Circular dated 10.2.2012 which are in accordance with Section 67 of Finance Act, 1994 and Rule 3 of Service Tax (Determination of Value) Rules, 2006, further demand for service tax on consideration received from land owners would constitute double taxation. As settled law that for application of any provisions of this type the comparison should be made between service recipients on same footing and as appellant has already discharged the complete service tax liability on gross consideration received, the presumed consideration to land owners cannot be separately taxed - The reliance placed on cases like Etics Infra Development Pvt Ltd., Vasantha Green Projects and LCS City Makers Pvt Ltd. supports the contention that facts and circumstances in this case do not warrant assessment of service tax on different value - Service tax demand on 41 flats and 1 shop handed to existing tenants is not sustainable - Consequently demands of interest under Section 75 and penalty under Section 78 are also set aside - Service tax amount paid by appellant during investigation shall be appropriated against any other tax liability or refunded – The impugned order is set aside and appeal is allowed
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