2026-VIL-1891-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Construction of individual residential houses under assignment agreements - Section 65(91a) and Section 65(105)(zzzh) of the Finance Act, 1994 and Entry 14(b) of Notification No. 25/2012-ST - The Appellant constructs residential complexes. Under assignment agreements, the purchasers acquired plots registered in their own names and engaged the Appellant to construct individual houses such as simplex, duplex and bungalows. SCN invoking the extended period alleged that these houses form part of a residential complex and are taxable as construction of residential complex service. The adjudicating authority confirmed the demand with interest and penalty, relying on the planned layout, common amenities and presence of more than twelve units. The Appellant contended that individual houses built on separate plots under separate approvals are not a residential complex. The Respondent contended that the colony had common area and facilities under the builder's control - Whether construction of individual residential houses under assignment agreements is taxable as construction of residential complex - HELD - The definition of residential complex before 01.07.2012 is cumulative. It requires a building or buildings having more than twelve residential units, a common area, specified facilities and an approved layout. The mere existence of several residential structures within a larger development does not dispense with proof of these elements. The requirement of more than twelve units is not fulfilled at the level of the individual structures, as the purchasers acquired the plots in their own names and entrusted the Appellant with construction of individual houses. The existence of other independently owned houses elsewhere in the colony cannot establish taxability. From 01.07.2012, Entry 14(b) exempts construction of a single residential unit otherwise than as part of a residential complex. Where title to a demarcated plot has passed to the purchaser and the construction agreement entrusts the erection of a house, the transaction bears the characteristics of construction undertaken for the landowner. The source of the land is not decisive, and the gated nature of the colony, common boundary and facilities are not conclusive. The houses were self-contained units with separate entries and separate electricity and water connections for one family, and the Revenue failed to establish that they formed part of a residential complex - The demand, interest and penalty on construction of individual houses are set aside - Abatement on construction of residential flats - Notification Nos. 1/2006-ST, 29/2010-ST and 26/2012-ST - Under agreements for sale, the purchasers acquired identified flats together with the corresponding interest in land for a consolidated consideration. The Appellant did not dispute the taxability of construction of flats but discharged Service Tax on the abated value. The Department denied the abatement on the ground that the value of land was not included in the amount charged, and that a satisfactory break-up of corner charges and development charges was not furnished. The Respondent contended that an exemption notification is to be construed strictly - Whether the abatement can be denied on construction of residential flats - HELD - The abatement of 33% under Entry 10 of the 2006 Notification carried no condition regarding land. The condition regarding separate recovery of land cost was introduced by Entry 10(a) only from 01.07.2010. Where the purchaser agrees to acquire a flat together with the corresponding interest in the land for a consolidated consideration, the amount represents the consideration for the transaction as a whole. The absence of a separately stated allocation towards land does not signify that land was excluded or separately recovered. In the case of flats, land is never sold separately but forms the undivided portion accruing to the flat buyer, so the land cost is invariably included in the value of the flat. The denial of abatement on the premise that the value of land was not separately identified is unsustainable. The absence of a break-up of corner charges and development charges cannot by itself render the entire consideration ineligible for abatement. The same reasoning applies to the condition under Notification No. 26/2012-ST that the value of land is included in the amount charged from 01.07.2012 - The Appellant is entitled to abatement for the entire period, subject to verification of other conditions. The matter is remanded to the adjudicating authority to re-quantify the demand after allowing abatement and to adjust the Service Tax already paid. The payment claimed on preferential location or development service is remanded for verification. Penalty is set aside, the claim of refund is left open to be made separately and limitation is not examined since the merits are decided.
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