2026-VIL-1737-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Construction of Residential Complex Service - Sections 65(91a) and 65(105)(zzzh) of the Finance Act, 1994 - Builder or developer - Period prior to 01.07.2010 - Composite works contract - Appellant, engaged in construction of residential complexes, was alleged to have constructed a residential complex of more than the sanctioned number of units without payment of service tax, and the demand was confirmed with interest and penalties and upheld in appeal - Appellant contended that the additional units were created by buyers converting common rooms, that a developer was not liable before the Explanation to Section 65(105)(zzzh) was inserted with effect from 01.07.2010, and that the construction was a composite contract of goods and services - Whether the demand under Construction of Residential Complex Service is sustainable - HELD - The description of the Appellant as a developer or contractor is not conclusive, and the Department must establish that the activity answers the statutory description of the taxable service. The number of units was a factual dispute to be resolved on the basis of the sanctioned plan, building records and agreements. Alterations by purchasers cannot be attributed to the Appellant without evidence, and Revenue failed to discharge its burden. The Explanation inserted with effect from 01.07.2010 expanded the scope of the taxable service and cannot be applied retrospectively. Composite works contracts could not be taxed under the construction service categories prior to 01.06.2007, and for the subsequent period they could not be taxed under Construction of Residential Complex Service, which covers only services simpliciter. The sale of undivided shares of land and non-payment of VAT do not establish that the contracts were service contracts simpliciter. Strong suspicion and grave doubts cannot take the place of legal proof - Demand is not sustainable and is set aside - Service Tax - Sub-contract and petty job receipts - Construction of Residential Complex Service - Burden of proof - Receipts were treated as consideration for construction services on the ground that the Appellant did not produce documents showing that they related to activities distinct from the residential complex - Whether the demand on such receipts is sustainable - HELD - The absence of supporting documents does not dispense with the Department's obligation to establish the nature of the taxable service and the legal basis for the demand. The Department had not shown that specific documents were called for under summons and not produced. Composite works contracts cannot be taxed under the construction service categories merely by allowing an abatement. The impugned order does not establish that the receipts represented consideration for services simpliciter - Demand is set aside - Service Tax - Renting of Immovable Property Service - Section 65(105)(zzzz) of the Finance Act, 1994 - Small service provider exemption - Revenue contended that the property was let out for commercial purposes, whereas the Appellant contended that the rental income for the earlier year was below the threshold and that service tax was paid from December 2009 onwards - Whether the demand is sustainable - HELD - The mere fact that the property was let out for commercial purposes does not conclude the amount of tax payable. The eligibility for the exemption, the year-wise receipts and the tax paid required verification, and the Adjudicating Authority neither considered the contentions of the Appellant nor rebutted them with cogent reasons. In the absence of sufficient evidence, the benefit must enure to the Appellant. Considering the small duty and that the events occurred more than a decade ago, remand would impose a disproportionate burden - Demand is set aside - Service Tax - Extended period of limitation and penalties - Sections 73(1), 77 and 78 of the Finance Act, 1994 - Whether limitation requires separate determination and whether penalties survive - HELD - Since the demands are unsustainable on merits, limitation need not be separately determined and the penalties under Sections 77 and 78 cannot survive - Impugned order is set aside and the appeal is disposed of with consequential relief, if any.
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