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CA Sandesh Mundra

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Construction of complex - Calculation of 12 units

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Construction of Residential complex has been a matter of lot of debate. The judgement below brings into light a new issue as far as calculation of number of units is concerned for ascertaining the 12 units exemption. That is if a contractor is constructing two separate building each not containing more than 12 units, then he may still be eligible to claim the exemption.  How far this contention be accepted in the court of law is to be seen very cautiously ?


Order Per: P. G. Chacko

This application filed by the appellant seeks waiver and stay in respect of the adjudged dues which include an amount of Rs. 71,05,017/-  demanded from them as service tax and education cesses for the period from November 2006 to September 2010 under the Head "Construction of Complex Services". On a perusal of the records, we find that the appellant constructed houses for low-income groups of people under two schemes of Andhra Pradesh State Housing Corporation Ltd. and that the impugned demand is on the amounts collected by them from the Housing Corporation. It further appears that the dwelling units were constructed in two storeyed blocks in a large area with common facilities. The issue raised by the appellant is whether service tax is applicable to construction of such houses for the benefit of low-income group of people. After hearing both sides on this issue, we are of the view that the leviability of service tax under the above Head on construction of Residential complex cannot depend on economic status of the ultimate beneficiaries/residents. Prima facie, service tax is leviable on construction of residential complexes for low-income groups of people also. In the present case, the appellant rendered the service of construction of residential buildings to the Housing Corporation and received consideration for the same. At this stage, it is the submission of the learned consultant for the appellant that a major part of the demand is beyond the normal period of limitation and also that the appellant can claim support from the following decisions of this Tribunal even on merits.  • Macro Marvel Projects Ltd. Vs. Commr. of Service Tax, Chennai [2008 (12) S.T.R. 603 (Tri-Che) = STO 2008 CESTAT 369]  • Vinod Kumar Goyal Vs. Commr. of Central Excise, Jaipur [2011 (23) S.T.R. 30 (Tri-Del.) = STO 2011 CESTAT 216]  2. We have heard the learned Commissioner (A.R.) and considered his submissions also.  3. The cited decisions are apparently in support of the submissions made by the learned Consultant. In the case of Macro Marvel Projects Ltd.(supra), it was held that a residential complex comprising more than 12 dwelling units would attract service tax under the aforesaid Head  but individual residential units could not be considered as residential complex hence its construction would not attract the levy. This view was followed in the case of Vinod Kumar Goel also. It is not in dispute in the present case that the residential units were constructed as two-storeyed blocks, each consisting of less than 12 units. It is debatable as to whether these complexes can be considered to be residential complexes for the purpose of levy of service tax. The cited decisions appear to be in support of the learned Consultant's arguments. In this scenario, we grant waiver of predeposit and stay of recovery in respect of the adjudged dues.

(Pronounced and dictated in open court)

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CA Sandesh Mundra, Consultant – Management Audit and Indirect Taxation - Chartered Accountant, Diploma in Information System Audit, Diploma in Insurance & Risk Management , Certificate from ICAI on International Financial Reporting Standards. Actively associated with clients in the industrial construction sector since last 9 years.He possesses special skills in structuring the indirect tax component of the works contracts and as management auditor, has visited several construction sites in various states like Orissa, Rajasthan, Gujarat, Maharasthra, Madhya Pradesh etc. During the course of said visits he has been to very large industrial complexes, refineries, power plants etc


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