By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Whether explanation added on 01-07-2010 to section 65 (105) (zzzq) and 65(105) (zzzh) for expanding the scope of construction services are prospective in nature and otherwise?
Facts:
Revenue had challenged the Order passed by the Appellate Authority allowing the appeal of the Appellant which held that construction services rendered to prospective buyers of flat were to be regarded as self–service by the builder for the period upto 30/06/2010 and therefore service tax was not applicable on the amounts received till this date.
Held:
After considering the judgements quoted by the Appellant such as G. S. Promoters vs. UOI -2011 (21) STR 100 (P & H), MCHI vs. UOI-2012 (25) STR 305 (Bom) and after referring to the Board Circular No. 334/4/2010 dated 01-07-2010, Tribunal held as follows:
The Punjab and Haryana High Court rejected the challenge to the constitutional validity of the said explanation in G. S. Promoter’s case. The issue whether the said explanation is retrospective or prospective in nature was not considered nor decided by the High Court whereas the Bombay High Court in MCHI’s case considered the issue whether the said explanation is prospective in nature or otherwise. Bombay High Court held that the said explanation was specifically legislated upon to expand the concept of taxable service as prior to explanation view was taken that a mere agreement to sale does not create any interest in the property and title to the property continues to remain with the builder, no service was provided by the builder, that the service, if any would be in the nature of a service rendered by the builder to himself. The explanation inserted with effect from 01-07-2010 expands the scope of the taxable service to include the service provided by the builder to buyers pursuant to an intended sale of immovable property before, during or after the construction and therefore the provision is expansive of the existing intent and not clarificatory of the same and is consequently prospective. In view hereof, the Tribunal held that since the construction was undertaken for the period before the insertion of the explanation, there is no liability to pay service tax and the Appeal was dismissed.
