By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Prior to introduction of explanation with respect to levy of service tax on builders, the services provided in relation to commercial or industrial construction services provided by a builder were in nature of self-service not leviable to service tax.
Facts: The appellants received application money/advances from prospective buyers of space/shop/ office in a commercial complex to be constructed by them which the department contended to tax under the category of “commercial and industrial construction services”.
The department concluded that although the title to property in space/shop/office had not been passed to the prospective buyers, since advances were received and the appellants were constructing the complex, they were liable to pay service tax.
Held:
Relying on the decision of the Hon. High Court in Maharashtra Chamber of Housing Industry vs. UOI 2012 (25) STR 205 (Bom) and Hon. Tribunal in C.C.E., Chandigarh vs. Skynets Builders, Developers, Colonizer 2012 (27) STR 388 (Tri.-Del), wherein it was observed that the explanation introduced to section 65(105)(zzq) of the Finance Act, 1994 with effect from 01-07-2010 was to expand the scope of levy and therefore, prior to its introduction, a mere agreement to sell would not create any interest in the property in favour of the prospective buyer and the title of property was with the builder which constituted self-service. Since the issue was prior to the introduction of explanation, no services were provided to another person and thus, not liable to service tax.
