Service tax demanded on construction of apartments for a client who in turn allotted it to its employees for residence — The issue highly debatable, however Board’s Circular No. 332/16/2010, dated 24-5-2010 in favour of appellant — Held: Activity covered by exclusion clause of the definition of ‘residential complex’ as per section 65(105) (zzzh) — Stay and waiver granted.

Service tax demanded on construction of apartments for a client who in turn allotted it to its employees for residence — The issue highly debatable, however Board’s Circular No. 332/16/2010, dated 24-5-2010 in favour of appellant — Held: Activity covered by exclusion clause of the definition of ‘residential complex’ as per section 65(105) (zzzh) — Stay and waiver granted.

The appellant constructed residential complexes during March, 2007-March, 2008 for ITC Ltd. who provided the apartments for residence of its employees. Invoking extended period in July, 2009, service tax was demanded and penalty was levied. The appellant contended that residential construction was done for personal use of ITC Ltd. and hence was covered by exclusion clause u/s.65(91a) of the Act and relied on Board’s Circular 332/16/2010, dated 24-5-2010, wherein it was clarified that residential complex constructed by National Building Construction Corporation Ltd. (NBCC) for officers of the Central Government was not taxable. Support was also placed on Khurana Engineering Ltd. v. CCE, (2011) 21 STR 115 (Tri.-Ahmd.) wherein residential complexes constructed by the assessee for PWD/Government of India for residential use of the Central Government employees were held to be covered by the exclusion clause. The Revenue, on the other hand distinguished the situation wherein a person building on one’s own and not through a contractor, only would fall within the ambit of exclusion clause.

Held:

The issue is highly debatable, however the Board’s Circular and Tribunal’s decision (supra) could be taken support of. Further, considering that the appellant also had good case on limitation, recovery of dues was stayed, but the case was posted for early hearing.