HAREKRISHNA DEVELOPERS (THROUGH JAYANTIBHAI JERMABHAI KORAT) Vs. COMMISSIONER OF SERVICE TAX

JUDGEMENT

(1.) THE Applicant, which is a partnership firm wants to set up a joint venture with a non -resident named in the application, to develop a residential housing complex in Gujarat. As per the proposed activities Nos. 1 &2, the residential complex will be constructed by the applicant itself in activity 1 and through a contractor in activity 2. The residential units in the complex will be sold to third parties. The following questions of law are framed by the applicant for seeking advance ruling under Section 96 -C of the Finance Act, 1994:

(2.) WHETHER the applicant is liable to service tax under Section 65 (105) (zzzh) of the Finance Act, 1994 under the notified taxable service of construction of Complex in case of Proposed Activity No. 1 ?

(3.) THE applicant contends that it is not providing to the prospective buyer any 'taxable service' falling within the ambit of Section 65 (105) of the Act. The applicant states that it is itself developing the residential complex on its own land utilizing its own material. The construction is carried out by the applicant itself either by employing own labour or by engaging contractors working under its control. The ownership and possession remains with the applicant till the unit is handed over to the applicant on completion and on receipt of entire consideration. Since the complex is being developed for self, i.e., for the applicant, the service provider and service recipient are one and the same. Since service tax is attracted only when a taxable service is provided by one person to another, no levy is attracted in the instant case. In support of its contention, the applicant has referred to CBEG's circular No. 96/7/2007 -ST dated 23/8/2007. The applicant also contends, relying on the decision of Allahabad High Court in Assotech Realty case 2007 (7) STR 129 that the proposed activities 1 and 2 do not amount to 'works contract'. According to the learned authorized representative of the applicant, only the contractor's services entrusted with construction are covered by either of the sub -clauses relied upon by the Department, but not the activities of a person like the applicant who constructs for ultimately selling the built up unit. According to the applicant, the answers to all the questions posed for ruling should be in the negative.