Chittaranjan Satapathy, Member (T). ‑ Heard both sides.

2. The appellants are registered with Service Tax Department for rendering services under Commercial and Industrial Construction Service, Real Estate Agent Services, Construction of Complex Service and Rental of immovable property service vide Service Tax Registration No. AAAFGO 452AST002. During the course of scrutiny of their accounts, the departmental officers found that in one of the joint venture projects for construction of residential complex they have not discharged service tax on the land owners share of constructed area of 5,799 sq. ft. In the said project, GRN had entered into an agreement for construction of residential complex with land owners namely S/Shri R. Mohan, R. Harikrishnan, R. Ranganathan, R. Shanmugam, R. Parthasarathy, R. Viswanathan and Smt. Pushpa (in short called as Shri R. Mohan & Party) by an agreement for joint development executed on 3-3-2004 and supplementary deed dated 22-11-2004. By the agreement, appellants GRN had given 5,799 sq. ft. of the built up area' plus cash of Rs. 1,03,28,850 to the land owners towards the cost of the land.

3. The appellants were issued the impugned show-cause notice on the ground that they had provided construction service to Shri R. Mohan & Party for construction of their residential premises not free of cost but for consideration of the portion of land received by GRN from them and hence they are liable to pay service tax on the portion of the construction area handed over by Shri R. Mohan & Party on which no service tax was discharged with effect from 15-6-2005, the date from which 'Construction of Complex Service' came under service tax. The original authority has dropped the demand against the appellants but his order has been reviewed by the jurisdictional Commissioner who has levied service tax of Rs. 1,54,399, demanded interest and has imposed a penalty of Rs. 2 lakhs under the impugned Order-in-Revision leading to this appeal.

4. Shri R. Parthasarathy, learned consultant appearing for the appellants states that the impugned constructed area has been handed over to the land owners towards the price of land and as such no service tax is payable in respect of such flats. Secondly, the activities undertaken by the appellants which involve supply of construction materials would come under the category of 'works contract' and since works contract was not separately taxable at the material time, no service tax can be levied in respect of the same. Further, he states that if at all service tax is payable under 'Construction of Complex Service', the entire value of the flats cannot be taken as the value of service as the same includes supply of materials etc.

5. Heard learned SDR Shri A.B. Niranjan Babu, who supports the impugned Order-in-Revision.

6. Prima facie, the owners of the land have received the constructed flats against which they have traded part of the value of the land and for remaining part of the value of the land they have received cash/cheque. As such, it cannot be held at the prima facie stage of hearing the stay application that no construction service has been rendered by the appellants in respect of the impugned constructed flats or that therefore, they have a case for complete waiver of the service tax. As regards the argument that the appellants have undertaken a works contract and that before a separate levy on the same has been imposed, no service tax can be levied on the service portion of the works contract, the Larger Bench of the Tribunal has already decided that the works contract can be vivisected even for the period prior to separate levy on such works contract and portion of the works contract can be subjected to service tax if the same is otherwise covered by a specific entry under the service tax law [2010 (18) S.T.R. 555 (Tri -LB)]. Hence, on this ground also the appellants do not have a case for total waiver of the pre-deposit.

7. However, taking into account the fact that t