FA 2010 Service Tax Levy on Construction Upheld

Centax Editorial Board

January 31, 2026

• 2 min. read

Case Details: V. Square Project vs. Union of India (2025) 36 Centax 127 (Guj.)

Judiciary and Counsel Details

Bhargav D. Karia & Pranav Trivedi, JJ.
Shri Mahesh Bhavsar, for the Petitioner.
Shri Ankit Shah, for the Respondent.

Facts of the Case

The petitioners challenged the constitutional validity of amendments made to the Finance Act, 1994 by the Finance Act, 2010, whereby an Explanation was introduced to Section 65(105)(zzq) and Section 65(105)(zzzh), and a new entry (zzzzu) was inserted in Section 65(105), bringing within the scope of ‘deemed service’ certain activities of commercial or industrial construction and construction of residential complexes undertaken prior to obtaining completion certificate. It was contended that taxing construction activities before issuance of the completion certificate was constitutionally invalid and that the new entry under clause (zzzzu), providing for the levy of service tax on special services offered by builders, such as preferential location services, was ultra vires the provisions of the Finance Act, 1994. The petitions questioned the legislative competence and validity of the levy under Section 65(105)(zzq), Section 65(105)(zzzh), and Section 65(105)(zzzzu). The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the issue of constitutional validity of the amendments introduced by the Finance Act, 2010, was covered by the decision of the Bombay High Court in Maharashtra Chamber of Housing Industry [2012 (25) S.T.R. 305 (Bom.)], wherein a similar challenge had been rejected. Adopting and agreeing with the reasoning in the said judgment, it was observed that the legislature was competent to introduce the concept of deemed service in relation to construction activities and to levy service tax on services provided by builders prior to completion. The High Court concluded that the amendments were constitutionally valid and the challenge raised by the petitioners was liable to be rejected. Accordingly, the petitions were dismissed in favour of the department.

List of Cases Cited

Dattatraya Govind Mahajan v. State of Maharashtra — AIR 1977 SC 915 — Relied on [Para 27]
Godfrey Phillips India Ltd. v. State of Uttar Pradesh — (2005) 2 SCC 515 — Relied on [Para 25]
Gujarat Ambuja Cements Ltd. v. Union of India — 2005 (182) E.L.T. 33 (S.C.) = 2006 (3) S.T.R. 608 (S.C.) — Relied on [Para 25]
Hiralal Ratan Lal v. Sales Tax Officer — AIR 1973 SC 1034 — Relied on [Para 27]
Maharashtra Chamber of Housing Industry v. Union of India — 2012 (25) S.T.R. 305 (Bom.) — Applied [Paras 22, 23, 24, 25, 26, 27, 28, 29, 30]
Maharashtra Chamber of Housing Industry v. Union of India — 2017 (52) S.T.R. J205 (S.C.) — Applied [Paras 22, 23, 30]
Maharashtra Chamber of Housing Industry v. Union of India — Writ Petition No. 845 of 2006, decided on 26-4-2006 by Bombay High Court [Para 11]