Please clarify certain things.
(1) It is you who posed the query as to whether the concept of 'captive consumption' is available in regard to Service tax? I hope you will agree that the concept of 'captive consumption' means the producer himself consumes. That means the service provider himself consumes the service.
(2) Nowhere in your query you have stated that "XYZ engages a contractor to get the immovable property constructed." This you are stating only now.
(3) In fact you very clearly stated in your first query as under: "one legal entity (Say XYZ) renders two taxable services one of commercial or industrial construction and another renting of immovable property. In order to let out immovable property, XYZ construct an immovable property for themselves.
Now you go to the extent of saying "It is my belief that these two people have not understood the query."
I leave it to the members of the FORUM to draw their own conclusions, whether we understood your first query correctly or not.