TMI Blog2021 (11) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... planning of the layout and its construction; and (iii) The complex is intended for personal use as residence by such person. It is observed from the show cause notice itself that the appellant was observed to have been engaged in providing construction of the residential complex service to M/s. PGCIL, Patna for constructing the complex for staff quarters of M/s. PGCIL at three different locations viz. Madhubani, Phulparas and Darbanga in Patna. M/s. PGCIL, in turn, admittedly, has given these quarters to its staff free of charge. Thus it becomes clear that there is no element of commerce /industry when M/s. PGCIL received services of construction of residential complex from the appellant. Admittedly the staff quarters/ said residential units were not meant for the employees of M/s. BSEB. Though Letter of Award was executed in association with M/s. BSEB, but for the only reason that the land required for the impugned residential complex is owned by BSEB as is found clearly mentioned in clause 3.0 of the said letter of Award. Sub-clause (iii) Section 65(91a) of Finance Act do not require a person to be the owner. The only requirement is that a person should be one who need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010 as relied upon by Hon ble Member (Technical) has no significance. The said circular talks only about the sub-contractor being engaged by the provider of service of construction of residential complex for providing the said services to the persons for him he was otherwise engaged as the service provider. In the present case, facts and circumstances are that the appellant was directly engaged by M/s. PGCIL for construction of staff quarters to be used by M/s. PGCIL. Service receiver is M/s. PGCIL and service provider is the appellant. The work of providing the service of construction of residential complex has not further been awarded by the appellant to anyone else. This particular fact, to my opinion, distinguishes the present case from COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS, BANGALORE-II VERSUS NITHESH ESTATES LTD., [ 2018 (7) TMI 1135 - KARNATAKA HIGH COURT] , thus also gets out of the scope of Circular dated 24.5.2010 - In the present case, none is the sub-contractor, as already discussed under Issue No. 1, service provided by the appellant falls under the exclusion part of Section 65 (91a)(iii). The appellant is not liable to pay the service tax. Otherwise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri P. Das, A. Biswas and B. Sengupta, Advocates for the appellant Shri Joydeep Chattopadhyay, Authorised Representative for the respondent ORDER The brief facts as per the show cause notice dated 11.08.2010 are that the appellant is a proprietorship concern engaged in civil construction. During the period 2006-2007 to 2007 -2008, the appellant registered with the Department (w.e.f. 14.08.2009), under the category of Works Contract Service , which is a taxable service, was found engaged in providing taxable service defined under the category of construction of residential complex , earlier defined under Section 65(105) (zzzh). It appeared to Revenue that the appellant have evaded payment of service tax to the tune of ₹ 11,07,672/- including cess and the same appears to be recoverable with interest. Further, penalty was proposed under Section 77 and 78 of the Act. The show cause notice further states that as per the information received from CERA (Review) vide letter No.CERA/Review/ST/54/09-10 dated 17.06.2009, the appellant was engaged in construction of staff quarters for Power Grid Corporation of India Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not be taxable. However, if such constructions are for commercial purposes like local Government bodies getting shops constructed and letting them out, such activity would be commercial and builder would be subject to service tax. 4. Further, admittedly, the staff quarters have been allotted free of cost by the Power Corporation Grid Corporation to its employees and hence, there is no commercial purpose and there is no liability to service tax. 5. Vide Order-in-Original dated 30.03.2011, the Joint Commissioner recorded a finding that Power Grid Corporation, which have got the staff quarters constructed, have allotted the same free of charges to its employees and hence, these are not occupied for commerce or industry. Further, taking notice of Section 65(91a), it was observed that Power Grid Corporation has got the staff quarters built for themselves. Hence, the service provided by the appellant falls under the category of construction of residential complex as defined under Section 65(30a) read with Section 65(91a) and accordingly, the proposed demand was confirmed along with interest and further penalties of ₹ 5,000/- was imposed under Section 77 and ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authority. Common area would include roads staircases and other similar areas where residents of the residential complex have easement rights. Further, I find that Section 65(91a) of the Act states specifically that residential complex constructed by an individual, which is intended for personal use as residence and is constructed by directly availing services of a construction service provider, is not covered under the scope of the service tax and not taxable (para 13.4 of MF(DR) Circular No.B1/6/2005- TRU dated 27.7.2005). Personal use has also been defined in the explanation to include permitting the complex for use as residence by another person on rent or without consideration. From the case records, it is evident that the appellant was engaged by M/s. PGCIL to construct residential quarters for use by employees of M/s. PGCIL on rent or without consideration. Hence, the buildings constructed by the appellant cannot be considered to be residential complex taxable under service tax law. Thus, I find that no service tax liability on this account is attached to the appellant. 12. It is further urged that extended period of limitation is not invokable as there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had called the tender on behalf of the Bihar Electricity Board. Further, reliance is placed on Master Circular No.96/7/2007 dated 23.08.2007 , which reads as follows:- In a case where the builder, promoter, developer or any such person builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of the said residential complex, the contractor in his capacity as a taxable service provider (to the builder/promoter/developer/any such person) shall be liable to pay service tax on the gross amount charged for the construction services under construction of complex service [section 65(105)(ZZZH)] . Thus, the contention of the appellant that such quarters were for use of employees of the Power Grid Corporation is not tenable as the owner of the quarters is Bihar State Electricity Board. 15. Having considered the rival contentions, we find that admittedly, it is a case of composite contract, as held by the Hon ble Supreme Court in the case of Larsen Toubro Ltd. (supra). No service tax is chargeable on composite contracts prior to 1.6.2007 when works contract service was introduced. The Hon ble Supreme Court also held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and 08.12.2005 (for Phulparas Substation). All these quarters were constructed for the use by the staff of M/s Power Grid Corporation. Alleging that the construction activities undertaken by the appellants were classifiable as Construction of Residential Complex Services as defined by the 65 (105) (zzzh) of the Finance Act, 1994 a show cause notice was issued to the appellants demanding service tax stating the gross amounts received by the appellants for providing these taxable services. Appellants contested the show cause notice before the original authority and then in appeal before the Commissioner (Appeals). Aggrieved by the order in appeal appellants have preferred this appeal before us. 1.2 We have heard Shri Abhijit Biswas, Advocate for the Appellants and Shri Joydip Chattopadhyay, Superintendent, Authorized Representative for the revenue. 2.0 The Section 65 (91a) of the Finance Act, 1994 is reproduced below: (91a) residential complex means any complex comprising of (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smission System: Specification No.: POWERGRID/BIHAR ST/Sub-stn/3/J , reads as follows: 3.0 Award of Contract and its Scope We are pleased to accept your bid for the subject package submitted by vide your proposal read in conjunction with the agreement reached between POWERGRID and you in the Record Notes of Discussion, referred to at para 2.1 herein above, and award you a Contract on behalf of Bihar State Electricity Board (BSEB), the owner, for Construction of Quarters and Associated Amenities at 132/33 kV sub-station at Madhubani (Package-)) under Group-II, associated with Bihar Sub-transmission System as per BOQ, specifications direction of Engineer-in-Charge. For the execution of the contract, the contractual actions on the part of the owner shall be performed by POWERGRID for and on behalf of BSEB. Wherever reference to POWERGRID is made in the bidding documents, Letter of Award or any related paper/ documents, it shall be deemed to be for and on behalf of BSEB . Under this Letter of Award, Owner' shall mean Bihar State Electricity Board' (BSEB) and shall include their legal representatives, successors and assigns. 'Employer /POWERGR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. It says that the owner of the residential Quarters and associated Amenities, is Bihar State Electricity Board and not the Power grid Corporation. The claim made by the appellants that these residential quarters have been got constructed by M/s Powergrid Corporation is contrary to the above statement in the letter of award which is legally binding document binding on parties to the contract. The claim made by the appellants, to effect that these residential quarters and amenities, have been got constructed by the M/s Powergrid Corporation for their own use or for letting them out on rent, is not supported by any documentary evidence. Hence the claim made by the appellants that these residential quarters are covered by the exclusion clause of the definition of residential complex as per Section 65 (91a) of the Finance Act, 1994, as it existed then is not substantiated. 5.0 In the present case under consideration the Appellant has not been engaged by Bihar State Electricity Board, the owner of residential quarters as per the letter of award. Undisputedly the appellants have been engaged by M/s Powergrid Corporation for construction of these residential quarters, hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held as follows: 18 . The Residential Complex in question was undertaken to be constructed by the respondent assessee M/s. Nithesh Estates Limited for ITC Limited under the Contract dated 1-4-2006. It is equally undisputed before us that the construction activity in question was in its entirety sub- contracted by M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited. There is no material on record or evidence to indicate that any part of construction activity in question was undertaken by the respondent assessee M/s. Nithesh Estates Limited itself. The fact of sub-contract of the entire Residential Complex in question by the respondent assessee M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited is not disputed by the Revenue. It is also not disputed that due Service Tax on the payments made to the sub-contractor M/s. L T Limited stood paid to the Government. 19 . The Central Board of Excise and Customs (C.B.E. C.) for the pre- amendment period prior to 1-7-2010 has issued the aforesaid Circular No. 108/2/2009-S.T., dated 29-1-2009 clarifying this position, that in such cases, where the ultimate owner (M/s. ITC Limited in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , how another Corporate body like M/s. ITC Limited in the present case could be denied the benefit of that type of user of Residential Complex to be occupied by its Managerial Staff. The law does not envisage any such distinction among the Private Sector Corporate Entities and the Departments of Government or Government Companies or Undertakings. 7.0 After examining the Letter of Award referred earlier vis a vis the relationship amongst the parties therein, undisputedly Bihar State Electricity Board, is the owner of the residential quarters, and for the construction of the same, they have entered into agreement with M/s Powergrid Corporation. In turn M/s Powergrid Corporation has engaged the Appellants for execution of these works through them. Thus the appellants become sub contractor to the main contractor for construction of these residential quarters for Bihar State Electricity Board. In the case of Nithesh Estate, referred above, the sub contractors viz L T had discharged the entire tax liability for construction of the residential complex for ITC, for which the main contractor was M/s Nithesh Estates. 8.0 Appellants have relied upon other decisions to support the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case the New Thermal Power Station, Parli is the such person and the respondent is another person . I find that the staff quarters constructed by the respondent are not covered under the definition of Construction of complex under Section 65(30a) ibid and therefore the activity does not attract Service tax. Therefore, I find that the adjudicating authority has rightly dropped the show cause notice. The impugned OIO needs no interference. The appeal merits rejection. In this case the appellant was engaged by the New Thermal Power Station, Parli who were the owner of the flats, whereas in the case under consideration, the appellant is sub contractor to the main contractor. Hence the facts of these case are clearly distinguishable. Kasana Builders Pvt Ltd [2019 (24) GSTL 231 (T)] In this case tribunal has observed as under: 2 . We note that the grounds raised by Revenue is that the Central Board of Excise Customs through clarification dated 24-5-2010 had clarified that if NBCC constructed residential houses for Central Govt. then the same were not taxable, but if NBCC further awards a contract to sub-contractors, then sub-contractors were l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services such as park, lift, parking space, community hall, water supply or effluent treatment system, located within a premises. Further perusal of show cause notice indicates that Revenue could not make out a case that there were any such common facilities. We, therefore, hold that the appellant in the instant case did not provide construction of residential complex service. We, therefore, set aside the impugned order and allow the appeal. Since this decision does not decide the issue under consideration it cannot be considered an authority on this subject. 9.0 Appellants have also relied upon the decision of Commissioner (Appeal) in their own case [843/PAT/S.Tax/Appeal/2014 dated 23.07.2014 to support their case. The appeal filed by the revenue against the said decision was withdrawn by the revenue on monetary grounds as per the Litigation Policy of the Government, as per tribunal order No 14/07/2016 [in appeal No ST/ 5054/2015] dated 14.07.2016. We do not find any merits in the submissions made in view of the provision of Section 35 R of the Central Excise Act, 1944 which reads as follows: SECTION 35R. Appeal not to be filed in certain cases. - (1) The Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be a ground for taking the view that the credit taken by the petitioner was correct and its reversal was illegal and Article 14 cannot be invoked by the petitioner for claiming equality [See Chandigarh Administration v. Jagjeet Singh J.T. 1995 (1) S.C. 445]. 10.0 The appellants have suppressed the information in respect of the actual owner of the residential quarters constructed by them. They have stated that M/s Powergrid Corporation are the owner of residential quarters and have awarded the contract to them for building these residential quarters for their own use, hence they are covered by the exclusion clause to the definition Residential Complex as per Section 65 (91a). The submission made by the appellants is contrary to the letter of award referred earlier. By doing so appellants have intentionally avoided payment of Service Tax due. For the act of suppressing these facts with intention to evade payment of service tax due, extended period of limitation as per Section 73, has been rightly invoked against the appellants. Adjudicating Authority has for invoking extended period held as follows: It is also established that noticee did not take registration within thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25 . In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26 . We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptember, 2004 and Notification No. 01/2006, dated 1st March, 2006; the allowance of abatement is a clear demonstration of ascertainment that supply of goods did form a part of the contract. Therefore, we have no hesitation in accepting the said contracts in dispute to be composite contracts for supply of both goods and services. 8. We note that the findings of the adjudicating authority do accept that supply of goods were involved in the contracts and that he was merely sceptical that VAT liability had been discharged on the goods supplied in the contract; whether VAT liability was discharged on the goods or not is irrelevant in the light of the decision of the Hon ble Supreme Court in re Larsen Toubro and Ors. We, therefore, have to merely determine the scope of taxability of works contract service rendered before and after 1st June, 2007 under the Finance Act, 1994. 14.0 Both the decisions, rendered in the case of M/s Larsen Tubro and M/s URC Constructions were not before the concerned authorities for consideration. Since no finding has been rendered by the original and first appellate authority on the applicability of the ratio of these decisions, in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l record before the Hon ble President for nomination of learned third Member to consider the aforementioned questions on difference of opinion, for his opinion. (ANIL CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) Member (TECHNICAL) Per Rachna Gupta Arguments with respect to the issues due to difference of opinion among the Hon ble Members of the bench who decided the impugned matter, have been heard. Issue wise findings are as follows: Issue No. 1 Construction of residential complex for personal use is excluded under Explanation II to Section 65(91a) read with Section 65(30a), 65(105)(zzzza) and 65(105)(zzzh) and hence not taxable, as held by the learned Member (Judicial) OR In view of the CBEC Circular dated 24.05.2010 (para 3 of the circular) where work is done by the sub-contractor, it does not fall under the Exclusion Clause of Section 65 (91a) and hence is taxable, as held by the learned Member (Technical). 2. On this issue it is submitted on behalf of the appellant that the residential complex services have been provided by the appellant to Power Grid Corporation India Ltd. (hereinafter referred as PGCIL) for cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter is Bihar State Electricity Board (hereinafter referred as BSEB). The appellant had been engaged not by BSEB but by M/s. PGCIL. It is also submitted that M/s. PGCIL is not a Government authority, it is rather a corporation. Hence, the service provider shall not be exempted from the tax liability. Learned Departmental Representative further submitted that the above fact is also sufficient to hold that the appellant is the sub- contractor, and since the sub contractor has provided the services to a non-government body, he is actually liable to discharge the service tax liability. Circular dated 24.5.2010 has been impressed upon. With these submissions, findings rendered by Hon ble Member (Technical ) have been impressed upon. 4. To adjudicate this issue foremost reference to the legal provisions defining the impugned service of construction of complex/ residential complex and those providing taxability of these services need to be looked into: 5. Section 65(30a) of the Finance Act, 1994 define construction of complex as under: a. Construction of a new residential complex or a part thereof; or b. Completion and finishing services in relation to residential complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is used as residence even by another person on rent or without consideration, it shall be considered as personal use by such person as mentioned in above clause (iii) of section 65(91a). The Explanation (b) clarifies that a residential unit means a single house or a single apartment intended for use as a place of residence. 8. Applying this legal position to the facts of the present case, it is observed from the show cause notice itself that the appellant was observed to have been engaged in providing construction of the residential complex service to M/s. PGCIL, Patna for constructing the complex for staff quarters of M/s. PGCIL at three different locations viz. Madhubani, Phulparas and Darbanga in Patna. M/s. PGCIL, in turn, admittedly, has given these quarters to its staff free of charge. Thus it becomes clear that there is no element of commerce /industry when M/s. PGCIL received services of construction of residential complex from the appellant. Further, I observe that the appellant was engaged by M/s. PGCIL only vide the letter of Award for Construction of Quarters dated 20.01.2005. 9. I further observe that it is not the case of the department that the complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person of the said sub clause and appellant being the any other person . Hence, irrespective the impugned service is the service of construction of residential complex but is the one as stands exempted from the tax liability due to the exclusion given to the residential complex which is meant for personal use as residence by the person who directly engaged the service provider and that no element of commerce or industry is involved. 12. The Board s circulars No. B2/8/2004-TRU dated 10.9.2004 and Circular No. 80/10/2004/ST, dated 17.09.2004 also clarifies the same. 13. Relevant para 13.2 in both the Board circulars are reproduced herein below:- 13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is used, or to be used for commerce or industry . The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon ble Member (Judicial) on this issue. Issue No. 2 In the facts and circumstances, the appellant is not a sub- contractor, as held by the learned Member (Judicial) OR The appellant is a sub-contractor, as held by the learned Member (Judicial) 17. As far as the submissions for personal use not leviable to service tax under the category of residential complex service also the existence of main contractor and sub contractor is concerned, appellant has relied upon the following decisions: 1) CC, CCE ST vs Kasana Builders Pvt Ltd. [2019 (24) GSTL 231 (Tri-All)]; 2) M/s. Rama Construction Company vs CCE, Delhi I [2018 (9) TMI-917(T)] 18. It is submitted on behalf of the appellant that as it is an admitted fact that the appellant constructed staff quarters for Power Grid Corporation India Ltd., Patna. During the period from 2006-08 at Madhubani, Phulparas and Darbanga who in turn has given these quarters to its staff, free of charge and for the purpose M/s. PGCIL has engaged the appellant. This fact conclusively establishes that present is not the case of existence of main contractor and sub-contracts relationship. It is submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Quarters dated 20.1.2005 issued by M/s. PGCIL in favour of present appellant. Perusal thereof shows that M/s. PGCIL was not engaged by M/s. BSEB for providing the construction services but was authorized to act on their behalf to engage any other person who may provide the construction of residential complex services. Apparently and admittedly, PGCIL is not the concern which is engaged in providing services of construction of residential complex. This particular finding is sufficient for me to hold that the appellant cannot be called as sub -contractor of PGCIL. PGCIL rather was the agent acting on behalf of BSEB and as such is to be classified as a person as mentioned in sub-clause (iii) of 65(91(a). In view of this finding, CBEC Circular No. 25/2010 as relied upon by Hon ble Member (Technical) has no significance. The said circular talks only about the sub-contractor being engaged by the provider of service of construction of residential complex for providing the said services to the persons for him he was otherwise engaged as the service provider. 22. As already discussed under issue No. 1, clause (iii) of Award of Contract is not about M/s. PGCIL being engaged by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice provided by the appellant falls under the exclusion part of Section 65 (91a)(iii). The appellant is not liable to pay the service tax. Otherwise also the services rendered are apparently and admittedly in the nature of composite contract or work contract service. In terms of decision of Hon ble Supreme Court in the case of Commissioner of Central Excise vs. Larsen and Toubro reported in [2015 (39) STR 913] tax cannot be charged for such services for the period prior to 7.2.2012. Though the period in dispute is pre as well as post the said date, even for the post dated period, the appellant is not liable to pay the service tax, the service being covered under exclusion part of 65(90a)(iii), Finance Act. In the light of above discussion, not only on this issue but on the Issue No. 1 as well, I am in consonance with the findings rendered by Hon ble Member (Judicial) on this issue in the impugned order. Issue No. 3 Extended period of limitation is not attracted, as held by the learned Member (Judicial) OR Extended period of limitation is attracted, as held by the learned Member (Technical) 23. So far as the third issue of extended period of limitation is c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by a person i.e. M/s. PGCIL who require the said residential complex for their own personal use, was not liable to pay the service tax. The Board s circular of May, 2010 and the proviso to section 73 of Finance Act invoking the extended period of limitation are observed to be not applicable to the facts and circumstances of the present case. I am in agreement with the findings of Hon ble Member (Judicial) setting aside the order of Departmental Adjudicating authority confirming the demand. I do not deem fit that the case be remanded back for redetermination of the quantum of duty liability in terms of decision of M/s. Larsen and Toubro (supra) and in the case of URC Construction Pvt. Ltd. reported in [2017 (50) STR 147] Once the facts of this case stand distinguished absolutely from the finding and the facts of the case of Nitesh Estates Limited (supra) and from relied upon the Circular dated 24.5.2010, the question of redetermination of duty liability did not at all arise. Hence I am in consonance with the findings of Hon ble Member (Judicial) on this issue as well 27. Consequent to the above discussion on the issues under reference I confirm the findings of Hon ble Member ..... X X X X Extracts X X X X X X X X Extracts X X X X
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