2019 (7) TMI 59 - CESTAT MUMBAI

Construction of Complex Services - levy of service tax on the part of the construction of complex constructed prior to entering into the agreement to sale with the flat buyers/ customers - works contract - levy of VAT - CBEC Circular No 108/02/2009-ST dated 29.01.2009 - Levy of penalty - extended period of limitation.

HELD THAT:- Appellants are providing taxable service under the category of ‘Construction of Complex Services’ as defined by Section 65(105) (zzzh). The services provided by them in respect of residential complexes have been brought in the taxable category with effect from 01.07.2010 by insertion of explanation to Clause (zzzh) of sub section 105 to Section 65 - Appellants do not dispute the classification of the services provided by them under this taxable category. However in their appeal memo and during the course of argument they have contended that, the service provided by them is one of work contract, and have relied upon series of case laws to argue that in case of work contracts the VAT was leviable.

The issue under consideration is not of classification of services, whether as work contract or under the category of construction of complex services. At the material time both work contract services and construction of complex services were leviable to service tax. Since the services provided by the appellants are more specific to construction of complex services they get classified under that category which is more specific - The dispute in the present case is in relation to valuation of taxable services. Appellants have contended that in view of the above referred decisions the service tax cannot be levied in respect of activities undertaken by them prior to entering into agreement of sale with the buyer of flats.

There seem to be no iota of doubt with regards to the value to be taken for determination of the tax payable in respect of the services rendered by the appellants. Appellants have contended that certain portion of the works have been completed by them prior to entering into contract/ agreement of sale of the flats with the buyer. Hence no service tax can be demanded in respect of the works undertaken prior to entering into such agreement of sale - We are not in agreement with the contentions raised because the value of taxable service is not vis a vis the activity done prior to entering into contract/ agreement for sale, but is on the basis of gross amount (Consideration) received for providing the such construction of complex services. The gross consideration received cannot be vivisected into the on the basis of work done prior to and after entering into agreement for sale. If the argument advanced by the appellant was to be accepted then the taxable value for every flat sold in the same complex constructed by the appellant will vary depending on the date of agreement, though the gross amount charged for the same flat from the customer remains the same.

In the present case when the measure of levy has been prescribed to be based on 25% of the Gross Receipts then the same cannot be questioned on the basis of considerations such quantum of completed work before the agreement to sell.

Extended period of limitation - HELD THAT:- The SCN have been issued within a period of one year from the date of filing the returns, hence even without invoking the extended period of limitation the demand would not be hit by limitation.

There is no hesitation in upholding the demands of service tax made - However in respect of the Appellant 2, the demand needs to be reworked - interest is also upheld - penalty under Section 78 will also follow - By not furnishing the correct information as required on ST-3, appellant have made themselves liable to penalty under Section 77(2) read with Section 70 of the Act. Hence the penalties under Section 77(2) read with Section 70 of the Act upheld.

Appeal dismissed - decided against appellant.