TMI Blog2018 (9) TMI 1149X X X X Extracts X X X X X X X X Extracts X X X X ..... of construction of new building or civil structure or new residential complex etc. involving indivisible composite contract, such services will require to be exigible to service tax liabilities under ‘Works Contract Service‟ as defined under section 65(105)(zzzza) ibid - The show cause notices in all these cases prior to 1.6.2007 and subsequent to that date for the periods in dispute, proposing service tax liability on the impugned services involving composite works contract, under ‘Commercial or Industrial Construction Service‟ or ‘ Construction of Complex‟ Service, cannot therefore sustain. In respect of any contract which is a composite contract, service tax cannot be demanded under CICS / CCS for the periods also after 1.6.2007 for the periods in dispute. Demand raised for the reason that appellants did not intimate the department about their intention to opt for payment of service tax under composition scheme under Works Contract Service - Held that:- The Tribunal in the case of Vaishno Associates Vs. Commissioner of Central Excise [2018 (3) TMI 417 - CESTAT NEW DELHI] had occasion to consider this issue and held for sole reason of not filing the intimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Non-payment of service tax on the services provided to land owners 48,98,579/- Residential Sai Brindavan Non-payment of service tax on the services provided to land owners Rs.15,49,944/- Total Rs.2,06,20,252/- 2.1 Another Show Cause Notice No. 570/2009 dated 20.10.2009 was also issued in respect of amount received towards construction of residential apartments and commercial complexes for the period from 1.4.2008 to 31.3.2008. It appeared to department from the nature of the services provided, that appellants are liable to pay service tax under construction of complex services or under commercial construction service in terms of section 65(105)(zzzh) and section 65(105)(zzq) of the Finance Act, 1994. The show cause notice also proposed demand of ₹ 1,05,99,978/- on the following projects:- Name of the Project Allegation Tax liability Commercial PRGT Non-payment of service tax on the services provided to buyers Rs.1,05,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision in the case of Vasihno Associated vide Final Order No. 50871/2018 dated 6.3.2018 to argue that the non-intimation to the department is only a procedural lapse and that the same may be condoned. 3. Today, when the matter came up for hearing, ld. counsel Shri G. Natarajan, appeared for Real Value Promoters Pvt. Ltd. and took us to the history of introduction of service tax on various construction services and also made various contentions, submissions in respect of the matter under appeal. The submissions and contentions of the ld. counsel can be broadly summarized as under:- 3.1 Service Tax was introduced on the following taxable services from the dates mentioned against each: S.No Name of the service Section of the Finance Act, 1994 Introduced with effect from 1 Commercial or industrial construction service (CICS) 65 (105) (zzq) 01.07.2003 2 Construction of Complex Service (CCS) 65 (105) (zzzh) 16.06.2005 3 Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax on the gross amount, including the value of transfer of property in goods also, which is constitutionally impermissible. The exemption notifications issued at the discretion of the executive are not sufficient to sustain the levy. The Hon‟ble Apex Court has also observed that only with the introduction of WCS as a separate taxable service, statutory mechanism to exclude the value of transfer of property in goods has been prescribed. 3.6 The effect of the above decision is that CICS and CCS, as defined under clauses (zzq) and (zzzh), respectively, of sub section (105) of the section 65 would cover only pure service contracts, without any transfer of property in goods. 3.7 In various decisions the importance of classification of services has been laid down and it has been held that once the show cause notice proposes demand of service tax under a particular category of taxable service, the adjudicating / appellate authorities cannot travel beyond the scope of allegations in the show cause notice and confirm the demand under a different category of taxable service as the assesse was not at all put on notice on the new category of taxable service. These d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... composite contracts (commercial buildings, residential buildings, service provided to buyers and service provided to landowners). If the plea that such demands under CICS and CCS for the period both prior to and post 01.06.2007 is not sustainable is upheld, there is no need to advance any further arguments specific to the projects in question. 4. The above arguments advanced by the ld. counsel Shri Natarajan was adopted by ld. counsel Shri Raghavan Ramabhadran and ld. consultant Shri Ramachandra Rao. 5. On the other hand, the ld. AR Shri A. Cletus has made oral and written submissions, which can be broadly summarized as under:- 5.1 That even prior to 1.6.2007 from which date Works Contract Services were introduced in the Finance Act, 1994, the construction services like CICS and CCS were subject to levy of service tax. These services have not been deleted or omitted from the Act ibid after 1.6.2007 when works contract service was introduced. This can only mean that after 1.6.2007 also such services (CICS / CCS) are leviable to service tax being composite contracts. 5.2 The argument of the appellants that these services were introduced prior to 1.6.2007 and as per the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex; 7.3 Residential Complex‟ was defined in section 65(91a) ibid during the disputed period as under:- 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 space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for design ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 223;ble Apex Court in the case of Commissioner of Central Excise Vs. Larsen Toubro Ltd. reported in 2015 (39) STR 390 (SC). The Hon‟ble Apex Court held that the taxable services of consulting engineer‟ under section 65(105)(g) of the Finance Act; erection, commission and installation services‟ under section 65(105)(zzd) of the said Act; technical testing and analysis‟ under section 65(105)(zzh) ibid; construction services‟ under section 65(105)(zzq); construction of complex services under section 65(105)(zzzh) would refer only to service contracts simpliciter and not to composite works contracts; that these five taxable services only would qualify without any other element. The Hon‟ble Supreme Court also observed that with introduction of works contract service as a separate taxable service, statutory mechanism to exclude the value of transfer of property of goods has been prescribed. The Apex Court held that since the Finance Act had not laid down any charge or machinery to levy and assess service tax on indivisible works contract prior to 1.6.2007, the levy on such composite works contract prior to that date has no constitutional validity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, they will necessarily fall within the ambit of works contract service as defined under section 65(105)(zzzza) ibid. It is possibly with this intent in mind that the lawmakers have included in the definition of works contract, erection and commissioning service, commercial or industrial construction service, construction of complex service and in addition turnkey projects including EPC projects within the definition of Works Contract Service. 7.9 At this juncture, it is worthwhile to reproduce excerpts from the Union Finance Minister‟s budget speech in 2007:- State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the words contract . 7.10 The issue was analyzed by the Hon‟ble Apex Court in Larsen Toubro case (supra) and held that there can be no levy of service tax on composite contracts (involving both service and supply of goods) prior to 1.6.2007. This read together with the budget speech as above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation (c). For both these categories for the definition of residential complex, the definition given in section 65(105)(91a) will have to be adopted as discussed above will have to be taken into account. 7.13 We find sustenance in arriving at this conclusion by a number of decisions of the Tribunal in which it has held as under:- a. In the case of Commissioner, Service Tax, New Delhi Vs. Swadeshi Construction Company 2018-TIOL-1096-CESTAT-DEL, the Tribunal in para 7 has held as under:- 7. We note that in the present case, the SCN was issued on 27.05.2011. On that date, both the tax entries, namely, Commercial orIndustrial Construction Service and Works Contract Service, were available in the Finance Act, 1994. The SCN did mention this in the first para itself. However, the proposal for tax demand was specifically made under Commercial or Industrial Construction Service under Section 65 (105) (zzq) of the Finance Act, 1994. In such situation, we note that it cannot be a case of simple mentioning of wrong provisions of law as submitted by the Revenue. Apparently, the tax liability of composite works contract is to be considered under works contract services only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines taxable service as any service provided . All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 26,88,611/-. We note that the appellant has not contested the liability under works contract for this period. The only argument brought forth by the Ld. Counsel is that they have discharged an amount of around ₹ 82 lakhs under this category after the visit of the departmental officers and therefore an amount of ₹ 36,88,611/- demanded in the impugned order should be considered as having been discharged. We find merit in his argument and hence the demand of ₹ 26,88,611/- under works contract service for the period 01.04.2008 to 30.09.2008 is required to be considered as having been paid, albeit subsequent to the visit of the officers. However, the interest liability if any that arise on this amount if not paid already will have to be discharged by the appellants. So ordered. 8. In the light of the discussions, findings and conclusions above and in particular, relying on the ratios of the case laws cited supra, we hold as under:- a. The services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or indust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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