TMI Blog2019 (9) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... e verified to ascertain the full tax liability for the period post 01.7.2010 or otherwise - Matter on remand. Demand of service tax - construction of Mahatma Gandhi Cancer Hospital and Research Institute - HELD THAT:- There are no reason to hold that the activity of a corporate hospital does not amount to commerce or industry. In fact, health care and hospitals is one of the most profitable and fast growing service industries in the country - there are no reason to hold that the construction of hospital building of a corporate hospital is excluded from the definition of works contract service. It is clearly covered by section 65 (105) (zzzza) (ii) (b) as a new building meant for the purpose of commerce or industry - demand upheld. Demand of service tax - construction of administrative building for Indian Registrar of Shipping - HELD THAT:- The Indian Registrar of Shipping is regulatory body who registers ships and vessels in the country and also classifies them and does related activities. These cannot be termed as an act of commerce or industry. Learned departmental representative submits that the IRS charges fees for its activities. Even if it does so it is similar to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service tax calculated on 1 Satyam Residency 61,38,894/- Works Contract Service 12.36/10.3% Advances Received 2 Green Homes 39,78,272/- Works Contract Service 10.3% Advances Received 3 James Enclave 33,46,934/- Works Contract Service 10.3% Advances received 4 Indian Registrar of Shipping 5,40,430/- Works Contract Service 4.12% (composition scheme) Reverse charge mechanism on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... administrative building of Indian Registrar of Shipping 5,40,430 5,40,430 5. He would submit that as far as the construction of residential complex services is concerned, they are not liable to pay service tax prior to 01.07.2010 as has been held by the Principal Bench of the Tribunal in the case of Krishna Homes v CCE, Bhopal [2014 (34) STR 881 (Tri-Delhi)]. This judgment was followed in the case of Kolla Developers Builders v CCCE ST, Hyderabad-II [2018 (11) TMI 164-CESTAT-Hyd] and Mehta Modi Homes v CCT, Secunderabad in Final Order No. A/31630/2018 dt.19.12.2018. 6. He would submit that prior to 01.07.2010 construction of residential complex services were not chargeable to service tax because even if some advance is received from the customers any service rendered by the builder towards construction was still treated as self service until the completion certificate is issued and the flat is transferred to the customer. If any service is rendered thereafter, such service was taxable. Further, if the service is towards completion of an individual home or flat then such service wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to (b) and (c); or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects. 8. He would argue that construction of a new building or civil structure is not taxable unless it is primarily meant for the purpose of commerce or industry. A hospital being neither an industry nor commerce it cannot be treated as covered under the definition of works contract services. On a specific query from the bench as to whether the hospital is a charitable one or a Government run hospital, learned counsel fairly submits that it is a corporate hospital meant for treatment of cancer and research in it. 9. As regards the third item of demand, he would submit that this demand is also on the construction of administrative building for Indian Registrar of Shipping. He would submit that Indian Registrar of Shipping, under Government of India (Ministry of Commerce) registers ships and classifies them. He would, therefore, urge that this cannot, by any stretch of imagination, be considered a building for commerce or for industry. In view of the above, he would urge that the entire demand needs to be set aside along with i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court in the case of State of Madras vs Gannon Dunkerley Co. (Madras) Ltd. 1959, SCR 379. After examining this judgement, the Law Commission of India, in its 61st Report suggested three alternative amendments to the Constitution to bring the goods used in execution of works contracts within the legislative competence of the States to tax. Accepting one of these alternatives, the Parliament passed the 46th Amendment to the constitution in 1983 by inserting sub-clause (29A) to Article 366, the definition clause as follows: 366 (29A) tax on the sale or purchase of goods includes - (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; b. This 46th Constitutional amendment was challenged in Builders Assn. of India v. Union of India, (1989) 2 SCC 645 and it was upheld by the Apex court. Thus, the goods component of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :- To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment. (at page 427) 27 . In fact, the speech made by the Hon ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax liability under the category of commercial or industrial construction service under Section 65 (105) (zzzh), Construction of complex service under Section 65 (105(zzzq) will continue to be attracted only if the activities are in the nature of services simpliciter. i. Thus, if the services rendered are in the nature of composite works contracts, they cannot be charged to service tax prior to 1.6.2007 and can be charged post this date only under this head 65 (105) (zzzza) and not under any other head. j. In the case of M/s. Krishna homes vs CCE Bhopal and CCE Bhopal vs M/s. Raj Homes as reported in 2014 (3) TMI 694- CESTAT Ahmedabad, the scope of taxing Composite Works Contracts rendered in connection with construction of complex services prior to 1.7.2010 was examined. Construction of complex services was covered in Section 65 (105) (zzzh) and in this clause an explanation was added wef 1.7.2010. This reads as follows: (zzzh) to any person, by any other person, in relation to construction of complex; Explanation. - For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided to the customer and hence was not taxable. Similarly, where the semi-built flats are sold and then the customer enters into an agreement with the builder for its completion, such agreement, being in the nature of service for a flat for personal use, was also excluded from the definition of residential complex under Section 65 (91a) which reads as follows: (ii) 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 designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 any authority under 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 designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person . There is no dispute that the complex constructed by both the assessees in these appeals are covered by the definition of residential complex as given in Section 65(91a). There is also no dispute that both the assessees had engaged contractors for construction of the complexes. The dispute in these appeals is as to whether the assessees would be liable to pay Service Tax on the amounts charged by them from their customers with whom they had entered into agreements for construction of the residential units and whose possession was to be handed over on completion of the construction and full payment having been made by the customers. It is seen that on this point, the Tax Research Unit of the Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of CCE, Chandigarh v. U.B. Construction (P) Ltd. (supra) as prospective amendment. In this regard, para 5 of this judgment is reproduced below :- 5. In Maharashtra Chamber of Housing Industry v. Union of India -(Bom.), the validity of the Explanation added to Sections 65(105)(zzq) and (zzzh) was challenged on several grounds. The Bombay High Court, also considered the issue whether the explanation was prospective or retrospective in operation and ruled that the explanation inserted by the Finance Act, 2010 brings within the fold of taxable service a construction service provided by the builder to a buyer where there is an intended sale between the parties whether before, during or after construction; that the Explanation was specifically legislated upon to expand the concept of taxable service; that prior to the explanation, the view taken was that since a mere agreement to sell does not create any interest in the property and the title to the property continues to remain with the builder, no service was provided to the buyer; that the service, if any, would be in the nature of a service rendered by the builder to himself; that the explanation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the exclusion in the definition of residential complex service. v. After 1.7.2010, service tax is chargeable under the head of construction of complex services if it is service simpliciter and under works contract service if it is a composite works contract. o. In view of the above, it is well settled legal position that whether the service is rendered as service simpliciter or as a works contract, no service tax can be levied on construction of residential complex prior to 01.7.2010. Learned counsel would submit that for the period post 01.7.2010, they have been discharging service tax appropriately. This is a fact which can be verified to ascertain the full tax liability for the period post 01.7.2010 or otherwise. ii. The demand of service tax on construction of Mahatma Gandhi Cancer Hospital and Research Institute : Learned counsel sought to impress upon us that it is not meant for industry or commerce and therefore, a hospital building cannot be subjected to service tax. We do not find any reason to hold that the activity of a corporate hospital does not amount to commerce or industry. In fact, health care and hospitals is one of the most profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e upheld, the assessee claims that they have already paid service tax on residential complex services from 01.7.2010 onwards. In view of the above, invoking the provision of Section 80, we set aside all the penalties. 14. In view of the above, both appeals are disposed of as below: A. The service tax under works contract services on construction of residential complexes post 01.07.2010 is upheld and the demand for the period prior to this date is set aside. B. The demand of service tax on construction of Mahatma Gandhi Cancer Hospital and Research Institute is upheld under works contract service. C. The demand of service tax on construction of building for Indian Registrar of Shipping is set aside. D. The appellant/assessee can opt for works contract (composition scheme), if they so desire, for the payment of service tax liability. E. Interest needs to be re-calculated on the differential service tax as above. F. All penalties are set aside. 15. The matter is remanded to the original authority for the limited purpose of calculation of service tax liability and interest as above, after following principles of n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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