TMI Blog2022 (1) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... (VICE-VERSA) [ 2019 (9) TMI 792 - CESTAT HYDERABAD] has dealt in great details the option of paying Service Tax under the composition scheme and it cannot be forced on the assessee. Appeal dismissed. - Service Tax Appeal No.76795 of 2017 - FINAL ORDER NO. 75029/2022 - Dated:- 11-1-2022 - SHRI P.K.CHOUDHARY, MEMBER (JUDICIAL) AND SHRI P.V.SUBBA RAO, MEMBER(TECHNICAL) Shri A. Roy, Authorized Representative for the Appellant (s) Shri Puneet Agrawal Shri Yuvraj Singh, Advocates for the Respondent (s) ORDER The present appeal has been filed by the Revenue being aggrieved with the Order-in-Original dated 09thJune, 2017 passed by the learned Commissioner, whereby the demand of Service Tax of ₹ 8,67,02,265/- for the period 2010-11 to 2014-15 as proposed in the Show Cause Notice (SCN) dated15th October 2015 has been dropped by the Ld. Commissioner. 2. Briefly stated, the facts of the case are that the Respondent inter alia is engaged in the provision of Erection, Commissioning and Installation Services, Works Contract Services and Goods Transport Agency Services and are engaged in execution of turnkey contracts for various power distribution authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f valuation for works contract service to the Respondent. He further stated that when the classification of the service as per the SCN has been accepted by the learned Adjudicating authority then dropping of demand on the ground that proper valuation has not been considered by the department while issuing the SCN is bad in law and hence the demand should have been confirmed as the Respondents have mis-declared their classification of services. He thus relied on the grounds of appeal filed by the department. 4. Shri Puneet Agarwal, learned Advocate appeared on behalf of the Respondent. He contended that the order of the learned Adjudicating authority is a detailed order covering all aspects of taxation of work orders in dispute and the learned Commissioner has rightly dropped the demand of Service Tax as in the present case the Respondent has correctly paid Service Tax on the entire service component of the contract as defined in the work order. He further submitted following judgments in his favour: a. Commissioner of Central Excise Customs, Kerala Vs Larsen and Toubro Ltd (2016) 1 SCC 170 b. Federation of Indian Hotel and Restaurant Association of India C UOI 2016 (44) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the arguments on both sides and perused the records. The demands in all these cases are under the works contract. There is no dispute that in all these cases the appellant not only supplied materials but also rendered services related to the works contract. Therefore, these are all composite works contracts. It is not in dispute that the appellant has not sought or followed the procedure required for composition scheme. Now, we proceed to decide each of the demands on merits. (i) The demand of Service Tax on residential complex services : At this stage, it would be profitable to examine the various legal provisions and to issue decisions with regard to levy of Service Tax on construction of residential complex services. (a) The Constitution of India divided the legislative powers between the Union and States listing them in three lists of the Seventh Schedule. Service Tax is levied by the centre as per its legislative competence under Article 265 read with Entry 97 of List I of this Schedule. Tax, on sale or purchase of goods, falls in the competence of States as per List II. Initially, Constitution of India (as well as its predecessor Government of India Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied a tax (hereinafter referred to as the Service Tax) at the rate of ten per cent of the value of taxable services referred to in sub-clauses of clause (105) of Section 65 and collected in such manner as may be prescribed. (f) The sub-clauses of clause (105) of Section 65 listed various services. With effect from 1st June, 2007, Works Contract Service has been introduced in this clause by sub-clause (zzzza) of clause (105) of Section 65. Even before the introduction of this sub-clause, Revenue sought to charge Service Tax under various other heads on composite works contracts allowing abatement towards the cost of materials as per applicable notifications. Hon ble Apex Court held that works contract is a separate species of contract distinct from the contract for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. It was further held that prior to the introduction of sub-clause (zzzza) of clause (105) of Section 65, there was neither any charging section nor machinery to levy and assess Service Tax on indivisible works contracts. The relevant paras of this landmark judgment are as below : 17. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by Counsel for the revenue that several exemption notifications have been granted qua Service Tax levied by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of Service Tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of. 45. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the Revenue. (g) Thus, the established legal position is that Works Contract Service can be charged as works contracts only under Section 65(105)(zzzza) and only with effect from 1-6-2007. (h) In the case of Real Value Promoters Pvt. Ltd. and Others as reported in 2018 (9) TMI 1149-CESTAT, Chennai, the question which arose was whether a demand can be made on commercial and industrial construction service under Section 65(105)(zzzh) of the Finance Act, 1994 after 1-6-2007 where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects; (l) Before the introduction of the explanation in [sub-clause] (zzzh) w.e.f. 1-7-2010, in all cases where the builder entered into an agreement to sell flats and collected advances, but the actual transfer of the property took place only after the completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the question as to whether the activity of M/s. Krishna Homes and M/s. Raj Homes was taxable during the period of dispute or not, by Finance Act, 2005, Clause (zzzh) was introduced into Section 65(105) of Finance Act, 1994, so as to bring within the purview of the term taxable service , a service provided or to be provided to any person by any other person in relation to construction of complex . The expression construction of complex was defined in sub-section (30a) of Section 65 and accordingly this expression covered - (a) construction of a new residential complex or a part thereof or (b) completion of 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 . The expression residential complex was defined in Section 65(91a) of the Finance Act, 1994 as any complex comprising of - (i) a building or buildings, having more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a new building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer. Thus, in terms of this explanation, when a builder/promoter/ developer got a residential complex constructed for his customers with whom he had individually entered into agreements, in terms of which the prospective customers were required to make payments for the residential units to be constructed in instalments and the possession of the residential units was to be given to the customers on completion of the complex and full payment having been made, the builder/promoter/developer was to be treated as a deemed provider of construction of residential complex service to his customers. Thus, by this explanation, the scope of the Clause (zzzh) of Section 65(105) has been expanded and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65(105)(zzzh) w.e.f. 1-7-2010, and therefore, it has to be held that such contracts were not covered by Section 65(105)(zzzh) during the period prior to 1-7-2010. (n) To sum up, as far as construction of residential complexes by the builders are concerned : (i) Prior to 1-6-2007, if it is a composite works contract, no Service Tax is leviable in view of the judgment of the Hon ble Apex Court in the case of Larsen Toubro (supra). (ii) After 1-6-2007, it is chargeable as works contract only if it is a composite contract and under construction of complex services if it is a service simpliciter. (iii) However, after 1-6-2007 but prior to 1-7-2010, whether it is a service simpliciter or a works contract, if the service is rendered prior to issue of completion certificate and transfer to the customer, it is not taxable being in the nature of self service. (iv) Further, whenever the service is rendered for completion or construction of a flat for personal use of the service recipient, no S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the demand on construction of administrative building for IRS is liable to be dropped and we do so. 12 . In view of the above, we find that the demand under works contract on construction of residential complexes post 1-7-2010 and on construction of cancer hospital building need to be upheld and the rest of the demands need to be set aside. As far as the composition scheme is concerned, the assessee has the option of paying Service Tax under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, if he chooses to do so. The mere fact that they have not opted for this earlier does not reduce their entitlement to opt for this scheme now. The demand of Service Tax needs to be recomputed as above, after following principles of natural justice and giving the assessee an opportunity to present their case including, indicating if they desire to avail the benefit of composition scheme. Interest as applicable will have to be paid on the differential Service Tax, if any. 11. We find that the Tribunal in the above judgment has dealt in great details the option of paying Service Tax under the composition scheme and it cannot be forced on the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
