TMI Blog2023 (9) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... n was provided along with material is not under dispute. If this is be so then the service is clearly classifiable under works contract service and up to 01.06.2007, the service tax was not leviable on works contract service was held by the Hon ble Supreme Court in the case of Total Environment Building System P. Ltd [ 2022 (8) TMI 168 - SUPREME COURT ]. As regard the period post 01.06.2007, the demand is not sustainable on the ground that despite the service of works contract service, the demand was raised under construction of residential complex. Since the service tax of works contract service demanded under different head i.e. Construction of Residential Complex the same is not legal and correct. It is found that as per the Board Circular No. 108/02/2009 dated 29.01.2009, the construction service provided by the builder/developer was not taxable up to 01.07.2010. This particular issue has been considered by this Tribunal in the case of COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, VISAKHAPATNAM - I VERSUS M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) [ 2019 (9) TMI 792 - CESTAT HYDERABAD] where it was held that It is well settled legal position that whether the serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri-partied arrangement with the land owner and buyer of property, and recovered construction amount. The period during which such income was realized falls both prior to as well as after 01.06.2007. 2.1 He submits that the service of the appellant clearly falls under the category of works contract service as the construction service was provided along with material. This fact is admitted in the show cause notice itself as abatement of 67% was extended while raising the demand. The said abatement is available only when the service is provided along with material. In this fact the service is clearly classifiable under works contracts service, hence, the demand raised under Construction of Residential Complex is not sustainable. He placed reliance on the following judgments:- Total Environment Building Systems P. Ltd 2022 (63) GSTL 257 (SC) L T Ltd- 2015 (39) STR 913 (SC) 2.2 He submits that in respect of works contract service till 01.06.2007 there was no service tax, therefore till that date there was no levy of service tax. After 01.06.2007 also demand will not sustain as the same was raised under the category of construction of residential complex. 2.3 He w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd (Supra).As regard the period post 01.06.2007, the demand is not sustainable on the ground that despite the service of works contract service, the demand was raised under construction of residential complex. Since the service tax of works contract service demanded under different head i.e. Construction of Residential Complex the same is not legal and correct. 4.1 Without prejudice, we further find that as per the Board Circular No. 108/02/2009 dated 29.01.2009, the construction service provided by the builder/developer was not taxable up to 01.07.2010. This particular issue has been considered by this Tribunal in the case of Pragati Edifice P. Ltd -2019 (31) GSTL 241 (Tri.Hyd):- 11 . We have 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Entry 97 of List I (Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists). (d) The question as to whether such taxation is covered by the charging section of the Service Tax provisions (Finance Act, 1994) or otherwise was examined by the Hon ble Supreme Court in the case of Commissioner of Central Excise and Customs v. Larsen Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)]. The charging sections in this Act are Sections 66 and 66A. While Section 66 provides for charging services within India, 66A provides for charging the recipient of a service for services received from outside India. (e) Section 66 reads as follows : There shall be 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 introduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract. 42. It remains to consider the argument of Shri Radhakrishnan that post, 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell s case. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess Service Tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works 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 44. 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 fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer. (k) The definition of Works Contract Service is as follows : (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. - For the purposes of this sub-clause, works contract means a contract wherein, (i) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of residential complexes is concerned, prior to 1-7-2010 (when the explanation was inserted), no tax could be levied. This was also clarified by the C.B.E. C. in Circular No. 108/2/2009-S.T., dated 29-1-2009. The question as to whether this limitation on taxation prior to insertion of the explanation in construction of complex services also extends to cases where such services are rendered as works contract service was examined and answered in affirmative in the case of Krishna Homes (supra) by the Tribunal. This ratio has been followed in subsequent orders including by this bench. The relevant portion of the order in the case of Krishna Homes v. CCE, Bhopal [2014 (34) S.T.R. 881 (Tri. - Del.)] is as follows : Coming first to 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 def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pay Service Tax on the gross amount charged for the construction service provided to the builder/promoter/developer under construction of complex service falling under Section 65(105)(zzzh) of the Finance Act, 1994 and that if no person is engaged by the builder, promoter, developer for construction work who undertakes construction work on his own without engaging the services of any other person than in such cases, in absence of the service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. W.e.f. 1-7-2010 an explanation was added to Section 65(105)(zzzh) which was as under :- Explanation. - For the purposes of this sub-clause, the construction 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sen Toubro Limited and Others v. State of Karnataka Others (supra), the agreements entered into by a builder/promoter/developer with prospective buyers for construction of residential units in a residential complex against payments being made by the prospective buyers in instalments during construction and in terms of which the possession of the residential unit, is to be handed over to the customers on completion of the residential complex and full payment having been made, are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with prospective customers for construction of residential units in a 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) Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o so. (iii) The demand of Service Tax on construction of administrative building for Indian Registrar of Shipping : We find 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 of other regulatory agencies such as RT officer, Transport Authority charging fees for issuing a driving license or for registering a vehicle. It is neither an organisation involved in commerce or industry nor does the organisation make any profit. In view of the above, we find that 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 Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yers. Revenue proceeded against them on the ground that they have evaded payment of Service Tax on the services rendered by them to their customers in the category of Commercial or industrial Construction Services during the period 2004-05 to 2008-09. Whereas, we find that an explanation was added by the Finance Act, 2010 in Section 65(105)(zzzh) of the Finance Act, 1994 which reads as under : Construction of a Complex 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 a person authorized by the builder before the 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. Further, the Board issued clarification on the construction service vide Circular No. 151/2/2012-S.T., dated 10-2-2012 as under : (A) Taxability of the construction service : (i) For the period prior to 1-7-2010 : construction service provided by the builder/devel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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