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TMI Blog2024 (11) TMI 1049X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of residential apartments in various projects of the Appellant such as Sobha Primrose, Sobha Dahila, Sobha Carnation and Sobha Lavender. During the course of audit of their records for the period from April 2006 to March 2011 by the Internal Audit Team of the LTU, it was observed that in the agreements entered into by the Appellant with their customers for the sale and construction of residential apartments, that in addition to the construction cost, the Appellants were collecting amounts towards 'other charges' such as BESCOM charges, BWSSB(GBWSP) charges, legal charges etc. Accordingly, a Show Cause Notice dated 18.04.2012 was issued proposing to treat the "other charges" as taxable value under the category of 'commercial and industrial construction service' and demanded Service Tax of Rs.14,00,40,596/- with interest and penalty. The Commissioner vide impugned Order-in-Original dated 24.05.2013 confirmed the demand on the ground that the Appellants while rendering the service of "construction of Residential complex service" and "works contract" service collected certain amounts such as KEB charges, BWSSB charges and advocate fees from their customers, which has not been inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, by any other person, in relation to construction of complex;" Post 01.07.2010, an explanation was added to Section 65 (105) (zzzh), which reads as under "Explanation - For the purposes of this sub- clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorised by a 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 authorised 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" ( Emphasis Supplied ) He further submits that as per the Explanation, construction of a complex which is intended for sale by a builder or any person authorized by the builder, is deemed to be service by the builder to buyer. Prior to the insertion of the Explanation, a builder was not a service provider and a builder could be deemed to be service provider only with effect from 1.7.2010. In the absence of machinery provisions to ascertain value of service involved in constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discussed when the agreements were entered for construction of residential units and possession was handed over on completion of the construction after full payment was made by the customers. The Hon'ble Tribunal held that Explanation inserted with effect 01.07.2010 expanding the scope of the provision is prospective and the liability can be fastened on the builder or a person authorized by the builder from 01.07.2010. Reliance is also placed on Commissioner of C.Ex & S.T., Bangalore-I v. Keerthi Estates Pvt Ltd 2019 (26) G.S.T.L. 227 (Tri-Bang.) wherein the department had alleged that there was non- payment of service tax under the category of 'Construction of Residential Complex Service' for the period 16.6.2005 to 31.1.2007. The Hon'ble Tribunal observed that the levy of service tax on construction of complex by builder will be taxable only from 1.7.2010 and that the Board vide its Circular dated 10.2.2012 clarified that prior to 01.07.2010, service tax is not chargeable from builders/developer. Similarly in Silver City Constructions Ltd v. Commissioner of C.Ex., Chandigarh-I: 2022 (59) G.S.T.L. 77, it was observed that any service rendered by a builder prior to the execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd taxes as per the builder's statutory obligation cannot be confused with a taxable service as defined under the Finance Act, 1994. Therefore, the statutory activities of the Appellant are not liable to service tax under construction of residential complex service. 2.6 The Appellants submit that water charges, electricity charges, municipal taxes, advocate fees cannot be subjected to levy of service tax as they are reimbursable expenses not leviable to service tax till 14.05.2015. It is submitted that as per Section 67, only the gross amount charged by the service provider for such service provided by him, becomes the value. Rule 5(1) of the Service Tax Determination of Value Rules, 2006 (Valuation Rules) provides that any expenditure or costs incurred by the service provider in the course of providing taxable service, all such expenditure or costs shall be treated as consideration for the taxable service provided or to be provided and shall be included in the value for the purpose of charging service tax on the said service. Reliance is placed on the decision in the case of Union of India v. M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (10) G.S.T.L. 401 (S.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the sale deed, post the completion of the construction activity. 2.8 Without prejudice, it is submitted that if the Appellant is liable to pay service tax, they are eligible for benefit of alternate schemes for payment of service tax in respect of construction services in terms of the Notification No.01/2006-ST dated 1.3.2006 which exempts 67% of the gross amount charged for 'commercial or industrial construction service' or 'construction of complex service' from the levy of Service Tax. Vide an Explanation to the Notification, it is provided that 'gross amount charged' shall include the value of goods and materials supplied or provided or used by the provider of construction service for providing the said service. Similarly, Notification No.12/2003- Service Tax dated 20.06.2003 exempts the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under section (66) of the said Act, subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials. The decision rendered by the Tribunal in Sobha Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.07.2010 in terms of the Circular No.108/2/2009-ST dated 29.01.2009 and hence the "other charges" collected would also not be taxable. He submits that this contention of the appellant cannot be accepted since the agreement with the customer is to deliver a fully completed flat with electricity, water, Sewage connection and ready for occupation, therefore, all charges collected should be part of the taxable value. Service tax has been collected by the Appellant as could be seen from the agreements with the customers and has been paid under protest as claimed by the appellant themselves, therefore, their contention that their main activity is not taxable and therefore, the other charges would not be taxable is not acceptable. The Circular No.108/02/2009-ST dated 29.01.2009 would not be applicable to them as they have already collected service tax from their customers. In terms of the construction agreement with the buyer, there is a clear agreement for construction of complex with all facilities like club house, swimming pool etc., and not only the flat/house. It cannot be considered as self- service as there is a clear agreement and therefore, the Circular No.108/02/2009-ST dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held as follows: "24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 1, 2006) or after its amendment, with effect from, May 1, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 25. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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