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TMI Blog2024 (11) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... as amended and not listed in negative list regime w.e.f 01.07.2012. Accordingly, the show cause notice dated 21.04.2016 was issued demanding service tax under the category of construction of residential complex service for the period 2011 (October, 2010 to March, 2011) to 2013-2014 along with proposal for interest and penalty. In the notice an amount of Rs. 40 Lacs already paid by the appellant was proposed to be adjusted against total tax liability. The said show cause notice has been adjudicated by the adjudicating authority whereby the demand of service tax along with interest and penalties were confirmed and amount of Rs. 40Lacs paid by the appellant during investigation was appropriated. Against the said adjudication order dated 30.03.2017 passed by the Additional Commissioner, Central Excise , Customs and Service Tax- Vadodara, the appellant filed an appeal before the Commissioner (Appeals) who vide order-in-appeal No. CCESA-SRT (APP)-AT-172-2018-19 upheld the order-in-original and rejected the appeal filed by the appellant. Therefore, the present appeal is before us. 2. Shri Vipul Khandhar, Learned Chartered Accountant appearing on behalf of the Appellant submits that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Shrinandnagar -IV Co.Op Housing Society Ltd - 2011 (23) STR)439 (Guj.) * Calcutta Club Ltd - 2019 (29) GSTL 545 (SC) * Sujal Developers - 2013 (31) STR 523 (Guj.) * Rajasthan Co-Op Dairy Federation Ltd - 2022 (65) GSTL 350 (Tri.-Del) * Rajasthan Co-Op Dairy Federation Ltd - 2022 (65) GSTL 257 (SC) 2.3 He further submits that the entire demand is time bar as the same is under extended period. The show cause notice covering the period 01.10.2010 to 31.03.2014 was issued on 21.042016. Therefore, the show cause notice has invoked the extended period of limitation which in the facts of the present case is not sustainable as there is no suppression, wilful mis-statement on the part of the appellant, for the same reason penalties are also liable to be set aside. He submits that the entire demand of service tax, interest and penalty be set aside and amount of Rs.40 Lacs paid by the appellant during investigation may be ordered to be refunded. 3. Shri Mohit Agarwal, Learned Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. Post-hearing he also submitted a written submission dated 23.10.2024 which is taken on record. 3.1 He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y considered the submission made by both sides and perused the records. We find that in the facts of the present case the period involved is 01.10.2010 to 31.03.2014, therefore, both the periods i.e. prior to negative list regime and post negative list regime is involved. We find that the appellant vehemently argued that the relationship between the appellant and its members to whom the residential flats have been allotted are of association and its members. Therefore, there is no service as the service provider and service recipient are not existing. As per the facts of the present case we find that there is no dispute that the appellant is a co-operative housing society constituted by its members for the objective of construction of residential complex exclusively for the members of the society. Therefore, it is not a case that of the independent builder has constructed the residential complex and sold to the unrelated buyers. Since, the concept of doctrine of mutuality is involved in the present case between the appellant and its members, it cannot be said that the society has provided any service to its members. Between the association and its members in such service no service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a service to its members, is a taxable activity or not? (iii) Whether Hon'ble CESTAT has committed error in interpreting the Board's Circular No. 108/2/009-S.T., dated 29-1-2009 by not distinguishing a co-operative housing society, which is providing service to its members from a developer/promoter? 3. We have heard learned counsel for the appellant and the respondent. Brief facts are that respondent Co.-Op. Housing Society had availed of the services of Contractor for constructing the residential units for use of the members of the Housing Society. Initially, the Society had paid service tax. Subsequently, however, the society carried a belief that it was not liable to pay service tax. Society filed refund claims which were dismissed. The issue, ultimately, reached the Tribunal. Tribunal by the impugned judgment relying on the Board's Circulars and Clarifications, formed an opinion that if the activity is undertaken by the Society for and on behalf of the members, it cannot be stated that the Society provided the services to its members. 4. Counsel for the respondent drew our attention to the judgment of Division Bench of this Court rendered in Tax Appeal No. 1550 of 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, it does not appear that the respondent-developer is a contractor who is executing the construction work on behalf of the society. Here, the developer is using its own finances and developing the land in question and selling the property constructed thereon to the members of the society. Thus, in the light of the clarification issued by the Board, viz., when it is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then, the ownership of the property gets transferred to the ultimate owner, in such a case, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed, would be in the nature of "self-service" and consequently, would not attract service tax. 14. In the facts of the present case, there is nothing to indicate that the respondent has been hired as a contractor by the society so as to bring the activities of the respondent within the ambit of taxable services as contemplated under section 65(105)(zzzh) of the Act. In the absence of there being any service provider and service recipient in relation to the transaction in quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y law for the time being in force) shall be deemed to be service provided by the builder to the buyer." 8. We are not inclined to discuss whether by virtue of such explanation legal situation in factual background arising in present appeal, would or would not be any different. Suffice it to note that the explanation was brought in the statute book long after the taxing event in the present case had arisen. 9. In absence of any indication in the amendment to make it either retrospective or explanation being merely declaratory or clarifiacatory in nature, such statutory change cannot be made applicable to the long past events. 10. In the result, we do not find that any question of law arises. Tax Appeal, is therefore, dismissed." 4.2 In an another case of Sujal Developers (Supra) Hon'ble Gujarat High Court held that service of construction of complex can be taxable only when there is service from one person to another person. In the said case the developer using its own finances and developing the land in question and selling the property constructed there on to the members of the society. The relevant part of the judgment is reproduced below:- "9. Sub-section (105) of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. The Board, in the clarification dated 29-1-2001, which has also been reproduced by the Tribunal in the impugned order, has clarified that "generally, the initial agreement between the promoters/builders/ developers and the ultimate owner is in the nature of 'agreement to sell'. Such a case, as per the provisions of the Transfer of Property Act, does not itself create an interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of "self-service" and consequently wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling within the ambit of the said provision is that there has to be a service provider and a service receiver. In the present case as noticed earlier, the land on which the residential complex has been constructed belongs to the society. The society has entered into a development agreement with the respondent. Under the agreement between the society and the respondent-developer, the work of construction and development of the housing project has been entrusted to the respondent. The respondent-developer has agreed to develop the said land by attending to construction and development work and to complete the scheme duly and diligently on the terms and conditions contained in the agreement. Under the agreement, the developer is required to carry out every act necessary to complete construction and development of the project directly or indirectly, which includes preparation and approval of plans, getting the buildings constructed directly or by sub-contracting and/or purchase of material, hiring labour, arrangement of finance, marketing and advertising the project, enroll members, collect money, etc. The respondent is permitted to use the property in question for the purposes mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooperatives and milk unions are its members. As an apex cooperative society, the appellant is a legal entity by itself. The milk unions are also legal entities by themselves. The milk unions are engaged in purchasing milk, processing it and selling milk and milk products. The appellant is providing various services to support the milk unions in this endeavour and is charging a fee which is called RCDF cess at the rate of 1.25% on the turnover of the milk unions. The question which falls consideration is whether in this factual matrix the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another. 9. We find that the Constitution Bench of the Supreme Court has in State of West Bengal v. Calcutta Club Ltd. discussed at length the doctrine of mutuality under Article 366(29A)(e) of the Constitution and held that doctrine of mutuality continues to be applicable to incorporated and unincorporated members' clubs after the 46th Amendment to the Constitution and, therefore, no sales tax is payable to the State by the Calcutta Club. It was further held that the same logic applies to service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative societies under various State Acts, such societies being bodies corporate under the aforesaid Acts. xx xx xx 72. The definition of "club or association" contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody "established or constituted" by or under any law for the time being in force, is not included. Shri Dhruv Agarwal laid great emphasis on the judgments in DALCO Engineering Private Limited v. Satish Prabhakar Padhye and Ors. Etc., (2010) 4 SCC 378 (in particular paragraphs 10, 14 and 32 thereof) and CIT, Kanpur and Anr. v. Canara Bank, (2018) 9 SCC 322 (in particular paragraphs 12 and 17 therein), to the effect that a company incorporated under the Companies Act cannot be said to be "established" by that Act. What is missed, however, is the fact that a Company incorporated under the Companies Act or a cooperative society registered as a cooperative society under a State Act can certainly be said to be "constituted" under any law for the time being in force. In R.C. Mitter & Sons, Calcutta v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax net. xx xx xx 76. What has been stated in the present judgment so far as Sales Tax is concerned applies on all fours to Service Tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members' clubs, there has to be an activity carried out by one person for another for consideration. We have seen how in the judgment relating to Sales Tax, the fact is that in members' clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when we are to construe the definition of "service" under Section 65B(44) as well. 77. However, Explanation 3 has now been incorporated, under sub-clause (a) of which unincorporated associations or body of persons and their members are statutorily to be treated as distinct persons. 78. The Explanation to Section 65, which was inserted by the Finance Act of 2006, reads as follows : "Explanation. - For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration." 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. 12. Thus, in view of the judgment of the Constitution Bench of the Supreme Court in Calcutta Club, and the decision of the Tribunal in Karnataka Co-operative Milk Producers Federation Limited it has to be held that no service tax was payable by the appellant for the services rendered to its members. 13. Accordingly, the demand confirmed by the impugned order cannot be sustained. The interest on the demand and the penalties imposed also need to be set aside and are set aside. The appeal is, accordingly, allowed and impugned order is set aside with consequential benefits to the appellant, if any." 4.3 The above judgment has been upheld by the Hon'ble Supreme Court reported as 2022 (65) G.S.T.L. 257 (S.C.) considering the constitution bench judgment in the case of Calcutta Club Ltd 2019 (29) GSTL 545 (S.C.) 4.4 In view of the above judgments, on the very same issue, we are of the view that in a case the appellant being a society consisting of members provided the residential complex to its members does not amount to service in the light of settled legal position in Calcutta Clu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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