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TMI Blog2020 (3) TMI 1481X X X X Extracts X X X X X X X X Extracts X X X X ..... land, constructs flats to some extent and then sells them to the prospective buyers under two agreements (1) the sale deed for sale of undivided interest in land along with an incomplete structure on which appropriate stamp duty is paid (2) a construction agreement for completion of the flat as per the requirement of the customers. Initially, they got themselves registered for service tax under the category of "construction of complex service" and have been discharging service tax accordingly. Thereafter, based on a Circular No. 108/2/2009-ST dated 29.01.2009 issued by the CBEC, they came to the conclusion that they were not liable to pay service tax and discontinued paying service tax. A show cause notice dated 24.10.2011 was thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule. Service tax is levied by the centre as per its legislative competence under Article 265 read with entry 97 of list-1 of the schedule. Tax on sale or purchase of goods falls within the competence of States as per list-2. Initially, Constitution of India as well as its predecessor, the Govt of India Act-1935, did not provide for taxing the goods used in executing indivisible works contract. The provincial Govt of Madras had attempted to tax the goods used in works contract treating them as deemed sale of goods and this was struck down by Constitution Bench of the Hon'ble Supreme Court in the case of State of Madras Vs Gannon Dunkerly & Company Madras Ltd [1959(SCR)379)] also reported in [2015(330)ELT 11 SC]. 3. After examining the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to tax "works contracts" per se was never in doubt. 5. The question as to whether taxation of works contracts 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 & Customs Vs Larsen & Toubro Ltd [2015(39)STR 913(SC)]. Section 66 & 66A of this Act are the charging sections. Section 66 charges service tax on taxable services referred to in various sub-clauses of clause 105 of Section 65. Section 66A dealt with charging the service recipient under reverse charge mechanism in certain cases. The question before the Hon'ble Apex Court in the case of Larsen & Toubro Ltd (supra) was whether the service tax could b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as residence by another person on rent or without consideration; (b) "residential unit" means a single house or a single apartment intended for use as a place of residence." For a charge to sustain under Works Contract Service, the nature of service must be one of construction of residential complex service. The charge for construction of complex service as service simpliciter is under Section 65(105)(zzzh) which reads as service "to any person by any other person in relation to construction of complex" an explanation was inserted with effect from 01.07.2010 in this clause as follows:- "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 au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum up, as far as construction of residential complex by 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 under 'works contract' 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 buyer, it is not taxable the service being in the nature of self service. (iv) Further, whenever the service is rendered f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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