9911796707
TMI Blog2024 (7) TMI 1636X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation Service) + 86,29,510.00 Construction of Complex Service)] against M/s Ganpati Infrastructure Development Company Limited, Ganesh Plaza, 31/472, C/1. First Floor, Sultanganj Bye Pass Road, Agra under Section 73(1) of the Finance Act, 1994. As the noticee has already deposited Service Tax amounting to 3,02,701.00, the same is appropriated against the said confirmed demand of Service Tax. I drop the demand of Service Tax amounting to 21,99,154.00 (Rupees Twenty One Lakhs Ninety Nine Thousand One Hundred Fifty Four only) against the noticee. 2. I also confirm the demand of interest at appropriate rates as applicable from time to time till the deposit of demanded amount of Service Tax from said M/s Ganpati Infrastructure Development Co. Ltd., Agra under Section 75 of the Finance Act, 1994. 3. I hereby impose a penalty of Rs.1,697.00 for the period from 01.07.2010 to 7th April 2011 (100% of the Tax evaded) and 43,81,751.00 for the period from 8th April 2011 to 2013-14 (50% of the Tax evaded) total amounting to Rs.43,83,448.00 (Rupees Forty Three Lakhs Eighty Three Thousand Four Hundred Forty Eight only) upon said M/s Ganpati Infrastructure Development Co. Ltd., Agra under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amounts under this head but no Service Tax was paid on the same. The noticee was also not registered for club or association service. Shri Nikhil Agarwal, Director of the noticee in his statement dated 21.01.2014 agreed that till 15.03.2013 they had not paid Service Tax on club membership charges. (iii) Shri Nikhil Agarwal stated in his statement dated 05.12.2014 stated that in lieu of club membership fee the buyers of the flat/houses get the facility of Gymnasium. Community Hall and other common facilities; that club membership fee have been charged and received over and above the price of the plot and construction; that they had not paid Service Tax on club membership fee received prior to 31.03.2013 but later on the same amounting to 78,342.00 (ST- Rs.57,477,00 + interest- 20,865.00) has been deposited and intimated vide letter dated 30.09.2014; that all the receipts from customers are considered inclusive of Service Tax and it is paid after reverse calculation: that the noticee undertook all assets and liabilities of M/s Ganpati Group of Industries in April, 2012. (iv) Shri Nikhil Agarwal, Director of the noticee in his statement dated 21.01.2014 stated that the noticee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 76, 77 and 78 of the Finance Act, 1994 should not be imposed upon them." 2.5 Appellant-II was also issued with a show cause notice, asking them to show cause, why penalty should not be imposed on them under Section 78A of the Act. 2.6 These show cause notices were adjudicated as per the impugned order referred in para-1 above. 2.7 Aggrieved appellants have filed these two appeals before the Tribunal. 3.1 We have heard Shri Dharmendra Srivastava, Chartered Accountant alongwith Mohammad Suhail, Advocate appearing for the appellants and Shri Sandeep Pandey, Authorised Representative appearing for the revenue. 3.2 Arguing for the Appellants learned Counsel submits that- * The demand made in respect of club and membership fees should not have been made at all, as the entire demand of Rs. 1,35,689/- of service tax due alongwith due interest of Rs. 20,865/- for the Financial Year 2012-13 was deposited much before the issuance of show cause notice then invocation of extended period of imposition of penalty in respect of this demand could not be sustained. * In respect of demand under the category of "Construction of Residential Complex Service" it is submitted that in the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tallments were received from the customers. Therefore, in the successive period when the installments (which have become due earlier) are actually received, service tax liability on such is duly discharged by the appellant. Thus, there is no short payment of tax liability on the part of appellants. The only demand that can be made in the present case of interest on late payment of service tax. * Extended period of limitation cannot be invoked and penalty could not have been imposed. * Penalty on appellant-II under Section 78A cannot be upheld for the reason that for imposition of penalty under this section the Director must be knowingly engaged in contravention of Act which is not true in the present case. 3.3 Learned Authorized Representative appearing for the revenue reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 Though the appellant have specifically stated that the search was not proper, in absence of any reasonable belief, we do not find any merits in the said submission. It is for the officer issuing the search warrant to make such reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement on gross amount received in terms of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 as amended w.e.f. 01.07.2012 vide Notification no. 24/2012ST dated 06.06.2012. In view of the dispute in the classification of service provided by Noticee, there is need to discuss the taxability of service and determine the amount of Service Tax financial year-wise. Period-01.07.2010 to 31.03.2011 42.1 The Department has calculated the Tax liability for the period, in the Annexure-A of the SCN, as under: Project-wise Income from 01.07.2010 to 31.03.2011 (Amount in Rs. ) Period Name of Project Total Ganpati Classique Ganpati Kings County Ganpati City Gross Receipts 2963530 40664812 27835211 71463553 %age as Taxable Value 25% 25% 33% Taxable Value 740883 10166203 9185620 20092705 Taxable Value declared in ST-3 and Differential Service Tax liability (Amount in Rs. ) Gross Receipts Value of Taxable Service Taxable Value declared in ST-3 Returns Taxable Value suppressed Service Tax payable (Differential) Service Tax @10% Edu. Cess @2% of ST Sec. & High. Edu. Cess@ 1% of ST Total 71463553 20092705 20046229 46476 4648 93 46 4787 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or F.Y.2011-12 (Amount in Rs. ) Period Name of Project Total Ganpati Classique Ganpati Kings County Ganpati City Apr."11-Jun."11 3217500 12701962 Jul."11-Sep."11 30807239 16079262 Oct."11-Dec."11 17266387 18731462 Jan."12-Mar."12 21504834 13141287 Gross Receipts 72795960 60653973 37123168 170573101 %age as Taxable Value 25% 25% 33% Taxable Value 18198990 15163439 12250645 45613129 Taxable Value declared in ST-3 and Differential Service Tax liability (Amount in Rs. ) Gross Receipts Value of Taxable Service Taxable Value declared in ST-3 Returns Taxable Value suppressed Service Tax payable (Differential) Service Tax @10% Edu. Cess @2% of ST Sec. & High. Edu. Cess@ 1% of ST Total 170573102 45613129 11680886 33932243 3393224 67864 33932 3495021 42.2.1 As far as nature of service i.e. Construction of Complex is concerned, there is no dispute, however, noticee argued that due to limitation of online return filing utility, they could not file complete ST-3 Returns and after taking advice from ACES Helpdesk and local Range Officer, they filed online Return only for on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative. 25 42.2.3 In the case of Ganpati City Project, the noticee was charging cost of land separately and the same is not included in the gross receipts of Construction of Residential complex, therefore, noticee was paying Service Tax on 33% of gross receipts in terms of Sl. no. 10 of Notification no. 1/2006-ST dated 01.03.2006 and in respect of other projects, they were paying Service Tax on 25% of gross receipts in terms of Sl. no. 10(a) of the said notification. Noticee pleaded that due to problem in filing of online ST-3 i.e. non-acceptance of claim of abatement under Sl. no. 10 & 10(a) by online utility, the noticee has referred the matter to ACES Helpdesk through e-mails dated 23.11.2011 & 26.11.2011 and also dated 24.04.2012 and in response the ACES helpdesk replied vide e-mail dated 28.11.2011 to contact Local Range Officer. I find that the period of 2011-12 was Initial phase of online filing of ST-3 and there were fair possibilities of problems in e-filing of ST-3 Returns, therefore, the noticee has filed both online as well as manual ST-3 Returns for both the half-years of 2011-12. The noticee submitted copies of both types of ST-3 Returns with coples of Challans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential) Service Tax @10% Edu. Cess @2% of ST Sec. & High. Edu. Cess@ 1% of ST Total 1 2 3 4 5 6 7 8 170573102 45613129 33001893 12611236 1261124 25222 12611 1298957 Financial Year 2012-13 & 2013-14 43. The Department has calculated the Tax liability for the period, in the Annexure-A of the SCN, as under: Project-wise Income for F.Y.2012-13 (Amount in Rs. ) Period Name of Project Total Ganpati World Ganpati Classique Ganpati Kings County Ganpati City Apr."12 0 2013050 8265687 2670927 May"12 293125 1858350 4300950 Jun"12 0 1799525 4094625 Jul"12 293125 5046762 7170950 Aug"12 0 3127556 4277900 Spe"12 0 5133050 2618250 Oct"12 596300 4212812 18654732 Nov"12 298652 0 6059775 Dec"12 5217890 7099216 4190650 Jan"13 5102067 13440412 21391382 Feb"13 6458737 2705677 5998662 Mar"13 2646000 744800 15100382 31139038 Total 20905896 47181210 102123945 33809965 204021016 % age as Taxable Value 25% 25% 25% 33%(upto Feb."13) and 100% w. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out faxable value in respect of Wonder City RH project. The noticee admitted that they were engaged in the construction of residential complex in all the projects mentioned in the above Tables including Ganpati City and Wonder City RH, but the construction receipts of Ganpati City Project after 01.07.2012 and Wonder City Row House Project should be treated under Work Contract and the taxable value should be 40% of gross Construction Receipts (excluding value of land) under the provisions of Rule 2A of the Service Tax (Determination of Value) Rules, 2006. 43.2 I find that no dispute has been raised by Noticee as far as project under Ganpati World, Ganpati Classique, Ganpati Kings County are concerned. 43.3 I also find that noticee was paying Service Tax in respect of services of Construction of Residential Complex in Ganpati City on taxable value calculated @33% of the gross receipts in terms of Sl. no. 10 of Notification no. 1/2006-ST dated 01.03.2006, since starting of construction of the project because they were not including value of land in the amount charged, however, after introduction of Negative List Regime from 01.07.2012, said Notification no. 1/2006-ST dated 01.03.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction, erection. commissioning, installation, completion, fitting out, improvement, repair, renovation, alteration of any building or structure on land or for carrying out any other similar activity or a part thereof in relation to any building or structure on land." 43.4 Thus as per the definition of Work Contract, there must be a Contract wherein transfer of property in goods involved is there. I also find that Government has also made provisions of interpretation of specified descriptions of services in Section 66F of the Act and the relevant provisions thereof are reproduced below: "66F. Principals of interpretation of specified descriptions of services or bundled services._ (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service. (2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s......" 43.6 Thus, there are no evidence to substantiate the claim that said claimed services are work contract. The noticee has also issued a 'No Objection Certificate to Mortgage to said Shri Sandeep K Chetan on 09.02.2013. In this case Sale Deed of Land/ Plot has been signed on 01.03.2013 but the Construction Agreement has been executed on 09.02.2013 itself between the noticee and Shri Sandeep K Chetan ie. the Residential Unit has been allotted to the service receiver and agreement of construction agreement has been made much before the transfer of ownership of land/plot to service receiver and Agreement of Construction of House is made between Noticee and buyer on a plot of land when buyer was not actually a land owner? Thus, the whole gimmick is for claiming the benefit, which was otherwise not available to them. Actually, the noticee has been constructing the whole projects of Residential Complex under different names of projects with one or more common facilities like park, lift, parking space, community hall, common water supply or effluent treatment system etc. but in projects like Ganpati City and Construction of Row Houses in Wonder Cily, the noticee has bifurcate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apr-12 2670927 0 May.12 100000 0 Total 2770927 0 2770927 33% 914406 01.07.2012 Onwards Jul.12 64930 0 Aug.12 0 195000 Nov.12 0 150000 Dec. 12 0 384850 Mar-13 31139038 0 Total 31203968 729850 30474118 100% 30474118 Grand Total 33974895 729850 33245045 31388524 43.8 find that the taxable value for the Ganpati City Project is Rs.3,13,88,524.00 instead of Rs.3,20,20,444.00 for the financial year 2012-13. I thus hold that method adopted by the Department for calculation of taxable value under the category of Construction of Residential Complex Service as per the conditions provided in Notification no. 26/2012-ST dated 20.06.2012 for the financial years 2012-13 & 2013- 14 is correct and proper and accordingly the taxable value for the financial year 2012-13 & 2013-14 is Rs.7,39,41,287.00 (Rs.52,26,474.00+ Rs.1,17,95,303.00+ Rs.2,55,30,986.00 +Rs.3,13.88,524.00) and Rs.12,52,38,426.00 respectively on which the noticee is liable to pay Service T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um tax benefit should be allowed to them during the entire period of dispute. However we note that the demands in the present case have been made on the basis of the Receipts shown in the Book of Accounts which are made on the basis of the Guidance Note on accounting for real estate transaction GN (A) 33 (Revised 2012), Accounting Standard - 7 pertaining to Construction Contracts. As per the said guidance note revenue is recognized on percentage completion method and no accounting entry is passed on in respect of installments becoming due from the customers unless the same is received by the appellant. In our view if the receipts taken are not as per as invoice issued/ installments paid but on the basis of the book of accounts then the cum tax benefit needs to be extended to the appellant. The fact whether the amount of service tax was collected over and above the contract value as per the terms of agreement needs to be verified from the invoices issued by the appellant and relevant records maintained by the appellant in respect of the installment received. Thus in our view this issue needs to be re-examined by the adjudicating authority on the basis of actual receipts project wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correct taxable value as per ST-3 returns and after allowing the benefit of the abatement as claimed by the appellant in respect of M/s Ganapati City Projects and similar projects where the appellant is recovering the cost of land separately. 4.8 We also find that appellant was discharging service tax liability due on receipt basis. After insertion of Point of Taxation Rules, 2011 the liability to discharge the service tax was shifted to due basis. Undisputedly appellant was maintaining the books of account on the basis of GN (A) 33 (Revised 2012), Accounting Standard - 7 pertaining to Construction Contracts which provide that the receipts are to be accounted on percentage completion basis. The demand made in the present case has been made on the basis of entries taken from the book of accounts. In case of Firm Foundations & Housing Pvt. Ltd [2018 (16) G.S.T.L. 209 (Mad.)] Hon'ble Madras High Court has observed as follows: "10. Rule 3 finds part in the Point of Taxation Rules, 2011 applicable with effect from 1-4-2011. It provides for a methodology for determining the accrual and quantification of services, the exact delivery of which is not certain or ascertainable, and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract will flow to the enterprise; (c) both the contract costs to complete the contract and the stage of contract completion at the reporting date can be measured reliably; and (d) the contract costs attributable to the contract can be clearly identified and measured reliably so that actual contract costs incurred can be compared with prior estimates. 23. In the case of a cost plus contract, the outcome of a construction contract can be estimated reliably when all the following conditions are satisfied: (a) it is probable that the economic benefits associated with the contract will flow to the enterprise; and (b) the contract costs attributable to the contract, whether or not specifically reimbursable, can be clearly identified and measured reliably. 24. The recognition of revenue and expenses by reference to the stage of completion of a contract is often referred to as the percentage of completion method. Under this method, contract revenue is matched with the contract costs incurred in reaching the stage of completion, resulting in the reporting of revenue, expenses and profit which can be attributed to the proportion of work completed. This method provides useful information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from customers may not necessarily reflect the work performed. 30. When the stage of completion is determined by reference to the contract costs incurred up to the reporting date, only those contract costs that reflect work performed are included in costs incurred up to the reporting date. Examples of contract costs which are excluded are : (a) contract costs that relate to future activity on the contract, such as costs of materials that have been delivered to a contract site or set aside for use in a contract but not yet installed, used or applied during contract performance, unless the materials have been made specially for the contract; and (b) payments made to sub-contractors in advance of work performed under the sub-contract. .... 15. AS 7 thus provides for a detailed methodology for the reporting and determination of the percentage of income from the contract over the term of the project and sets out the mode of computation for arriving at the same. The basis of such recognition and reporting is the apportionment of the income earned and expenditure incurred over the tenure of the project. This is entirely different and distinct from the scope, object and applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The rendition of the service results in the accrual of the receipt of consideration in respect thereof. 21. The relevant clause in the construction agreement dated 30-12-2014 (provided as a sample) reads thus : ..... 1. The party of the Second Part shall pay the party of the First Part a sum of Rs. 1,75,43,320/- (Rupees One Crore Seventy Five Lakhs Forty Three Thousand Three Hundred And Twenty Only) for the construction of a Three Bed Room Flat measuring 2055 sq. ft. as per the specifications mentioned in Schedule B and Schedule C in the following manner : At the time of booking Rs. 25,43,320/- On completion of Basement work Rs. 26,00,000/- On completion of Ground Floor Roof Rs. 18,00,000/- On completion of First Floor Roof Rs. 18,00,000/- On completion of Second Floor Roof Rs. 18,00,000/- On completion of Third Floor Roof Rs. 18,00,000/- On completion of Brick Work Rs. 18,00,000/- On completion of Internal Plastering Rs. 18,00,000/- On completion of Tile Laying in your flat Rs. 12,00,000/- On Handing Over Possession of your flat Rs. 4,00,000/- 2. The Party of the Second Part has paid a sum of Rs. 87,43,320/- (Rupees Eighty Seven Lakhs Forty Three Tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purposes of determination of service tax payable, the basis of the impugned assessment is erroneous. 26. It is a well settled position that when a statutory provision or rule addresses a specific scenario, such rule/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision." The fact of payment of service tax on the receipt basis also needs to be verified, it cannot be so that the service tax is demanded on due basis by taking the figures from the book of accounts and is in actual paid by the appellant on receipt basis. In such situation it would amount to double taxation on such transactions by following different method of computation which is against the Article 265 of Constitution. In case the amount in respect of all the projects has been paid of receipt basis then the benefit of such payments should be allowed while computing the tax demand. However, in such cases also appellants would be liable to pay interest on the total payment of service tax from the due date determined as per Point of Taxation Rules, 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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