Court grants applicant relief in service tax liability case pre-1-7-2010

The Bench ruled in favor of the applicant in the case involving service tax liability on construction services prior to 1-7-2010. The demand for services rendered before 1-7-2010 was dropped, and the applicant was granted the benefit of cum-tax value. The Settlement Commission was deemed to have jurisdiction over the issue, and the applicant received partial immunity from penalties. The total tax liability was settled at Rs. 88,45,406, with a penalty of Rs. 6,00,000 imposed. The applicant was granted immunity from prosecution and ordered a refund of excess payment.

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Issues Involved:

1. Service Tax liability on construction services prior to 1-7-2010.
2. Admissibility of cum-tax benefit.
3. Jurisdiction of the Settlement Commission.
4. Penalties and prosecution.

Issue-wise Analysis:

1. Service Tax Liability on Construction Services Prior to 1-7-2010:

The applicant contended that the "Aiswaryam Enclave" Project was completed before 1-7-2010 and hence not taxable under "Construction of Residential Complex" Service, supported by C.B.E. & C. Circular No. 108/2/2009-S.T., dated 29-1-2009, and Notification No. 36/2010-S.T., dated 28-6-2010. The Bench examined the facts, including the commencement of construction on 15-12-2008 and the sale of UDS for only three flats. The Bench concluded that the construction services provided prior to 1-7-2010 were not taxable, as supported by various clarifications and judicial pronouncements, including the C.B.E. & C. Circular No. 151/2/2012-S.T., dated 10-2-2012. Therefore, the demand of Rs. 24,55,070/- for services rendered before 1-7-2010 was dropped.

2. Admissibility of Cum-Tax Benefit:

The applicant claimed the benefit of cum-tax value as they had not charged any service tax from clients over and above the invoice value. The Bench allowed this claim, noting that the applicant had made full and true disclosure and had paid the admitted tax liabilities along with interest. The revised tax liability was worked out to Rs. 88,45,406/- after extending the cum-tax benefit.

3. Jurisdiction of the Settlement Commission:

The applicant argued that the issue was not about classification but whether the construction activity constituted a "service" per se. The Bench agreed, stating that the question of exigibility to Service Tax is within the purview of the Settlement Commission. The Bench referred to the case of M/s. Alchem International Ltd. - 2009 (247) E.L.T. 864 (Sett. Comm.), which emphasized determining liability in an equitable manner without undue technicalities.

4. Penalties and Prosecution:

The Bench noted that the applicant had collected service tax but did not pay it on time. However, considering the applicant's cooperation, full disclosure, and the complexity of the taxability issue for the period prior to 1-7-2010, the Bench granted partial immunity from penalties. A penalty of Rs. 6,00,000/- was imposed, and the applicant was granted immunity from prosecution under Section 32K of the Central Excise Act, 1944, as applicable to Service Tax.

Findings and Decision:

The Bench settled the case on the following terms:
1. Service Tax liability settled at Rs. 88,45,406/-. The applicant had already paid Rs. 89,86,318/-, and the excess amount of Rs. 1,40,912/- was ordered to be refunded.
2. Interest payable to be worked out by the Commissioner, with the applicant having already paid Rs. 9,62,384/- towards interest.
3. A penalty of Rs. 6,00,000/- imposed, to be paid within 30 days.
4. Immunity from prosecution granted.

The Bench emphasized that the immunities are liable to be withdrawn if any material particulars were withheld or false evidence was given. Copies of the order were provided to the applicant and the Jurisdictional Commissioner for implementation.

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