2013 (12) TMI 379 - AT - Service Tax

Tribunal grants appeal to Saumya Construction Pvt. Ltd., recognizes shift to works contract services

M/s Saumya Construction Pvt. Ltd. Versus CST Ahmedabad

M/s Saumya Construction Pvt. Ltd. Versus CST Ahmedabad - 2016 (46) S.T.R. 723 (Tri. - Ahmd.) Issues Involved:1. Liability of the appellant to discharge Service Tax under the category of real estate agent services for the amount received as development charges.2. Requirement for the appellant to discharge differential Service Tax liability under the head commercial and industrial construction services for the period post 01.06.2007.3. Denial of the benefit of Notification No.12/2003 for availing abatement of 67% of the value and discharge of Service Tax liability on 33%.Issue-wise Detailed Analysis:1. Liability under the Category of Real Estate Agent Services:The appellant, M/s Saumya Construction Pvt. Ltd. (SCPL), was alleged to have provided services categorized under real estate agent services for the development charges received. The definition of 'real estate agent' under Section 65(88) of the Finance Act, 1994, includes a person engaged in rendering services related to the sale, purchase, leasing, or renting of real estate. The adjudicating authority concluded that SCPL provided real estate consultant services and confirmed the demand for Service Tax. However, SCPL contended that the development charges were profits from their own projects, not commissions for services rendered. The Tribunal found that SCPL undertook the entire development project, financed it, and bore the profit or loss, indicating no service was rendered to another party. The Tribunal also referenced CBEC Circular No.151/2/2012-ST, which clarified that construction services by a builder/developer are not taxable if they involve a tripartite business model. The Tribunal concluded that SCPL's activities did not fall under real estate agent services and set aside the demand.2. Differential Service Tax Liability Post 01.06.2007:The appellant had initially discharged Service Tax under commercial and industrial construction services and later shifted to works contract services. The adjudicating authority did not accept this shift, asserting that once a project starts under a particular classification, it cannot be changed. However, the Tribunal noted that the decision in Cemex Engineers (2010) supported the appellant's claim that if VAT was paid on the activity as a works contract, the classification could be shifted. Therefore, the Tribunal found the appellant's shift to works contract services justified and set aside the demand for differential Service Tax.3. Benefit of Notification No.12/2003 for Abatement:The appellant claimed the benefit of Notification No.12/2003, which allows an abatement of 67% from the gross value for Service Tax purposes. The adjudicating authority denied this benefit, but the Tribunal found no evidence that the appellant had not used any material for the completion of the projects. Therefore, the Tribunal concluded that the appellant was entitled to the abatement and set aside the denial.Conclusion:The Tribunal set aside the impugned order, allowing the appeal with consequential relief. The key findings were that SCPL's activities did not fall under real estate agent services, the shift to works contract services was justified, and the appellant was entitled to the abatement under Notification No.12/2003. The Tribunal's decision was supported by the judgment of the Hon'ble High Court of Gujarat in the case of Sujal Developers, which dealt with similar issues.