Tribunal modifies service tax demand, grants cum tax benefit, and reduces penalty under Section 78.

The Tribunal upheld the order with modifications, reducing the demand to the service tax calculated on 33% of the total amount, granting cum tax benefit, and modifying the penalty under Section 78. The appellant was given a reduced penalty if the entire demand was paid within the specified timeframe.

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Issues involved:
1. Interpretation of construction of complex service under section 65 (30a)/(105) (zzzh) of Finance Act, 1994.
2. Applicability of judgments in similar cases.
3. Abatement calculation and inclusion of value of free supplies.
4. Cum tax benefit eligibility.
5. Wilful mis-statement/suppression of facts and penalty imposition.

Analysis:

1. Interpretation of construction of complex service:
The appeal was filed against the Order-in-Original confirming a service tax demand for construction of a complex. The appellant argued that their case aligns with certain judgments, while the Department argued that the complex constructed falls under the definition of a residential complex as per relevant legal provisions. The Tribunal examined the ground plan and photographs of the complex, concluding that it indeed met the criteria of a residential complex under the law.

2. Applicability of judgments:
The Tribunal found that the judgments cited by the appellant were not applicable to their case as those cases involved individual residential houses, not complexes as defined in the law. Therefore, the service provided by the appellant was deemed to fall under the construction of a complex service liable to service tax.

3. Abatement calculation and value of free supplies:
The Tribunal agreed with the Department that the demand should be computed after giving abatement of 67%, without adding the value of free supplies. This decision was influenced by a judgment in the case of Bhayana Builders Pvt. Ltd. The calculation was based on the total amount paid by the client along with TDS deducted.

4. Cum tax benefit eligibility:
The Tribunal extended the cum tax benefit to the appellant, despite opposition from the Department, as the amount received from the client did not include service tax. The provision for payment of service tax separately in subsequent contracts with the client supported this decision.

5. Wilful mis-statement/suppression of facts and penalty imposition:
The Tribunal found the appellant guilty of wilful suppression of facts as they failed to register, pay service tax, file returns, or respond to requests for information. The mandatory penalty was deemed applicable, and the extended period invoked. The Tribunal also referenced a judgment allowing for the reduction of mandatory penalty if not expressly granted by lower authorities.

In conclusion, the Tribunal upheld the order with modifications, reducing the demand to the service tax calculated on 33% of the total amount, granting cum tax benefit, and modifying the penalty under Section 78. The appellant was given a reduced penalty if the entire demand was paid within the specified timeframe.

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