2020 (6) TMI 260 - AT - Service Tax

Appellant wins tax liability case on composite contracts & service tax for residential complex construction

The Tribunal ruled in favor of the appellant in a tax liability case involving composite contracts and service tax on residential complex construction. ... Non-payment of service tax - Composite Contract - Construction Services - Appellant was paying service tax regularly on all the services and stopped making payment of tax from January, 2009 in view of Circular No. 108/02/2009 – ST dated 29.01.2009 - whether composite contracts are liable to service tax prior to 01.06.2007 when the classification of works contract service was introduced in the Finance Act, 1994 w.e.f. 01.06.2007? HELD THAT:- Admittedly, the appellant have supplied both material and labour / service in the contracts executed by them. We find that the issue is no longer res-integra and it has been held by Hon’ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] that prior to 01.06.2007 only service contracts simplisitter (not involving supply of material) are taxable under the existing classification of CICS, ICS, CCS, etc. - demand set aside. Service tax liability on promoters / builder / developer prior to 01.06.2010 in respect of construction of residential complex - HELD THAT:- The CBEC by way of clarification vide Circular No. 108/02/2009-ST dated 29.01.2009 r/w Circular No. 151/2/2012-ST dated 10.02.2012, have clarified that for the period prior to 01.06.2010, construction(residential) provided by builder / developer will not be taxable - Admittedly, the tax under this category, of ₹ 42,01,090/- relates to the period prior to 01.06.2010. Accordingly, this ground is allowed in favour of the appellant and the demand is set aside. Maintenance and repair service - HELD THAT:- Learned Counsel urges that the appellant does not dispute the tax liability, and they have already paid the amount of ₹ 90 lakhs (approximately) prior to the show cause notice, and shall pay the balance if any, upon reconciliation. Demand under the head renting of immovable properties for the period 2007-08 to 2009-10 - HELD THAT:- Learned Counsel states that they have already paid the tax prior to the issue of show cause notice, and within the window provided for payment of tax under this head, when this taxable head was re-introduced by Finance Act, 2010 after the same was quashed by Hon’ble Delhi High Court in HOME SOLUTIONS RETAILS (INDIA) LTD. VERSUS UNION OF INDIA & ORS [2011 (9) TMI 46 - DELHI HIGH COURT]. - Since admitted tax has been deposited, no penalty. Service tax of ₹ 20,685/- under the head ‘engineering consultancy services’ - HELD THAT:- Learned Counsel states that they did not dispute this amount, thus same is confirmed. - Penalty u/s 77 and 78 of the Finance Act - HELD THAT:- As the issues involved are interpretational in nature and the appellant have deposited the admitted taxes prior to issue of show cause notice, along with interest - Penalties set aside. The appellant is liable to deposit, if any tax is found short paid, on arithmetical verification. Appellant is also directed to file a calculation of their final tax liability, with the details of payment of such tax liability, before the adjudicating authority for his information and perusal - appeal allowed - decided in favor of appellant. Issues:1. Tax liability on composite contracts prior to 01.06.2007.2. Service tax liability on promoters/builders/developers pre-01.06.2010 for residential complex construction.Analysis:1. The first issue addressed was the tax liability on composite contracts before 01.06.2007. The Tribunal referred to a Supreme Court judgment stating that only service contracts (not involving material supply) were taxable pre-01.06.2007. The demand of Rs. 34,91,178 was set aside as no alternative classification was proposed.2. The next issue involved service tax liability on promoters/builders pre-01.06.2010 for residential complex construction. Circulars clarified non-taxability before 01.06.2010. The demand of Rs. 42,01,090 was set aside for the period before 01.06.2010.3. Regarding works contracts, the appellant had paid service tax using Rule 2A of Valuation Rules, 2006. The demand of Rs. 1,32,29,790 was set aside as the composition scheme cannot be imposed on the assessee.4. The demand of Rs. 91,76,607 for maintenance and repair services was acknowledged by the appellant, who had already paid a significant amount. The remaining balance was to be paid upon reconciliation.5. For renting of immovable properties, the appellant had paid the tax within the provided window, and the demand of Rs. 2,68,833 was set aside.6. The demand of Rs. 20,685 for engineering consultancy services for 2009-10 was confirmed as undisputed by the appellant.7. The Tribunal held that no penalty was imposable as the issues were interpretational, and taxes were paid before the show cause notice. The demands were either set aside or confirmed based on the specific issues discussed.8. Penalties were set aside, and the appellant was directed to deposit any short-paid tax after verification. The appellant was instructed to provide a calculation of final tax liability to the adjudicating authority.9. Ultimately, the appeal was allowed in favor of the appellant, with the decision pronounced on 10.06.2020 in open court.