2024 (12) TMI 945 - AT - Service Tax

Construction service tax liability depends on advance payments received before completion certificate issuance after July 2010

Creative Engineering Constructions Versus Commissioner of Central Tax, Visakhapatnam - I

CESTAT Hyderabad ruled on service tax liability for construction services, holding that works contract services were not taxable before 01.07.2007 as no ... Classification of services - Construction of Complex Service and Works Contract Service - liability to pay Service Tax under the taxable category of ‘Transportation of Goods by Road Service’ during the period from 01.10.2006 to September, 2011 - Non-production of documents in support that no advance has been received - - liability to pay service tax on the services rendered during the period from October, 2006 to March, 2015 - liability of interest and penalty. Classification of services - Construction of Complex Service and Works Contract Service - HELD THAT:- It is an admitted fact that the nature of service being provided by the assessee was more appropriately classifiable under ‘Works Contract Service’ for the period prior to 01.04.2012 as also during the subsequent period. This is also clear from the department’s stand in Appeal that appellants were having composite contract i.e., works contract. It is also now a settled law that no demand can be made under ‘Works Contract Service’ for the period prior to 01.07.2007 as there was no specified service for ‘Works Contract’ prior to 01.07.2007, as held by Hon’ble Supreme Court in the case of Larsen & Toubro [2015 (8) TMI 749 - SUPREME COURT]. Therefore, the demand prior to 01.07.2007 is not sustainable on this ground itself as the service provided was in the nature of composite contract and could not have been charged to Service Tax by classifying the same under ‘Construction of Residential Complex Service’ - It is also a settled legal position that any flat or building/ villa sold post receipt of OC cannot be subjected to Service Tax. However, in case, any advance has been taken before issuance of OC, then Service Tax liability is fastened on the service provider for the period post 01.07.2010. Non-production of documents in support that no advance has been received - HELD THAT:- It is observed that in the first round of appeal, the Tribunal had, while remanding the matter to the Original Adjudicating Authority, had invited his attention to Circular No. 151/2/2012-ST dt. 10.02.2012, which clarified about non-leviability of Service Tax for the period prior to 01.07.2010 in respect of construction services provided by the builder/ developer in terms of Board Circular No.108/02/2009-ST dt. 29.01.2009. Whereas, for the period after 01.07.2010, the construction services provided by the builder/ developer are taxable in case any part of the payment/ development rights of the plan was received by the developer before the issuance of completion certificate. Therefore, the principles are very clear that if any payment has been received from the customer or development right has been received from the land owner then when the construction service is provided to both the land owner and the buyer, Service Tax would be leviable in case advance development rights have been received. Further, there are certain submissions by the department concerning calculation of Service Tax on account of non-furnishing of relevant documents evidencing non-receipt of advance, as also the authority for issuance of OC in the respective area of construction and therefore, the matter may be considered for remanding back to the Original Adjudicating Authority. There are merit in the submissions of Department and therefore, remand these orders covered in these appeals to Original Authority. Thus, in the facts of the case, discussions and settled legal position, there is no Service Tax liability for the period before 01.07.2010 and for the period after 01.07.2010, as also w.e.f. 01.04.2012, as regards the leviability of Service Tax, the matter is remanded to the Original Adjudicating Authority to recalculate, after going through the documents submitted by the assessee and keeping in view the observations made in the foregoing paras. He shall also adjust all the payments already made towards Service Tax liability and work out the net remaining liability, which will be required to be paid by the assessee. All the three appeals are disposed of by way of remand to the Original Adjudicating Authority. Issues Involved:1. Classification of services under 'Construction of Complex Service' and 'Works Contract Service'.2. Liability to pay Service Tax under 'Transportation of Goods by Road Service'.3. Total Service Tax liability for services rendered from October 2006 to March 2015.4. Liability to pay interest under Section 75 of the Finance Act, 1994.5. Liability for penalties under Sections 76, 77(1), 77(2), and 78 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Classification of Services:The primary issue was whether the services provided by the appellant were classifiable under 'Construction of Complex Service' prior to 01.06.2007 and 'Works Contract Service' thereafter. The Adjudicating Authority initially classified the services under 'Construction of Complex Service', but the appellant contested this classification, arguing that the services should be categorized under 'Works Contract Service', especially for the period post-01.06.2007. The Tribunal noted that the nature of services provided was more appropriately classifiable under 'Works Contract Service' for the period before and after 01.04.2012, as the contracts were composite in nature. It was also highlighted that no demand could be made under 'Works Contract Service' prior to 01.07.2007, as affirmed by the Supreme Court in the Larsen & Toubro case.2. Liability to Pay Service Tax under 'Transportation of Goods by Road Service':The Adjudicating Authority confirmed a demand of Rs. 4,43,905/- under 'GTA Service' for the period 01.10.2006 to September 2011. The appellant did not contest this specific demand, and it was upheld as part of the confirmed liabilities.3. Total Service Tax Liability:The total demand was Rs. 3,32,29,926/- for services rendered from October 2006 to March 2015. However, the Adjudicating Authority confirmed only Rs. 1,20,74,757/- and dropped the remaining Rs. 2,07,11,264/-. The appellant argued that the demand was confirmed under categories not specified in the Show Cause Notices (SCNs), rendering the demand unsustainable. The Tribunal agreed that demands confirmed under categories not specified in the SCNs were not sustainable, citing various judicial precedents.4. Liability to Pay Interest:The liability to pay interest under Section 75 of the Finance Act, 1994, was not specifically contested in the appeal. However, the Tribunal's remand to the Original Adjudicating Authority implies that interest calculations would be revisited based on the recalculated Service Tax liability.5. Liability for Penalties:The appellant was initially held liable for penalties under Sections 76, 77(1), 77(2), and 78. However, the Tribunal's decision to remand the case for recalculation of Service Tax liability suggests that the imposition of penalties would also be reconsidered in light of the revised tax liabilities.Additional Observations:The Tribunal noted that for the period prior to 01.07.2010, construction services were not leviable to Service Tax if the services were provided to individual buyers for personal use, as clarified by Board Circulars. The Tribunal also highlighted that any advance received before the issuance of an Occupancy Certificate (OC) would attract Service Tax liability post-01.07.2010. The Tribunal remanded the case to the Original Adjudicating Authority for a thorough review of documents to verify claims regarding advances and OCs, and to recalculate the Service Tax liability accordingly.Conclusion:The Tribunal remanded all appeals to the Original Adjudicating Authority for recalculation of Service Tax liabilities, considering the evidence provided by the appellant and the legal precedents cited. The recalculated liabilities would also influence the determination of interest and penalties. The Tribunal emphasized the need for the Original Adjudicating Authority to adjust all payments already made by the appellant towards the Service Tax liability.