Composite construction contracts escape pre-2012 construction-service tax, while uncertified developer construction remains taxable under the later regime.
Composite construction contracts involving transfer of property in goods cannot be taxed as construction services for the period before 1 July 2012. Under the post-2012 negative-list regime, developer construction for buyers before a valid completion certificate is taxable as works contract service. An unreliable completion certificate does not exclude the activity from tax. Extended limitation and penalties may apply where service tax is collected without registration or payment, taxable collections are omitted, and returns are filed late, establishing deliberate suppression and intent to evade tax.
Issues: (i) Whether service-tax demand on composite construction contracts under construction of complex service was sustainable for the period before 01.07.2012; (ii) Whether service tax and penalties were sustainable for construction undertaken from 01.07.2012 to March 2015 without a valid completion certificate; (iii) Whether the extended limitation period and penalties for non-registration, non-payment and delayed returns were validly invoked.
Issue (i): Whether service-tax demand on composite construction contracts under construction of complex service was sustainable for the period before 01.07.2012.
Analysis: Composite contracts involving transfer of property in goods are works contracts and cannot be subjected to demand under construction of complex service or construction of industrial complex service as services simpliciter. The pre-01.07.2012 demand had been raised under construction services despite the composite character of the agreements.
Conclusion: The demand for the period before 01.07.2012 was unsustainable and was set aside, in favour of the assessee.
Issue (ii): Whether service tax and penalties were sustainable for construction undertaken from 01.07.2012 to March 2015 without a valid completion certificate.
Analysis: After 01.07.2012, the negative-list regime taxed all services unless excluded or exempted, and construction by a developer for buyers before receipt of a completion certificate was a taxable declared service. The only purported completion certificate was found unreliable, and the construction activity for buyers during the relevant period constituted taxable works contract service.
Conclusion: Service-tax demand for the period from 01.07.2012 to March 2015, along with the related penalties, was rightly confirmed, against the assessee.
Issue (iii): Whether the extended limitation period and penalties for non-registration, non-payment and delayed returns were validly invoked.
Analysis: The assessee collected service tax before registration, did not deposit it, obtained registration only after investigation commenced, omitted additional collections from taxable value, and filed returns late without paying late fee. These circumstances established deliberate suppression of material facts with intent to evade payment of tax.
Conclusion: Invocation of the extended limitation period and imposition of penalties for delayed returns and deliberate non-compliance were valid, against the assessee.
Final Conclusion: The tax liability was confined to the post-01.07.2012 construction period, while the pre-01.07.2012 demand under construction services could not survive.
Ratio Decidendi: A composite construction contract involving transfer of property in goods cannot be taxed as construction service for the pre-01.07.2012 period, whereas developer construction for buyers before a valid completion certificate is taxable under the post-01.07.2012 regime; deliberate suppression justifies extended limitation and penalties.