TaxTMI 
TaxTMI 
2012 (6) TMI 363
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....e buyer and a construction agreement would also be entered into with the buyer, for construction of a flat/ house, in accordance with the agreed specifications. The constructed area in the form of flats/houses, allotted in favor of the land lord, would be dealt with by him according to his wish. 2. In this connection, the department conducted verification of the appellant s liability for payment of service tax and a show cause notice dated 11.02.2008 was issued to the appellant, stating various grounds of short levy of service tax and proposing a service tax demand of Rs. 83,98,962/- from the appellant, for the period 16.06.2005 to 31.03.2007 and also proposing imposition of penalties. 3. After due process of law, an Order-in-Original No.60/2008 dated 22.12.2008 has been passed by the Commissioner of Service Tax, confirming the above demand of service tax of Rs. 83,98,962/-, along with interest and imposing a penalty of Rs. 84,00,000/- under Section 78 of the Act. An amount of Rs. 58,45,507/- paid by the appellant was appropriated towards the above demand. Aggrieved by the said order-in-original, the appellant preferred an appeal before the Hon ble Tribunal, whi....
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....n respect of the following projects :- (i) TA Enclave, Velacherry consisting of 81 units (ii) Himardri, T.Nagar consisting of 20 units (iii) Kamakotivilasam, Madipakkam consisting of 16 residential units 6. We have heard both sides.We find that the disputes can be grouped under three major headings. These are,- (i) disputes in respect of constructed flats/ houses handed over to the land owners, in the nature of non-payment of tax; (ii) disputes in respect of constructed flats/ houses sold by the developer to the individual buyers, inthe nature of shot payment of tax on account of undervaluation; (iii) disputes in respect of Kamakotivilasam Project in the nature of non-payment of tax, which dispute involves questions of facts and law. 7. Since these disputes are somewhat different in nature andhence are being treated separately. Further many legal issues are argued under each of the above disputes. So we consider it proper to record arguments issue-wise and give findings. 8. The Appellants argue that there is no relationship of service provider and service recipient between the Developer and th....
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....r the introduction of the new entry for works contract. So this cannot be interpreted as an altogether new entry. It only provides a new method of determining the liability on such services at the option of the service provider. Accepting the argument of the appellants would render all taxes levied and collected on such services prior to 01-06-2007, as without authority of law. A reading of the entry in section 65 (105) (zzzza), Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 and Rule 2A of Service Tax (Determination of Value) Rules, 2006, does not warrant such an interpretation. 10.3. We also note the Apex Court has held in BSNL Vs. UOI- 2006 (2) S.T.R. 161 (S.C.) held that the nature of a composite contract should be decided with reference to intention of the parties and also with reference to the dominant aspect of the contract. Further it was held that a contract of the nature of composite contract as defined in Article 366 (29A) of the Constitution of India can be spilt into sale and service. In this case the Land Owners parted with partial rights in their land to be paid for in the form of constructed flats. Construction of flat is in the ....
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....s and subsequent to construction of the flats, the land owners desired to split the joint family into small families and live in individual flats and, therefore, there cannot be a conclusion that all flats in excess of one flat handed over to the land owners were not for personal use. 11.2. We have considered this argument. 11.3. The definition of residential complex as defined at section 65 (91a) reads as under: (91a) residential complex means any complex comprising of (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation. For the removal of doubts, it is ....
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....timate owner for selling a dwelling unit in a residential complex at any stage of construction (or even prior to that) and who makes construction linked payment. The Construction of Complex service has been defined under Section 65 (105) (zzzh) of the Finance Act any service provided or to be provided to any person, by any other person, in relation to construction of a complex . The Construction of Complex includes construction of new residential complex . For this purpose, residential complex means any complex of a building or buildings, having more than twelve residential units. A complex constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex intended for personal use as residence by such person has been excluded from the ambit of service tax. 2. A view has been expressed that once an agreement of sale is entered into with the buyer for a unit in a residential complex, he becomes the owner of the residential unit and subsequent activity of a builder for construction of residential unit is a service of construction of residential complex to the customer and hence service tax would be applic....
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....ce tax. 4. All pending cases may be disposed of accordingly. Any decision by the Advance Ruling Authority in a specific ease, which is contrary to the foregoing views, would have limited application to that case only. In case any difficulty is faced in implementing these instructions, the same may be brought to the notice of the undersigned. 12.3. He further submits that the said circular was reconfirmed by another circular dt. 10.2.2012.The main contention is that this is a joint venture between the land owners and the appellant where profit of the joint venture is shared by both the parties. The land owner makes available his land and the appellant does construction activity and constructed flats are divided in a ratio agreed at the time of execution of Joint Development Agreement. It cannot be considered that the appellant was providing any service to the land owners. The appellant was paying back the consideration for his share of the land which he bought through the Development Agreement by compensating in the form of flats constructed and handed over to the land owners. 12.4. We find that para 3 of the clarification dt29-01-2009deals with cases where flats....
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....vice to be provided . From 16-06-2005 the section 65 (105) was amended to read taxable service means any service provided or to be provided . Thus service to be provided became taxable from that date but that does not mean that service provided from that date was not taxable if consideration was received earlier. Thus we do not agree with the contention of the appellant in this regard. The new provision can be interpreted to mean only that prior to that date no tax was to be paid at the time when consideration was received but tax was to be paid at the time when service was provided. This position has been clarified by CBEC in its circular B1/6/2005-TRU dated 27-07-2005. 13.3 We note that this matter relates to the period prior to the notification of Point of Taxation Rules, 2011. So this issue has to be determined with reference to provisions in Act that were in force. As per the provisions of section 67 prior to 18-04-2006, the value of any taxable service was the gross amount charged by the service provider for such service provided or to be provided by him . From 18-04-2006 section 67 was amended to provide as under: SECTION 67.Valuation of taxable services ....
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....ice was rendered it is not proper to calculate value based on the prices at which flats were sold to independent buyers. The argument is that the service to the Land Owner commenced much earlier than the point of time at which the service commenced for other independent buyers.So the Counsel contests that if at all a value has to be adopted, then guideline values of the land fixed by the authorities registering transfer of immovable properties should be adopted rather than adopting the value of flats sold. The counsel argues that, if any service is considered as rendered by the appellant to the land owners the value should be determined by adopting the notional value of the share of rights in land sold to the appellant on the basis of value adopted for registration of property. 14.2 In the case of TA enclave it is specifically contended that the value of UDS to be handed over to the appellant was arrived atRs. 4,85,92,500/-. This was to be paid partly as cash of Rs. 3,46,50,000/- and Rs. 1,39,42,500 as cost of flats at the rate of Rs. 750 per Sq-Meter., but on the other hand the value of services rendered by the appellant has been arrived at by Revenue considering the val....
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.... that date. 15.3. Further Revenue points out that the appellants were asked by letters dated 26-12-2006, 05-02-2007, 23-03-2007, 08-05-2007, 15-05-2007 and 06-06-2007 to furnish the required details but the appellants did not furnish the required details. So the appellants were stonewalling the action of Revenue to issue demand and now they cannot claim that the demand is time-barred. 15.4. We have considered arguments on both sides. What we find is that there has been persistent resistance on the part of the appellant in providing the required information.After resisting for providing information the appellant cannot claim benefit of bonafide belief and argue that demand for a period of one year from relevant date only will apply. We also note that the letter dated 23.12.05 addressed by the appellant to the Superintendent of Central Excise deals only with Kamakotivilasam project and the main issue raised in that letter is something different as is being discussed in later paragraphs. 15.5. So we reject the argument of the appellants in this regard. PART-II- MATTERS RELATING TO FLATS/ HOUSES SOLD TO INDIVIDUAL BUYERS OTHER THAN LAND OWNERS. &....
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..... There can only be a dispute that a part of value of service is recovered as such expenses because such expenses charged are not against actual bills. Considering the position as already explained and the overall facts and circumstances Revenue has to make reasonable efforts to quantify such expenses and keep it outside the service tax net. Considering these aspects we propose to give one more opportunity to the appellants to provide reasonable basis to show that the amounts recovered are not in excess of amounts incurred on these activities. Here a liberal approach is required on the part of Revenue because we consider that these not in the nature of reimbursable expenses incurred while providing service but are expenses incurred before commencement of the service. So if there is difficulty in collecting evidence in respect of registration ofUDS in all the cases, the appellants should be allowed to submit sample documents. Since the charges are expected to be uniform for one type of flat Revenue should accept such calculation except to the extent Revenue is able to prove the amounts to be more than what was incurred for the impugned activities. PART-III- MATTERS RELATIN....
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.... stage of the proceedings. So we take the letter to be genuine and proceed accordingly. 18.4. We have examined this issue. In the first place this letter is dealing with Kamakotivilasam project. The main issue contended is that in each plot, there are only less than 12 residential units. In the last para, there is a mention about property developed for land owners and sold on their behalf. In this letter, there is no mention about the other two projects and details that Revenue has been asking about the said projects. But in the appeal the argument is placed as if the letter would apply to matters relating to service provided to Land Owners in general which is not the factual position. 18.5. In the case of Kamakotivilasm project there are disputes about facts like whether there is common boundary wall, common playground, common roads, common lighting etc. It is rather strange that on these facts also there is no agreement. 18.6. But what we notice is that the issue whether the definition of a residential complex as given in section 65 (91a) will apply only to cases where one building has more than twelve flats or will extent to cases where different bu....