TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 59
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....ry of "Construction of Complex Services" as defined by Section 65(105)(zzzh) of the Finance Act, 1994. Though providing taxable services at the material time they did not took registration and paid service tax. When enquiry was initiated against them they paid some amounts of service tax as is discussed in para 2.2 and 2.3. 2.2 M/s Laxmi Associates (Appellant 1) were providing the taxable services under said category from 01.07.2010. They were required to pay service along with the education and secondary and higher education cess as detailed below: Quarter Advance Received Taxable Amount Service Tax and Cesses Payable Due Date July-Sept 10 0 0 0 0 Oct-Dec 10 1000000 250000 25750 5.1.11 Jan-Mar 11 11185216 2796304 288019 31.3.11 Apr-June 11 13454876 3363719 346463 5.7.11 July-Sept 11 27439632 6859908 706571 5.10.11 Oct-Dec 11 31118723 7779681 801307 5.1.12 Jan-Mar 12 16734805 4183701 430921 31.3.12 Apr-June 12 22674691 5668673 700648 5.7.12 12,36,07,943 3,09,01,986 32,99,679 Against the above amount payable they deposited the tax along with interest as detaile....
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....ant 1) and 29.11.2013 (Appellant 2). By his order Additional Commissioner confirmed the demand of tax made against the appellants along with interest he also imposed penalties under Section 77(2) and Section 78 of the Finance Act, 1994 on the Appellants. 2.6 Aggrieved by the order of Additional Commissioner, Appellant 1 and Appellant 2 filed the appeal before Commissioner (Appeal) which were decided by the Commissioner(Appeal) vide his orders referred in para 1, supra, upholding the order of Additional Commissioner. 2.7 Aggrieved by the orders of Commissioner (Appeal) both Appellants have preferred these appeals before the tribunal. 3.1 In the appeals filed, appellants have challenged the order of Commissioner (Appeal) stating that- i. No service tax is leviable on the part of the construction of complex constructed prior to entering into the agreement to sale with the flat buyers/ customers. They have deposited the service tax on the value of construction services provided by them after entering into sale agreement with the buyer, as any activity rendered by them in respect of the construction of complex prior to entering into agreement of sale with the b....
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....f whole/ part of complex. d) Intended sale could be made by the builder/ developer or his authorized person. e) Intention of sale could be either before construction, during or after construction. Such sale should be to the buyer. f) Any such sale consideration is received after receipt of the completion certificate would not be covered by the present explanation. viii. When a construction activity is carried out by the builder/ developer not for any identified buyer, such construction activity would also fall outside the ambit of the said explanation. ix. To the extent they had carried out the construction activity prior to having an identified customer it would be out of service tax. x. In CBEC Circular No 108/02/2009-ST dated 29.01.2009 it has been clarified that any construction activity carried out by the builder/ developer prior to entering into the agreement to sale is a service to self. The principle outlined in the said circular shall apply in their case too. xi. The reliance placed on circular Nop 151/2/2012-ST dated 10.02.2012 is totally uncalled for. xii. &n....
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....EC Circular No 137/167/2006-CX.4 dated 03.10.2007. Reliance is also placed on the following decisions: a) Neev Sai Developer [2010-TIOL-2197-CESTAT-MUM] b) Gupta Coal Field & Washeries [2013 (29) STR 166 (T-Mum)] c) Krishna Security and Detective Services [2011 (24) STR 574 (T-Ahd)] d) Hajarilal Jangid [2011(24) STR 510 (T-Mum)] e) Nischint Engineering Consultants Pvt Ltd [2010 (19) STR 276 9T-Ahd)] f) Addecco Flexione Workforce Solutions Ltd [2012 (26) STR 3 (Kar)] g) Metro Automobiles [2013-TIOL-886-CESTAT-MUM] xviii. Demand need to re-quantified by granting the cum tax benefit, in view of decisions in case of- a) Srichakra Tyres Limited [1999 (108) ELT 361 (T-LB)] affirmed at {2002 (142) ELT A279 (SC)] b) Maruti Udyog Limited [2002 (141) ELT 3 (SC)] xix They are not required to pay any interest over and above what has been paid by them. 4.1 We have heard Shri Sagar Shah, Chartered Accountant for both the Appellants and Shri O M Shivdikar, Assistant Commissioner, Authorized Representative for the revenue. 4.2 Arguing for the appellants....
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....vices in relation to construction of complex, indirectly implies that there was tax applicable on the same. However Tax on land is a subject covered under entry 49 of List II of the Constitution of India and falls under exclusive domain of state legislature, therefore it falls outside the legislative competence of the Parliament as far as levy of service tax on land is concerned. Therefore the said delegated legislation clearly traverse beyond the legislative competence of the Act. Thus the notification is per se arbitrary and has been issued without there being sufficient cause. Thus the notification under challenge does not confirm to the statue under which it is made.[reliance placed on the decision of Hon'ble Apex Court in case of Indian Express Newspapers & Others [(1985) 1 SCC 641= 1999 (110) ELT 3 (SC)] h) Entire dispute of invocation of extended period, penalty and interest should be settled in their favour. {SP Associates [CESTAT Order No A/90026/16/SMB dated 23.08.2016] 4.3 Arguing for the revenue learned Authorized Representative submitted that- a) From the Agreement for Sale dated 26.05.2011 registered on 03.06.2011, it is evident that appellant is a....
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....and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex; (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 hereby declared that for the purposes of this clause,- (a) "personal use" includes pe....
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.... in relation to valuation of taxable services. Appellants have contended that in view of the above referred decisions the service tax cannot be levied in respect of activities undertaken by them prior to entering into agreement of sale with the buyer of flats. 5.4 The value for the purpose determination of the service tax payable has to be done in terms of Section 67 of the Finance Act, 1994 read with the relevant Valuation Rules, 2006. For ease of reference section 67 and relevant rules are reproduced below: "67. (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amou....
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....used for providing the taxable service by the service provider. 33 10(a) (zzzh) Construction of Complex This exemption shall not apply in cases where the taxable services provided are only completion and finishing services in relation to residential complex, referred to in sub-clause (b) of clause (30a) of section 65 of the Finance Act. Explanation.- The gross amount charged shall include the value of goods and materials supplied or provided or used for providing the taxable service by the service provider. This exemption shall not apply in cases where the cost of land has been separately recovered from the buyer by the builder or his representative. 25 5.6 The impact of Section 67 and the Notification No 1/2006-ST dated 1.03.2006 as amended by Notification No 29/2010-ST dated 22nd June 2010 has been explained by J S TRU vide his DOF No 334/3/2010-TRU dated 01.07.2010 in respect of these services as follows: "6. Construction services: 6.1 In the Finance Act, changes have been made in the construction services, both commercial construction and construction of residential complex, using 'completion certificate' issued by 'com....
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....use the value of taxable service is not vis a vis the activity done prior to entering into contract/ agreement for sale, but is on the basis of gross amount (Consideration) received for providing the such construction of complex services. The gross consideration received cannot be vivisected into the on the basis of work done prior to and after entering into agreement for sale. If the argument advanced by the appellant was to be accepted then the taxable value for every flat sold in the same complex constructed by the appellant will vary depending on the date of agreement, though the gross amount charged for the same flat from the customer remains the same. 5.7 Hon'ble Supreme Court has in case of Larsen And Toubro [2014 (303) ELT 3 (SC)] laid down the law as follows: 101.In light of the above discussion, we may summarise the legal position, as follows : (i) For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions must be fulfilled : (one) there must be a works contract, (two) the goods should have been involved in the execution of a works contract and (three) the property in those goods must be ....
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....le 366(29A)(b), there is a deemed sale of goods which are involved in the execution of the works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for the sale of goods and the other for supply of labour and services. In other words, the single and indivisible contract, now by Forty-sixth Amendment has been brought on par with a contract containing two separate agreements and States have now power to levy sales tax on the value of the material in the execution of works contract. (ix) The expression "tax on the sale or purchase of goods" in Entry 54 in List II of Seventh Schedule when read with the definition clause (29A) of Article 366 includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract. (x) Article 366(29A)(b) serves to bring transactions where essential ingredients of 'sale' defined in the Sale of Goods Act, 1930 are absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, transfer of movable property in a works ....
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....with levy of the VAT on those goods which have been used for construction of a building. When the building was sold it was immovable property, the value of goods that had gone into construction of building could only be subject matter of VAT in view of the deeming fiction created by the Article 366(29A) of the Constitution of India. Supreme Court has held vis a vis the taxability of the goods that have changed the form, from what they were to the point of sale. Hon'ble Supreme Court has not stated that the gross amount received gets varied on this account. 5.8 In any taxing statue the measure of levy is to be determined according to the provisions of taxing statue. The measure of levy can be on the basis of actual computations of the taxable value or on the basis of proxy prescribed by the legislature after taking into consideration all the relevant facts. Hon'ble Supreme Court has in case of Bombay Tyre International [1983 (14) ELT 1896 (SC)] has dealt with the issue in great length and has concluded as follows: "15.As we have said, it was open to the Legislature to specify the measure for assessing the levy. The Legislature has done so. In both the old Section 4 and the....
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....s sale, a "wholesale cash price" for that oil had never existed and was not ascertainable and that therefore its real value must be determined in accordance with Section 30(b) of the Act. The Privy Council observed that there was no other oil in Bombay which could be said to be "of the like kind and quality" as the oil imported by the appellants and therefore the relevant "wholesale cash price" for the appellants, if there be such price, was to be found in the actual sales of those oils in Bombay by the appellants themselves provided that such sales had taken place. It was noted that large stocks of oil were imported at Bombay and all contracts for sale were made with reference to stocks. The oils were disposed of directly to consumers and never to dealers. The appellants themselves discharged all the functions of retailers of their oil as so sold. Besides, the selling price to consumers was about 70 per cent above the entry price, the difference representing the appellant's retailing profit and the expenses incurred by them in respect of matters subsequent to importation. The quantities of oil purchased by individual consumers were in some cases very large indeed. The Privy Counci....
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....as not satisfied clause (a) could not be invoked. The Privy Council rejected the contention, observing that the application of clause (a) did not depend upon any hypothesis to the effect that at the time and place of importation an indefinite amount of further goods added to the available supply had had effect upon the wholesale price. And what is important, the Privy Council further observed : "But if there is an actual price for the goods themselves at the time and place of importation, and if it is a "wholesale cash price, less trade discount" the clause is not inapplicable for want of sales of other goods. The clause can be applied distributively to each of the motor cars in this consignment, and even if they are regarded collectively the clause is not defeated. A particular car may be sold at a price which, having regard to other transactions in such cars, or to other circumstances, is too high or too low. In that sense, the actual price in a particular instance does not necessarily or finally establish a wholesale price to satisfy clause (a), whether the particular car or cars sold be part of the shipment in question or not. But the goods under assessment may under clause (a)....
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....e basis". What was necessary was that the articles could be sold wholesale to traders. It was observed further that the application of Section 4(a) of the Act did not depend upon any hypothesis to the effect that at the time and place of sale any further articles of the like kind and quality should have been sold. If there was an actual price for the goods themselves at the time and place of sale and if that was a `wholesale cash price', the clause was not inapplicable for want of sale of other goods of a like kind and quality. Later follow the words, which have brought on the present controversy : "Excise is a tax on the production and manufacture of goods (see Union of India v. Delhi Cloth and General Mills (supra). Section 4 of the Act therefore provides that the real value should be found after deducting the selling cost and selling profit and that the real value can include only the manufacturing cost and the manufacturing profit. The section makes it clear that excise is levied only on the amount representing the manufacturing cost plus the manufacturing profit and excludes post-manufacturing cost and the profit arising from post-manufacturing operation, namely selling prof....
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....position of the true legal position. It was explained : "The value of the goods for the purpose of excise must take into account only the manufacturing cost and the manufacturing profit and it must not be loaded with postmanufacturing cost or profit arising from postmanufacturing operation. The price charged by the manufacturer for sale of the goods in wholesale would, therefore, represent the real value of the goods for the purpose of assessment of excise duty. If the price charged by the wholesale dealer who purchases the goods from the manufacturer and sells them in wholesale to another dealer were taken as the value of the goods, it would include not only the manufacturing cost and the manufacturing profit of the manufacturer but also the wholesale dealer's selling cost and selling profit and that would be wholly incompatible with the nature of excise. It may be noted that wholesale market in a particular type of goods may be in several tiers and the goods may reach the consumer after a series of wholesale transactions. In fact the more common and less expensive the goods, there would be greater possibility of more than one tier of wholesale transactions. For instance, in a t....
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....sells the same in wholesale to other dealers would be irrelevant to the determination of the value and the goods would not be chargeable to excise on that basis." 23.This case also does not support the case of the assessees. When it refers to post-manufacturing expenses and post-manufacturing profit arising from post-manufacturing operations, it clearly intends to refer not to the expenses and profits pertaining to the sale transactions effected by the manufacturer but to those pertaining to the subsequent sale transactions effected by the wholesale buyers in favour of other dealers. 24. Having explained the true scope of Voltas Ltd. (supra) and Atic Ltd. (supra), we may now proceed directly to the consideration of certain aspects of the provisions of the old Section 4. There has been serious argument on the question whether Section 4(a) provides for the value of the assessee's excisable article being determined on the basis of the wholesale cash price charged or chargeable for articles of the like kind and quality sold by manufacturers generally or on the basis of the wholesale cash price for articles of the like and quality sold by the assessee. At first blush, it....
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....acturers generally differ in both kind and quality. Further, the manufacturing and other costs would vary from one manufacturer to another, depending on the efficiency of manufacturing techniques and management methods employed. Other important considerations are certainty and convenience in the administration of the levy from the view-point of both the assessee and the Revenue. There is the further consideration that the wholesale cash price charged by the assessee must be ascertained on the basis that the sale to the wholesale dealer is at arm's length. We are, therefore, of the view that we should prefer the construction suggested by the Revenue, that Section 4(a) applies to the goods manufactured by the assessee himself. We may also point out that this conclusion is in accord with the general intent expressed in the new Section 4(i)(a), and as we shall show presently it is the case of both the assessees and the Revenue that in enacting the new Section 4 in supersession of the old section, no material departure was intended from the basic scheme for determining the value of the excisable article. 25. Accordingly, we hold that pursuant to the old Section 4(a) the value of....
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....two procedures do not clash with each other. If the assessee opts for procedure under Rule 96ZO(1) he may opt out of the procedure under Rule 96ZO(3) for a subsequent period and seek the determination of annual capacity of production. An assessee cannot have a hybrid procedure of combining the procedure under Rule 96ZO(1) to which Section 3A(4) of the Act is attracted. The claim by the respondents is a hybrid procedure of taking advantage of the payment of lump sum on the basis of total furnace capacity and not on the basis of actual capacity of production. Such a procedure cannot be adopted at all, for the two procedures are alternative schemes of payment of tax. 11. The learned Counsel for the respondent contended that the Rule 96ZO(3) is contrary to Section 3A(4) of the Act and, therefore, should be held to be ultra vires or read the relevant rules in such a manner as to allow the procedure prescribed under the provisions of Section 3A(4) to be followed. Section 3A of the Act provides for levy and collection of the tax arising under the Act in such manner and at such rate as may be prescribed by the Rules. Section 3A provides special procedure in respect of the pow....
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....bsp; On the reasoning adopted by us and bearing in mind that in taxation measures composition schemes are not unknown and when such scheme is availed of by the assessee it is not at all permissible for him to turn around and ask for regular assessment, we think, there is no substance in the contention urged on behalf of the respondents." 5.8 Appellants have contested the demand on limitation and have stated that they * were under a bonafide belief that they activities undertaken by them are not taxable; * There was dispute in respect of leviability to service tax and the constitutional validity was also under challenge. We do not find much merits in such submission as in our view the provisions in law and clarifications issued by the authorities on the subject were quite elaborate and clear. Disputes cannot be in respect of the levy but can only with reference to some view being taken. The appellants claim that levy itself was being disputed. Levy being disputed implies the challenge to the power of Parliament to levy tax and it in itself admits that tax has been levied. The difference between dispute and contested levy is quite evident. Further bonafi....
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....nt of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted." There can be no doubt that for invoking the proviso to Section 73(1), one or more of the five situations enumerated in the said proviso is required to be satisfied in the case. In the present case, the undisputed facts are that the appellant has not taken the service tax registration nor filed any service tax return or paid any service tax. Taking of the registration, filing of the return and payment of service tax are the requirements under the Finance Act, 1994/Service Tax Rules. These documents only provide the facts, information and other details about the activities of a service provider to the service tax authorities. Therefore, under the circumstances there can be no doubt that there was suppression of facts and also contravention of various provisions of the Service Tax Law. The main contention of the learned Advocate is based upon bona fide belief, interpretation of the statute, knowledge of the department and revenue neutrality. I find that none of these concept....
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.... entries redundant. The other reason quoted is that the appellant was paying VAT on the same amount. It is noted that the appellant was paying VAT as works contract. Works contract by very nature consists of two parts i.e. supply of goods and material and services. While providing the services, the material also gets consumed and both the services and material are handed over to the recipient. The fact that the appellant was paying VAT under works contract would indicate that they were providing some service. Obviously, the appellant should have kept track whether their service would, at any time, become a taxable service. The least that could have been expected was that the appellant start paying service tax after the introduction of works contract service under the Service Tax Law. Even this was not done. The other reason advanced is that there was excise litigation with respect to same activity. The appellant was litigating and not agreeing that their activity amounts to manufacture and, therefore, is not chargeable to excise duty should have made them believe that their activities involve services and would be liable to payment of service tax. In view of this position, I do not....
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....having their own jurisdictions and enforcing the respective laws. The appellant has not shown any evidence whatsoever that the jurisdictional Service Tax officials were informed about the activities of the appellant and, therefore, they were fully aware about them. The jurisdictional Central Excise officials may be aware of the ongoing litigation but there is no evidence to indicate that the Service Tax officials were aware of appellant's activities. On the contrary, the appellant would be knowing the same and should have approached the Service Tax official for registration and inform of all the facts relating to their activities. The last contention is relating to revenue neutrality. I do not find any substance whatsoever in the argument of the learned Advocate. If such a theory is accepted, it will lead to a situation wherein the final consumer of goods or services only should be taxed or charged and all other irregularities by various manufacturers or service providers would become nontaxable. It is also noted that service tax authorities issued summons in February 2006 but appellant did not cooperate. Appellant also did not take registration. It was only in 2010, after lot of p....
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....ns undertaken by the appellant came to light. Information relating to the transactions were given to the department in August 2009 and thereafter. After completion of investigation, the show cause notices were issued without any undue delay. In these circumstances, invocation of extended period of time cannot be faulted at all. There has been no undue delay on the part of the department either in completing the investigation or in issue of the show cause notices. Further, we observe that though the appellant has claimed bona fide belief, no material has been placed before us, either by way of expert opinion or otherwise, as to the basis for entertaining such belief. A belief can be said to be bona fide only when it is formed after all reasonable considerations are taken into account as held by this Tribunal in the case of Interscape v. Commissioner of Central Excise, Mumbai-I - 2006 (198) E.L.T. 275 (Tri.-Mum). In Winner Systems - 2005 (191) E.L.T. 1051 (Tri.Mum), it was held that blind belief cannot be a substitute for bona fide belief. Therefore, we do not accept the plea of bona fide belief claimed by the appellant. Consequently the demand of Service Tax confirmed in the impugne....
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....dical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) ...........; (iii) ..........." As per the show cause notice appellants have filed the returns on the dates as indicated in below: Period Date of Filing the Return Appellant 1 Appellant 2 Oct 10 - Mar 11 01.03.2012 Apr 11 -Sept 11 29.02.2012 29.02.2012 Oct 11-Mar 12 05.05.2012 05.05.2012 Date of SCN 18.12.2012 11.12.2012 As is evident from the above table show cause notices have been issued within a period of one year from the date of filing the returns, hence even without invoking the extended period of limitation the demand would not be hit by limitation. 5.9 Hence we have no hesitation in upholding the demands of service tax made. Howev....
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....st under Section 75 of the Finance Act, 1994. For upholding the demand of interest we also rely on the following decisions i. Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] ii. TCP Limited [2006 (1) STR 134 (T-Ahd)] iii. Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] iv. Ballarpur Industries Limited [2007 (5) STR 197 (T-Mum)] 5.11 Since service tax has been demanded invoking extended period of limitation under Section 73 of Finance Act, 1994, penalty under Section 78 will follow as has been held by the Hon'ble Apex Court in case of Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)] and Dharmendra Textile Processors [2008 (231) ELT 3 (SC)]. 5.12 Penalties under 77 of Finance Act, 1994 are in nature of civil penalties and are imposed in cases where the person who by his act of omission or commission has failed to fulfill the obligations cast on him under the statue. By not furnishing the correct information as required on ST-3, appellant have made themselves liable to penalty under Section 77(2) read with Section 70 of the Act. Hence the penalties imposed upon by the adjudicating auth....