TaxTMI 
TaxTMI 
2019 (7) TMI 59
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....ed in providing taxable services falling under the category 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  ....
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....e dated 18.12.2012 was issued by Additional Commissioner to the Appellant 1 and dated 11.12.2012 to Appellant 2, demanding the tax payable under Section 73 along with interest under Section 75 and penalties under Section 76, 77 and 78 of Finance Act, 1994. Show cause notice also proposed to appropriate the tax and interest already paid against the amount of tax and interest to be confirmed. 2.5 The matters were adjudicated by the vide his order in original dated 30.09.2013 (Appellant 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....
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....aving any customer, then that activity cannot be said to be provided by the appellant to the customer and as such cannot be classified as taxable service. vii. In terms of explanation inserted in the above referred section with effect from 1st July 2010, following conditions need to be cumulatively satisfied for the purpose of levy of service tax. a) There should be a residential complex. b) Construction is being done for an intended sale. c) Sale could be of 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. ....
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....429 (T-LB)] c) Vinayaka Travels [2011 (23) STR 5 (Kar)] xvi Extended period of limitation is not available in the present case in view of following decisions: a) Vineet Electrical Industries Pvt Ltd [2001 (136) ELT 784 9T-Kol)] maintained in [2002 (144 ELT A292 (SC)] b) Janta Rubber Distributors [2000 (125) ELT 671 (T- Kol)] xvii. The proceedings initiated by the Show Cause Notices are void ab initio as they have paid the service tax due along with interest prior to issue of show cause notice and the proceedings should have been concluded in terms of Section 73(3) and CBEC 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 Fl....
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....Tax Valuation Rules, 2006 was amended, vide Finance Act, 2017, retrospectively to be effective from 1/7/2010 deducting the value of land to determine the value of service involved in the works contract. f) Services of construction of complex, building or civil structure or part thereof cannot be valued as per Rule 2A of valuation Rules. 2006 which specifically deals with the valuation of Work Contract Service, and in absence of valuation provisions to ascertain the value of services involved "construction of complex service" demand to levy Service Tax under this category cannot be upheld. g) Notification No 26/2012-ST dated 20.06.2012 which provides for an abatement to the value of land with respect to services 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 be....
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....urse of arguments and in the written submissions filed. 5.2 Appellants are providing taxable service under the category of 'Construction of Complex Services' as defined by Section 65(105) (zzzh). The services provided by them in respect of residential complexes have been brought in the taxable category with effect from 01.07.2010 by insertion of explanation to Clause (zzzh) of sub section 105 to Section 65. The relevant clauses of Section 65 are reproduced below: "Section 65 In this Chapter, unless the context otherwise requires, (30a) "construction of complex" means- (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor 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....
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.... parties to the contract, the service provider and service receiver. Hence their cannot be any liability to service tax in respect of the activities undertaken by them prior to entering into agreement of sale with the buyer. 5.3 The decisions of the Hon'ble Apex Court are in relation to VAT, relatable to the sale of goods. Further the issue under consideration is not of classification of services, whether as work contract or under the category of construction of complex services. At the material time both work contract services and construction of complex services were leviable to service tax. Since the services provided by the appellants are more specific to construction of complex services they get classified under that category which is more specific. The dispute in the present case is 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 Financ....
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....s of Notification No 1/2006-ST dated 1.03.2006 as amended by Notification No 29/2010-ST dated 22nd June 2010, the value of taxable service for the calculation of the tax payable has been prescribed at 25% of the gross receipts. The relevant portion of Notification is reproduced below: S. No Sub-clause of clause (105) of Section 65 Description of taxable service Conditions Percent age 10 (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. 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 o....
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....nstruction, subject to conditions (Refer Notification 29/2010-Service Tax, dated 22nd June 2010). Importantly seventy five percent abatement will be applicable only if the gross value of commercial or residential complex or unit includes cost of land. Otherwise the existing rate of abatement of 67% would continue to apply." In our view from the above clarification there seem to be no iota of doubt with regards to the value to be taken for determination of the tax payable in respect of the services rendered by the appellants. Appellants have contended that certain portion of the works have been completed by them prior to entering into contract/ agreement of sale of the flats with the buyer. Hence no service tax can be demanded in respect of the works undertaken prior to entering into such agreement of sale. We are not in agreement with the contentions raised because 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 ....
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....t their significance where transactions are of the nature contemplated in Article 366(29A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. (vii) A transfer of property in goods under clause (29A)(b) of Article 366 is deemed to be a sale of the goods involved in the execution of a works contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. (viii) Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 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 ....
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....ettled after the decision of this Court in Raheja Development (supra). 117. The submission of Mr. K.N. Bhat that the view in Raheja Development (supra) that when a completed building is sold, there is no work contract and, therefore, no liability to tax is not correct statement of law, does not appeal to us. If at the time of construction and until the construction was completed, there was no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to have been sold by the builder since at that time there is no purchaser. That the building is intended for sale ultimately after construction does not make any difference." This decision of the Apex Court do not advance the case of the appellant any further. Hon'ble Supreme Court in case referred to by appellant as is evident that from the above decision was concerned 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) o....
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.... port of Bombay and sold by the appellants directly to consumers. A dispute arose as to the provisions under which duty under the Sea Customs Act was attracted. Section 30 of that Act provided that for the purposes of the duty the real value should be deemed to be "(a) the wholesale cash price, less trade discount, for which goods of the like kind and quality are sold or are capable of being sold, at the time and place of importation...... or (b) where such price is not ascertainable, the cost at which goods of the like and quality could be delivered at such place,........" The Government contended that the real value of the appellants' oil was its "wholesale cash price" referred to in Section 30(a) a price ascertainable, without difficulty. The appellants replied that in view of the unique character of their oil and of the invariable course of business pursued by them in relation to its 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 ....
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....ainable, the goods could not be dealt with under Section 30(b), and in this connection they referred to the expression "ascertainable" as importing more than should be satisfied by the result of a mere estimate. The Privy council held that the appellant's price to the distributors was a wholesale price within the meaning of Section 30(a) because it was a cash price, and only discount had been deducted, and the sum payable by the distributor had been reduced to a price referable to a car in the condition in which it arrived in Bombay. It was contended for the appellants that "goods of the like kind and quality" in clause (a) was a phrase which suggested other goods than that under assessment and therefore, the price fetched by the goods themselves must be disregarded or should be considered only to see what price other similar goods would have realised. It was urged that since that test was 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....
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....horities, and assessments were made on that basis. Subsequently, the Superintendent of Central Excise began to assess the duty on the basis of the retail price and not the wholesale cash price. The case was taken by writ petition to the High Court, which held that the duty fell to be assessed under the old Section 4(a) of the Central Excises and Salt Act on the basis of the wholesale cash price payable by the wholesale dealers, and not under Section 4(b) on the basis of the price of retail sales effected directly to the consumers. The case was brought in appeal to this Court. The Court observed that for the purposes of Section 4(a), it was not necessary for a wholesale market to exist in the physical sense of the term where articles of a like kind or quality are or could be sold. A wholesale market, it was observed, could also mean "the potentiality of the articles being sold on a wholesale 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 shoul....
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....e dye stuffs manufactured by the appellants should be determined under Section 4. The appellants contended that the value should be the price at which the appellants sold in wholesale to the two wholesale buyers, less a uniform trade discount of 18%. The excise authorities took the view that the value should be the price at which the wholesale buyers had sold the dye stuffs to the distributors without taking into account the discount given to the distributors. Before this Court, the excise authorities pressed the same contention, urging that Section 4(a) did not provide that in every case the wholesale price charged by the manufacturer should be taken into consideration and not the wholesale price charted by the wholesale buyers who sold the product also in wholesale to the next buyers. One of us (Bhagwati J.) spoke for the Court in that case, and delivered a closely enunciated and lucid exposition 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.....
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....ent, namely, selling cost and selling profit of the wholesale dealer. That would be plainly contrary to the true nature of excise as explained in the Voltas' case (supra). Secondly, this would also violate the concept of the factory gate sale which is the basis of determination of value of the goods for the purpose of excise. There can, therefore, be no doubt that where a manufacturer sells the goods manufactured by him in wholesale to a wholesale dealer at arm's length and in the usual course of business, the wholesale cash price charged by him to the wholesale dealer less trade discount would represent the value of the goods for the purpose of assessment of excise. That would be the wholesale cash price for which the goods are sold at the factory gate within the meaning of Section 4(a). The price received by the wholesale dealer who purchases the goods from the manufacturer and in his turn 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-man....
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....at the time and place of sale, any further articles of 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. It seems to us that the more practical way of looking at the problem is that there are very few cases indeed where two manufacturers produce an article of the like kind and quality. An instance has been supplied by learned Counsel for the assessees, and we are referred to the case of a factory which manufactures identical electric bulbs for supply to a number of companies who sell them in the market under their own distinctive trade name. While such examples are possible, we are inclined to accept the statement of the learned Solicitor General that goods manufactured by different manufacturers 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 ....
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.... and charged separately then taxable value shall be 25% of gross receipt; and • in case the cost of land is determined separately charged separately, then the taxable value will be 33% of the gross amount. This is clearly what has been explained by the J S (TRU) in his letter dated 1.07.2010. In case of person claiming taxable value to be 25% of the gross amount, the question of determination of cost of land is irrelevant and the decision of Delhi High Court in case of Sarwan Kumar Bansal relied upon by the appellant will not be applicable. In case of Venus Castings [2000 (117) ELT 273 (SC)], Hon'ble Supreme Court while upholding the Constitutional Validity of similar optional scheme held as follows: "10. The schemes contained in Section 3A(4) of the Act and Rule 96ZO(3) or Rule 96ZP(3) of the Excise Rules are two alternative procedures to be adopted at the option of the assessee. Thus the 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 hybri....
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.... purpose is carried out by the rules, the same cannot be stated to be ultra vires of the provisions of the enactment. Therefore, it is made clear that the manufacturers, if they have availed of the procedure under Rule 96ZO(3) at their option, cannot claim the benefit of determination of production capacity under Section 3A(4) of the Act which is specifically excluded. We find that the view taken by the Andhra Pradesh high Court in Sathawahana Steels & Alloys (P) Ltd. v. Government of India (supra) and the similar view expressed by the Division Bench of the Allahabad High Court in Civil Miscellaneous Writ Petition No. 1127 of 1999 M/s. Jalan Castings (P) Ltd. v. Commissioner of Central Excise & Ors. disposed of on February 28, 2000 is reasonable and correct. We overrule the view taken by the Allahabad High Court in Pravesh Castings (P) Ltd., Kanpur Nagar v. Commissioner of Central Excise, Allahabad & Anr. (supra). 12. 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 th....
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....the confirmation of duty demand invoking the extended period of time along with interest thereon cannot be faulted. Consequently, the appellant is also liable to penalty under the provisions of the Finance Act, 1994." In case of Kala Sagar [2015 (138) STR 1015 (T-Mum)] following has been held: "14. I have considered the submissions of both sides as also the orders recorded by my two learned brothers. Extended period of limitation is invoked under the proviso to Section 73(1) of the Finance Act. The said proviso reads as under :- "PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment 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 d....
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....on and no canon of interpretation permits such an exercise by any court leave alone the statutory provision. These can at the most have in some cases impact on determining the five situations enumerated in proviso to Section 73. Even for sake of argument, if it is assumed that these are relevant, even then the appellant's arguments have no merits. The first reason quoted for bona fide belief is that Section 65(25b) is applicable to construction of new building. The word "new" or "old" is not mentioned in the said definition. In fact a plain reading of clauses (c) and (d) would clearly indicate that the said clauses are applicable to the activities being carried out by the appellant. In fact there can be no doubt for this to a layman or persons engaged in the field of such services. Repair or renovation are not carried out in new building. Similarly, repair and renovation are always carried out in part of building. In fact, interpretation suggested will make 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....
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...., 1944 is concerned, the very fact that the appellant was disputing that their activity does not amount to manufacturing furniture and hence not liable to excise duty should lead them to believe that the said activity also involves services and would get covered under Service Tax. In view of this position, I do not find any substance in the contention of the learned Advocate that the issue involved is interpretation of statute. From 2005 onwards, after the introduction of 'commercial or industrial construction service', the activities of the appellant are very specifically covered under the said provision and there can be no two opinions about the coverage of the same after 2005 whatever the difference of opinion or anything can be is for the period prior to 2005. As far as knowledge of the department is concerned, I agree with the learned AR that the Service Tax Law and Excise Law are two different laws and are implemented by two different set of officers 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, therefor....
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....cause notice, dated 15-10-2009 as the demands in the other notices appear to be within the normal period of limitation. It is not the case of the appellant that the appellant took registration and gave details of the various contracts entered into to the department. The details of the services received from the non-resident service providers and the consideration paid therefore, was never declared to the department in the statutory returns filed by BCCI. In terms of the provisions of Section 66A read with Section 68 of the Finance Act, 1994, the appellant BCCI was the person responsible for paying Service Tax and it was their duty to comply with the statutory requirements which they failed to do. Both in the show cause notices as well as in the impugned orders, the fact of suppression/withholding of information has been examined and discussed at length. Only after the commencement of the investigation by the department, the true nature of the various transactions 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 ....
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....e years from the date of knowledge and, therefore, the contention that the notices are hit by time bar is clearly unsustainable in law and we hold accordingly. The reliance placed by the appellants on the various decisions are of no avail as in the present case there is deliberate withholding of information." In view of the above decision and the fact that appellants had failed to take registration, pay taxes due and file the service tax returns in time we do not find any merits in the submissions made by the appellant in respect of invocation of extended period of limitation. It is also pointed out that relevant defined in terms of Section 73 of Finance Act, 1994 is as follows: "(6) For the purposes of this section, "relevant date" means,- (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid - (a) where under the rules made under this Chapter, a periodical 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 ....
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....ernment from time to time. This is evident from the opening part of sub-section (1) of Section 11, which runs thus : "Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate ........" The terminal part in the quotation above, which is couched with the words "shall" and "be liable" clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional." Thus we uphold the demand of interest under Section 75 of the Finance Act, 1994. For upholding the demand of interest we also rely on the following decisions i. ....