TaxTMI 
TaxTMI 
2020 (2) TMI 632
X X X X Extracts X X X X
X X X X Extracts X X X X
....e consideration. 3. The 4th respondent, in addition to the consideration agreed upon, also demanded and received from the petitioners an amount of Rs. 33,77,539/- as service tax payable in respect of the sale of the said property in their favour on the ground that such an activity is considered 'commercial and industrial construction' service covered by Section 65(105)(zzq) of Finance Act,1994 (as amended from time to time). 4. Petitioners contend that they were initially under a bonafide impression and belief that the said sale and purchase of the commercial property including the undivided share of land is exigible to service tax under the provisions of the said Act and had paid the said amount as demanded by the 4th respondent towards service tax. 5. Petitioners contended that subsequently, they came to know that in respect of the composite contracts, like the one entered into by the petitioners for purchase of the immovable property along with goods used therein and also a part of the undivided land, service tax cannot be levied on composite price as per the provisions of the Act, inasmuch as the said statute did not contain any mechanism to segregate/bifurcate the val....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t matter of service tax; that Aspect Doctrine is applied for bifurcating/vivisecting the composite contract; that service tax can be levied on the services component of any contract involving service with sale of goods etc.; that computation of service component is a matter of detail and not a matter relating to validity of imposition of service tax; and that merely because no rules are framed for computation, it does not follow that no tax is leviable. (d) The provision mentioned and time period in the judgment relied upon by the petitioners pertain to the period prior to 2012 i.e., before the negative list and change in valuation provisions; that the ratio in that decision would not apply for the current period under consideration as the levy is made under Section 66E of the Finance Act, 1994 and Section 67 read with Rule 2A of the Service Tax (Determination of Value) Rules, 2006 (as amended by Service Tax (Determination of Value)(2nd amendment) Rules 2012 w.e.f. 01.7.2012), which prescribe a mechanism for ascertaining value in case of composite contracts. 10. Challenging the same, this Writ Petition is filed. 11. Heard, Sri Kailash Palagummi, Counsel representing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....claim for refund on 20.09.2006. On 23.05.2007, the respondents therein rejected the claim of the petitioner for refund on the ground that it is time barred and also on the ground that the claim was not in proper formant. Petitioner filed appeal to the Commissioner of Central Excise (Appeals), which was rejected by an order dt.21.11.2008 on the ground that even if the tax was collected without authority of law, the claim for refund cannot be entertained beyond the period mentioned in 11B of the Central Excise Act, 1944. Petitioner assailed the same before the Madras High Court and the Madras High Court allowed the Writ Petition and held that sub-Section (1) of Section 11B dealt with only the claim of refund of "any duty of excise"; and that the word "duty" is not defined under the Act. It held that if what was paid cannot be taken to be duty of excise, the bar of limitation under Section 11B(1) cannot be applied. It held that the bar of limitation prescribed under sub-Section (1) of Section 11B applies only to "any person claiming refund of any duty of excise and interest". It therefore held that the claim of the petitioner for refund can be entertained by the High Court as there wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... amount, it would not authorize the department to regularize such payment. It held that if the department had no authority to demand service tax from the assessee because of its Circular dt.17.09.2004, the payment made by the assessee would not partake the character of "service tax" paid by them and mere payment made by the assessee will neither validate the nature of the payment nor the nature of the transaction. In other words, mere payment of amount would not make it a 'service tax' payable by them and once there is lack of authority to demand service tax from the assessee, the department lacks authority to levy and collect it. According to the Court, when once there is a lack of authority to collect such service tax, it would not give the department the right to retain the amount paid by the assessee, which would actually not payable by them. 18. Having regard to these decisions, we are of the opinion that if the petitioners were not liable to pay 'service tax' on the transaction of the purchase of the constructed area along with goods apart from undivided share of land at all, the payment which was made by the petitioners would not be a payment of service tax at all; that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case (2 supra), but the said decision was overruled by the Supreme Court in Commissioner, Central Excise and Customs, Kerala v. Larsen and Toubro Limited 2016(1) SCC 170, specifically. The Supreme Court held that the judgment in GD Builders's case (2 supra) was wholly incorrect in its conclusion that the Act contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts. 24. Therefore, the said ground of rejection of the claim of the petitioners also cannot be accepted. RE: No mechanism for ascertaining value of service component in contracts for construction of complexes 25. Coming to fourth ground, whether there is a mechanism for ascertaining value of service component in case of composite contracts is concerned, to levy service tax, we would like to state that Section 65-BB(44) of the Act defines the term "service" as an activity carried out by a person for another for consideration, and includes a declared service, but would not include an activity which constitute merely a transfer of title in case of immovable property by way of sale, gift or in any other manner, or such transfer, delivery or supply of any goods, which is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the contract between a buyer and the builder/promoter/developer in development and sale of a complex is of a composite one; that arrangement between the buyer and the developer is not for procurement of services simplicitor; that agreement between a flat buyer and a builder/developer of a complex, who is developing the complex for sale is, essentially, one of purchase and sale of developed property; that the arrangement between the buyer and the builder is a composite one which involves not only the element of services but also goods and immovable property; while the legislative competence of the parliament to tax the element of service involved cannot be disputed but the levy itself would fail, if it does not provide for a mechanism to ascertain the value of the services component which is the subject of the levy. The Delhi High Court was of the view that the service tax cannot be levied on the value of undivided share of land acquired by a buyer of a dwelling unit or on the value of goods which are incorporated in the project by a developer and that levying a tax on the constituent goods or the land would clearly intrude into the legislative field reserved for the States un....