TaxTMI 
TaxTMI 
2021 (11) TMI 175
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....h interest. Further, penalty was proposed under Section 77 and 78 of the Act. The show cause notice further states that as per the information received from CERA (Review) vide letter No.CERA/Review/ST/54/09-10 dated 17.06.2009, the appellant was engaged in construction of staff quarters for Power Grid Corporation of India Ltd. at Madhubani, Phulparas and Darbhanga, received gross amount of Rs. 2,75,44,600/-, which includes cost of materials. It further appeared that construction of the residential complex service was brought into the Service Tax net and charge were created vide notification no.15/2005-ST w.e.f. 07.06.2005. It further appeared that Works Contract Service has been introduced by the Finance Act, 2007 w.e.f. 1.6.2007, which also includes construction of residential complex. Further, reference was made to Section 65 (30a) of the Finance Act, as substituted w.e.f. 16.06.2005, under which construction of complex means construction of a new residential complex or a part thereof, etc. Accordingly, service tax liability was calculated by allowing abatement of 67% on gross value towards material component and on the balance taxable value, service tax has been calculated....
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....quarters built for themselves. Hence, the service provided by the appellant falls under the category of "construction of residential complex" as defined under Section 65(30a) read with Section 65(91a) and accordingly, the proposed demand was confirmed along with interest and further penalties of Rs. 5,000/- was imposed under Section 77 and Rs. 10,83,961/- under Section 78 of the Act. 6. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals), who was pleased to dismiss the appeal agreeing with the adjudication order. 7. Being aggrieved, the appellant is before this Tribunal. 8. Reiterating the grounds already taken before the court below, it is further emphasised by the ld. Counsel for the appellant that construction of residential unit(s) for personal use does not come under the purview of "Taxable Service" under Clause (30a) and Clause (91a) of Section 65 of the Act. 9. It is further urged that admittedly, it is the case of composite service (labour plus material) and hence, not taxable prior to 1.6.2007 when the works contract service was brought to tax as per law laid down by the Hon'ble Supreme Court in the case of ....
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....al quarters for use" by employees of M/s. PGCIL on rent or without consideration. Hence, the buildings constructed by the appellant cannot be considered to be 'residential complex' taxable under service tax law. Thus, I find that no service tax liability on this account is attached to the appellant." 12. It is further urged that extended period of limitation is not invokable as there is no case of deliberate non-compliance or suppression etc. At best, the issue is of interpretation. It is further urged that under the facts and circumstances, the penalty imposed is fit to be set aside. Further, reliance is placed by the appellant on the Division Bench's ruling of this Tribunal in the case of CCE Vs. Mall Enterprises - 2016 (41) STR 119, wherein under the fact that assessee had constructed residential quarters for staff of Principal. It was case of Revenue that such construction of staff quarters fall under the residential complex services. In the order-in-original, the demand was dropped and in appeal by the Revenue the grounds taken that the activity does not fall within the ambit of Exclusion Clause under section 65(30) read with Section 65 (91a) w....
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....Corporation is not tenable as the owner of the quarters is Bihar State Electricity Board. 15. Having considered the rival contentions, we find that admittedly, it is a case of composite contract, as held by the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd. (supra). No service tax is chargeable on composite contracts prior to 1.6.2007 when works contract service was introduced. The Hon'ble Supreme Court also held that such composite contract are classifiable only under the head "Works Contract Service". I further find that under Section 65 (105) (zzzza)(ii)(b), construction of a new building or civil structure or part thereof, primarily for the purpose of commerce or industry and further, clause (c) provides construction of a new residential complex. We further find that Clause 65(91a), which defines, "residential Complex" provides exclusion of construction for personal residential use. Further, under Explanation II to Clause (91a), it is provided that "personal use" includes use as residence by another person on rent or without consideration. 15.1 We further find that in the facts of the present case, the Power Grid Corporation is not the contractor of....
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....Biswas, Advocate for the Appellants and Shri Joydip Chattopadhyay, Superintendent, Authorized Representative for the revenue. 2.0 The Section 65 (91a) of the Finance Act, 1994 is reproduced below: "(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 permitting the complex for use as residence ....
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....n above, and award you a Contract on behalf of Bihar State Electricity Board (BSEB), the owner, for Construction of Quarters and Associated Amenities at 132/33 kV sub-station at Madhubani (Package-)) under Group-II, associated with Bihar Sub-transmission System as per BOQ, specifications & direction of Engineer-in-Charge. For the execution of the contract, the contractual actions on the part of the owner shall be performed by POWERGRID for and on behalf of BSEB. Wherever reference to POWERGRID is made in the bidding documents, Letter of Award or any related paper/ documents, it shall be deemed to be "for and on behalf of BSEB". Under this Letter of Award, Owner' shall mean 'Bihar State Electricity Board' (BSEB) and shall include their legal representatives, successors and assigns. 'Employer"/POWERGRID' shall mean Power Grid Corporation of India Ltd and shall include their legal representatives, successors and assigns. 3.1 The scope of work under this package shall include but not be limited to the following: - You shall perform the work under this contract complete in all respects as per terms & conditions and specifications....
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.... letter of award which is legally binding document binding on parties to the contract. The claim made by the appellants, to effect that these residential quarters and amenities, have been got constructed by the M/s Powergrid Corporation for their own use or for letting them out on rent, is not supported by any documentary evidence. Hence the claim made by the appellants that these residential quarters are covered by the exclusion clause of the definition of residential complex as per Section 65 (91a) of the Finance Act, 1994, as it existed then is not substantiated. 5.0 In the present case under consideration the Appellant has not been engaged by Bihar State Electricity Board, the owner of residential quarters as per the letter of award. Undisputedly the appellants have been engaged by M/s Powergrid Corporation for construction of these residential quarters, hence the case of appellants will fall in the category indicated in bold in para 3 of the said clarification. This entire scheme has been considered by the CESTAT, Bangalore in case of Nitesh Estates Ltd. [2016 (40) STR 815 (Tri- Bang)] and after examining these provisions and the Board Clarification, CESTAT has observed as ....
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....entirety sub- contracted by M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited. There is no material on record or evidence to indicate that any part of construction activity in question was undertaken by the respondent assessee M/s. Nithesh Estates Limited itself. The fact of sub-contract of the entire 'Residential Complex' in question by the respondent assessee M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited is not disputed by the Revenue. It is also not disputed that due Service Tax on the payments made to the sub-contractor M/s. L & T Limited stood paid to the Government. 19. The Central Board of Excise and Customs (C.B.E. & C.) for the pre- amendment period prior to 1-7-2010 has issued the aforesaid Circular No. 108/2/2009-S.T., dated 29-1-2009 clarifying this position, that in such cases, where the ultimate owner (M/s. ITC Limited in the present case) enters into a Contract for construction of a 'Residential Complex' with the Promoter/Builder/Developer (M/s. Nithesh Estates Limited in the present case) which itself provides service of Design, Planning and Construction and after such construction, the ultimate owner receives such proper....
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.... Departments of Government or Government Companies or Undertakings." 7.0 After examining the Letter of Award referred earlier vis a vis the relationship amongst the parties therein, undisputedly Bihar State Electricity Board, is the owner of the residential quarters, and for the construction of the same, they have entered into agreement with M/s Powergrid Corporation. In turn M/s Powergrid Corporation has engaged the Appellants for execution of these works through them. Thus the appellants become sub contractor to the main contractor for construction of these residential quarters for Bihar State Electricity Board. In the case of Nithesh Estate, referred above, the sub contractors viz L & T had discharged the entire tax liability for construction of the residential complex for ITC, for which the main contractor was M/s Nithesh Estates. 8.0 Appellants have relied upon other decisions to support their case. These decisions are taken up for discussion in flowing paragraphs: • Mall Enterprises [2016 (41) STR 119 (T)] The facts as have been stated in the decision are reproduced below and are clearly distinguishable from the facts of present case: 3. T....
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....Section 65(30a) ibid and therefore the activity does not attract Service tax. Therefore, I find that the adjudicating authority has rightly dropped the show cause notice. The impugned OIO needs no interference. The appeal merits rejection." In this case the appellant was engaged by the 'New Thermal Power Station, Parli' who were the owner of the flats, whereas in the case under consideration, the appellant is sub contractor to the main contractor. Hence the facts of these case are clearly distinguishable. • Kasana Builders Pvt Ltd [2019 (24) GSTL 231 (T)] In this case tribunal has observed as under: "2. We note that the grounds raised by Revenue is that the Central Board of Excise & Customs through clarification dated 24-5-2010 had clarified that if NBCC constructed residential houses for Central Govt. then the same were not taxable, but if NBCC further awards a contract to sub-contractors, then sub-contractors were liable to pay Service Tax. On careful consideration of the definition of 'residential complex service' we note that flats constructed for personal use are not covered by the definition of residential complex." The decision of t....
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....case that there were any such common facilities. We, therefore, hold that the appellant in the instant case did not provide construction of residential complex service. We, therefore, set aside the impugned order and allow the appeal." Since this decision does not decide the issue under consideration it cannot be considered an authority on this subject. 9.0 Appellants have also relied upon the decision of Commissioner (Appeal) in their own case [843/PAT/S.Tax/Appeal/2014 dated 23.07.2014 to support their case. The appeal filed by the revenue against the said decision was withdrawn by the revenue on monetary grounds as per the Litigation Policy of the Government, as per tribunal order No 14/07/2016 [in appeal No ST/&5054/2015] dated 14.07.2016. We do not find any merits in the submissions made in view of the provision of Section 35 R of the Central Excise Act, 1944 which reads as follows: "SECTION 35R. Appeal not to be filed in certain cases. - (1) The Central Board of Excise and Customs may, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal,....
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....ner for claiming equality [See Chandigarh Administration v. Jagjeet Singh J.T. 1995 (1) S.C. 445]." 10.0 The appellants have suppressed the information in respect of the actual owner of the residential quarters constructed by them. They have stated that M/s Powergrid Corporation are the owner of residential quarters and have awarded the contract to them for building these residential quarters for their own use, hence they are covered by the exclusion clause to the definition Residential Complex as per Section 65 (91a). The submission made by the appellants is contrary to the letter of award referred earlier. By doing so appellants have intentionally avoided payment of Service Tax due. For the act of suppressing these facts with intention to evade payment of service tax due, extended period of limitation as per Section 73, has been rightly invoked against the appellants. Adjudicating Authority has for invoking extended period held as follows: "It is also established that noticee did not take registration within thirty days of starting the taxable service as they provided service during the material period 2006-08 and took Service Tax Registration on 14.08.09 in inappropr....
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....e gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relat....
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....demonstration of ascertainment that supply of goods did form a part of the contract. Therefore, we have no hesitation in accepting the said contracts in dispute to be composite contracts for supply of both goods and services. 8. We note that the findings of the adjudicating authority do accept that supply of goods were involved in the contracts and that he was merely sceptical that VAT liability had been discharged on the goods supplied in the contract; whether VAT liability was discharged on the goods or not is irrelevant in the light of the decision of the Hon'ble Supreme Court in re Larsen & Toubro and Ors. We, therefore, have to merely determine the scope of taxability of 'works contract service' rendered before and after 1st June, 2007 under the Finance Act, 1994." 14.0 Both the decisions, rendered in the case of M/s Larsen &Tubro and M/s URC Constructions were not before the concerned authorities for consideration. Since no finding has been rendered by the original and first appellate authority on the applicability of the ratio of these decisions, in the present case the matter needs to be remanded back to the original authority for limited consideration of this a....
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....record before the Hon'ble President for nomination of learned third Member to consider the aforementioned questions on difference of opinion, for his opinion. (ANIL CHOUDHARY) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) Member (TECHNICAL) Per Rachna Gupta Arguments with respect to the issues due to difference of opinion among the Hon'ble Members of the bench who decided the impugned matter, have been heard. Issue wise findings are as follows: Issue No. 1 Construction of residential complex for personal use is excluded under Explanation II to Section 65(91a) read with Section 65(30a), 65(105)(zzzza) and 65(105)(zzzh) and hence not taxable, as held by the learned Member (Judicial) OR In view of the CBEC Circular dated 24.05.2010 (para 3 of the circular) - where work is done by the sub-contractor, it does not fall under the Exclusion Clause of Section 65 (91a) and hence is taxable, as held by the learned Member (Technical). 2. On this issue it is submitted on behalf of the appellant that the residential complex services have been provided by the appellant to Power Grid Corporation India Ltd. (hereinafter referred as PGCIL) for con....
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....resent case is that service recipient in the present matter is Bihar State Electricity Board (hereinafter referred as BSEB). The appellant had been engaged not by BSEB but by M/s. PGCIL. It is also submitted that M/s. PGCIL is not a Government authority, it is rather a corporation. Hence, the service provider shall not be exempted from the tax liability. Learned Departmental Representative further submitted that the above fact is also sufficient to hold that the appellant is the sub- contractor, and since the sub contractor has provided the services to a non-government body, he is actually liable to discharge the service tax liability. Circular dated 24.5.2010 has been impressed upon. With these submissions, findings rendered by Hon'ble Member (Technical ) have been impressed upon. 4. To adjudicate this issue foremost reference to the legal provisions defining the impugned service of construction of complex/ residential complex and those providing taxability of these services need to be looked into: 5. Section 65(30a) of the Finance Act, 1994 define 'construction of complex' as under: a. Construction of a new residential complex or a part thereof; o....
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....nning of the layout and its construction; (iii) The complex is intended for personal use as residence by such person. The Explanation (a) to this clause clarifies that when constructed property is used as residence even by another person on rent or without consideration, it shall be considered as personal use by "such person" as mentioned in above clause (iii) of section 65(91a). The Explanation (b) clarifies that a residential unit means a single house or a single apartment intended for use as a place of residence. 8. Applying this legal position to the facts of the present case, it is observed from the show cause notice itself that the appellant was observed to have been engaged in providing construction of the residential complex service to M/s. PGCIL, Patna for constructing the complex for staff quarters of M/s. PGCIL at three different locations viz. Madhubani, Phulparas and Darbanga in Patna. M/s. PGCIL, in turn, admittedly, has given these quarters to its staff free of charge. Thus it becomes clear that there is no element of commerce /industry when M/s. PGCIL received services of construction of residential complex from the appellant. Fur....
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....105(zzza). 11. In view of the above observations, I am of the opinion that the services provided by the appellant to M/s. PGCIL are covered under the exclusion part of said sub clause (iii) of section 65(91a) of the Act, M/s. PGCIL being 'a person' of the said sub clause and appellant being the 'any other person'. Hence, irrespective the impugned service is the service of construction of residential complex but is the one as stands exempted from the tax liability due to the exclusion given to the residential complex which is meant for personal use as residence by the person who directly engaged the service provider and that no element of commerce or industry is involved. 12. The Board's circulars No. B2/8/2004-TRU dated 10.9.2004 and Circular No. 80/10/2004/ST, dated 17.09.2004 also clarifies the same. 13. Relevant para 13.2 in both the Board circulars are reproduced herein below:- "13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is 'used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such ....
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....for the purpose of making profit or not and clarified that if the building or civil structure was used or to be used not for the purposes of profit then the same are not taxable. 16. In view of the above discussion of mine, I am in consonance with the findings recorded by Hon'ble Member (Judicial) on this issue. Issue No. 2 In the facts and circumstances, the appellant is not a sub- contractor, as held by the learned Member (Judicial) OR The appellant is a sub-contractor, as held by the learned Member (Judicial) 17. As far as the submissions for personal use not leviable to service tax under the category of residential complex service also the existence of main contractor and sub contractor is concerned, appellant has relied upon the following decisions: 1) CC, CCE & ST vs Kasana Builders Pvt Ltd. [2019 (24) GSTL 231 (Tri-All)]; 2) M/s. Rama Construction Company vs CCE, Delhi I [2018 (9) TMI-917(T)] 18. It is submitted on behalf of the appellant that as it is an admitted fact that the appellant constructed staff quarters for Power Grid Corpora....
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....M/s. BSEB, accordingly, holding him liable to pay the service tax. 21. To my opinion, the plea of sub contractor taken by the department and accepted by Hon'ble Member (Technical) stands falsified even from para 3 of show cause notice itself. There is no document produced by the department to support that plea except that there is a letter of Award for Construction of Quarters dated 20.1.2005 issued by M/s. PGCIL in favour of present appellant. Perusal thereof shows that M/s. PGCIL was not engaged by M/s. BSEB for providing the construction services but was authorized to act on their behalf to engage any other person who may provide the construction of residential complex services. Apparently and admittedly, PGCIL is not the concern which is engaged in providing services of construction of residential complex. This particular finding is sufficient for me to hold that the appellant cannot be called as sub -contractor of PGCIL. PGCIL rather was the agent acting on behalf of BSEB and as such is to be classified as " a person" as mentioned in sub-clause (iii) of 65(91(a). In view of this finding, CBEC Circular No. 25/2010 as relied upon by H....
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....ceiver is M/s. PGCIL and service provider is the appellant. The work of providing the service of construction of residential complex has not further been awarded by the appellant to anyone else. This particular fact, to my opinion, distinguishes the present case from Nitesh Estates Limited case(supra), thus also gets out of the scope of Circular dated 24.5.2010. In the present case, none is the sub-contractor, as already discussed under Issue No. 1, service provided by the appellant falls under the exclusion part of Section 65 (91a)(iii). The appellant is not liable to pay the service tax. Otherwise also the services rendered are apparently and admittedly in the nature of composite contract or work contract service. In terms of decision of Hon'ble Supreme Court in the case of Commissioner of Central Excise vs. Larsen and Toubro reported in [2015 (39) STR 913] tax cannot be charged for such services for the period prior to 7.2.2012. Though the period in dispute is pre as well as post the said date, even for the post dated period, the appellant is not liable to pay the service tax, the service being covered under exclusion part of 65(90a)(iii), Finance A....
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....Issue No. 4 Whether the appeal has been rightly allowed setting aside the impugned order, as held by the learned Member (Judicial) OR Whether the appeal has been rightly allowed by way of remand for re-determination of quantum of duty liability, as held by the learned Member (Technical). 26. In the light of above discussions on other issues, I am of the firm opinion that the appellant not being the sub contractor, but the service provider of construction of residential complex service being directly engaged by a person i.e. M/s. PGCIL who require the said residential complex for their own personal use, was not liable to pay the service tax. The Board's circular of May, 2010 and the proviso to section 73 of Finance Act invoking the extended period of limitation are observed to be not applicable to the facts and circumstances of the present case. I am in agreement with the findings of Hon'ble Member (Judicial) setting aside the order of Departmental Adjudicating authority confirming the demand. I do not deem fit that the case be remanded back for redetermination of the quantum of duty liability in terms of decision of M/s. Larsen and Toubro (supra) and i....