TaxTMI 
TaxTMI 
2022 (1) TMI 509
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....engaged in execution of turnkey contracts for various power distribution authorities in relation to various rural electrification projects awarded to them. An investigation was conducted by the DGCEI (now DGGI) wing of the department as regards non-payment of Service Tax on the entire turnkey project by the Respondent as they were discharging Service Tax only on a part of the contract by treating the contracts as two separate contracts i.e. one for supply of goods and another for supply of service and thereby discharging Service Tax only on the service component whereas, as per the department, the entire turnkey contract would be subjected to Service Tax under 'Works Contract Service' as defined and the Respondent had to follow the provisions of Rule 2A of the Service Tax (Determination of Value) Rules, 2006. After the process of investigation was done, the Respondent was issued with a Show cause cum demand notice dated 15/10/2015 demanding service tax from the Respondent for the period April 2010 to March 2015 by treating the said services as provision of works contract service. The said show cause notice was adjudicated by the learned Commissioner wherein the entire proceedings w....
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.... 170 b. Federation of Indian Hotel and Restaurant Association of India C UOI 2016 (44) STR 3 (Del) c. CCE Vs Pragati Edifice Pvt. Ltd. 2019 (31) GSTL 241 (Tri- Hyd) d. Nagarjuna Construction Co. Ltd. Vs. UOI &Anr (2013) 1 SCC 721 5. He further submitted that what is chargeable to Service Tax is the service component alone and the transfer in property of goods involved in execution of works contract cannot be taxed by the Parliament by levying Service Tax on the same and the same is also defined under the scheme of Service Tax both pre and post negative list regime w.e.f. 01/07/2012. 6. He also submitted that since the contracts itself provide for Supply and Erection contracts values separately, then the question of taking the value of supply contract also for the purpose of valuation of Service Tax does not arise and the same is against the scheme of the act. 7. He thus states that the departmental appeal is devoid of merits and the order of the learned Adjudicating authority should be upheld. 8. Heard both sides through video conferencing and perused the appeal records. 9. The only question to be decided in the present Appeal is whether th....
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....petence of States as per List II. Initially, Constitution of India (as well as its predecessor Government of India Act, 1935) did not provide for taxing the goods used in executing composite, indivisible works contracts treating such use of goods as sale. The State's attempt to tax in such a manner was struck down by the Constitutional Bench of Hon'ble Supreme Court in the case of State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. - 1959 SCR 379 = 2015 (330) E.L.T. 11 (S.C.). After examining this judgment, the Law Commission of India, in its 61^st Report suggested three alternative amendments to the Constitution to bring the goods used in execution of works contracts within the legislative competence of the States to tax. Accepting one of these alternatives, the Parliament passed the 46th Amendment to the Constitution in 1983 by inserting clause (29A) to Article 366, the definition clause as follows : 366(29A) "tax on the sale or purchase of goods" includes - (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; and such transfer, delivery or supply of any goods shall be de....
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....ction nor machinery to levy and assess Service Tax on indivisible works contracts. The relevant paras of this landmark judgment are as below : 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :- "To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the Learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embody....
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...., Chennai, the question which arose was whether a demand can be made on 'commercial and industrial construction service' under Section 65(105)(zzzh) of the Finance Act, 1994 after 1-6-2007 where the nature of contract is a composite contract involving both supply of materials and rendition of services. It has been held that "For the period post 1-6-2007, Service Tax liability under the category of 'commercial or industrial construction service' under Section 65(105)(zzzh), 'Construction of complex service' under Section 65(105(zzzq) will continue to be attracted only if the activities are in the nature of services simpliciter. (i) Thus, if the services rendered are in the nature of composite works contracts, they cannot be charged to Service Tax prior to 1-6-2007 and can be charged post this date only under this head 65(105)(zzzza) and not under any other head. (j) In the case of M/s. Krishna Homes v. CCE, Bhopal and CCE, Bhopal v. M/s. Raj Homes as reported in 2014 (3) TMI 694-CESTAT, Ahmedabad, the scope of taxing 'Composite Works Contracts' rendered in connection with construction of complex services prior to 1-7-2010 was examined. 'Construction of complex serv....
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.... (l) Before the introduction of the explanation in [sub-clause] (zzzh) w.e.f. 1-7-2010, in all cases where the builder entered into an agreement to sell flats and collected advances, but the actual transfer of the property took place only after the completion certificate is issued, the service was considered as self-service by the builder only and not a service provided to the customer and hence was not taxable. Similarly, where the semi-built flats are sold and then the customer enters into an agreement with the builder for its completion, such agreement, being in the nature of service for a flat for personal use, was also excluded from the definition of 'residential complex' under Section 65(91a) which reads as follows : "(ii) "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....
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.... other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex". The expression residential complex was defined in Section 65(91a) of the Finance Act, 1994 as 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 any authority under 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". There is no dispute that the complex constructed by both the assessees in these appeals are covered by the definition of "residential complex" as given in Section 65(91a). There is also no dispute that both the assessees had engaged contractors for construction of the complexes. The dispute in these appeals is as to whether the ....
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....e customers on completion of the complex and full payment having been made, the builder/promoter/developer was to be treated as a deemed provider of construction of residential complex service to his customers. Thus, by this explanation, the scope of the Clause (zzzh) of Section 65(105) has been expanded and this amendment by adding an explanation has been held by this Tribunal in the case of CCE, Chandigarh v. U.B. Construction (P) Ltd. (supra) as prospective amendment. In this regard, para 5 of this judgment is reproduced below :- "5. In Maharashtra Chamber of Housing Industry v. Union of India - (Bom.), the validity of the 'Explanation' added to Sections 65(105)(zzq) and (zzzh) was challenged on several grounds. The Bombay High Court, also considered the issue whether the explanation was prospective or retrospective in operation and ruled that the explanation inserted by the Finance Act, 2010 brings within the fold of taxable service a construction service provided by the builder to a buyer where there is an intended sale between the parties whether before, during or after construction; that the 'Explanation' was specifically legislated upon to expand the concept of tax....
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.... is a service simpliciter or a works contract, if the service is rendered prior to issue of completion certificate and transfer to the customer, it is not taxable being in the nature of self service. (iv) Further, whenever the service is rendered for completion or construction of a flat for personal use of the service recipient, no Service Tax is payable in view of the exclusion in the definition of residential complex service. (v) After 1-7-2010, Service Tax is chargeable under the head of 'construction of complex services' if it is service simpliciter and under 'works contract service' if it is a composite works contract. (o) In view of the above, it is well settled legal position that whether the service is rendered as service simpliciter or as a works contract, no Service Tax can be levied on construction of residential complex prior to 1-7-2010. Learned Counsel would submit that for the period post 1-7-2010, they have been discharging Service Tax appropriately. This is a fact which can be verified to ascertain the full tax liability for the period post 1-7-2010 or otherwise. (ii) The demand of Service Tax on construction of Mahatma Gandhi Ca....