TaxTMI 
TaxTMI 
2023 (9) TMI 1374
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....refund is barred by Section 73 (3) of Finance Act, 1994 as upheld in the impugned orders. 2. Shri Saurabh Dixit, Learned Counsel appearing on behalf of the Appellant submits that the appellant had undertaken construction of residential complex with material and entered into Tri-partied arrangement with the land owner and buyer of property, and recovered construction amount. The period during which such income was realized falls both prior to as well as after 01.06.2007. 2.1 He submits that the service of the appellant clearly falls under the category of works contract service as the construction service was provided along with material. This fact is admitted in the show cause notice itself as abatement of 67% was extended while raising the demand. The said abatement is available only when the service is provided along with material. In this fact the service is clearly classifiable under works contracts service, hence, the demand raised under Construction of Residential Complex is not sustainable. He placed reliance on the following judgments:- • Total Environment Building Systems P. Ltd - 2022 (63) GSTL 257 (SC) • L & T Ltd- 2015 (39) STR 913 (SC) ....
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....ction was provided along with material is not under dispute. If this is be so then the service is clearly classifiable under works contract service and up to 01.06.2007, the service tax was not leviable on works contract service was held by the Hon'ble Supreme Court in the case of Total Environment Building System P. Ltd (Supra).As regard the period post 01.06.2007, the demand is not sustainable on the ground that despite the service of works contract service, the demand was raised under construction of residential complex. Since the service tax of works contract service demanded under different head i.e. Construction of Residential Complex the same is not legal and correct. 4.1 Without prejudice, we further find that as per the Board Circular No. 108/02/2009 dated 29.01.2009, the construction service provided by the builder/developer was not taxable up to 01.07.2010. This particular issue has been considered by this Tribunal in the case of Pragati Edifice P. Ltd -2019 (31) GSTL 241 (Tri.Hyd):- "11. We have considered the arguments on both sides and perused the records. The demands in all these cases are under the works contract. There is no dispute that in all these ca....
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.... India, (1989) 2 SCC 645 and it was upheld by the Apex Court. Thus, the goods component of the indivisible works contracts fell within the legislative competence of the States to tax. (c) The legislative competence of the Union to tax services itself is not in doubt because the Service Tax itself is under the residuary power under Entry 97 of List I (Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists). (d) The question as to whether such taxation is covered by the charging section of the Service Tax provisions (Finance Act, 1994) or otherwise was examined by the Hon'ble Supreme Court in the case of Commissioner of Central Excise and Customs v. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)]. The charging sections in this Act are Sections 66 and 66A. While Section 66 provides for charging services within India, 66A provides for charging the recipient of a service for services received from outside India. (e) Section 66 reads as follows : "There shall be levied a tax (hereinafter referred to as the Service Tax) at the rate of ten per cent of the value of taxable services referred to in....
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....'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated :- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract Service Tax. Hence, I propose to levy Service Tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." 42. It remains to consider the argument of Shri Radhakrishnan that post, 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess Service Tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services....
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.... the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer." (k) The definition of 'Works Contract Service' is as follows : (zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. - For the purposes of this sub-clause, "works contract" means a contract wherein, (i) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structu....
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....oubts, it is hereby declared that for the purposes of this clause, - (a) "personal use" includes permitting the complex for use as residence by another person on rent or without consideration; (b) "residential unit" means a single house or a single apartment intended for use as a place of residence; [Section 65(91a) of the Finance Act, 1994]" (m) Thus, as far as Service Tax, under 'construction of complex service' in respect of residential complexes is concerned, prior to 1-7-2010 (when the explanation was inserted), no tax could be levied. This was also clarified by the C.B.E. & C. in Circular No. 108/2/2009-S.T., dated 29-1-2009. The question as to whether this limitation on taxation prior to insertion of the explanation in 'construction of complex services' also extends to cases where such services are rendered as 'works contract service' was examined and answered in affirmative in the case of Krishna Homes (supra) by the Tribunal. This ratio has been followed in subsequent orders including by this bench. The relevant portion of the order in the case of Krishna Homes v. CCE, Bhopal [2014 (34) S.T.R. 881 (Tri. - Del.)] is as follows : ....
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....made by the customers. It is seen that on this point, the Tax Research Unit of the Central Board of Excise & Customs, which is a wing of the C.B.E. & C. dealing with legislation work, had vide Circular No. 332/35/2006-TRU, dated 1-8-2006 clarified that in case where a builder, promoter, developer builds a residential complex having more than 12 residential units by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay Service Tax on the gross amount charged for the construction service provided to the builder/promoter/developer under construction of complex service falling under Section 65(105)(zzzh) of the Finance Act, 1994 and that if no person is engaged by the builder, promoter, developer for construction work who undertakes construction work on his own without engaging the services of any other person than in such cases, in absence of the service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. W.e.f. 1-7-2010 an explanation was added to Section 65(105)(zzzh) which was as under :- "Explanation. - For the purposes of this sub-claus....
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.... the nature of a service rendered by the builder to himself; that the explanation expands the scope of the taxable service, provided by builders to buyers pursuant to an intended sale of immovable property before, during or after the construction and therefore the provision is expansive of the existing intent and not clarificatory of the same; and is consequently prospective". 9. In view of the above, though in view of the Apex Court judgment in the case of M/s. Larsen & Toubro Limited and Others v. State of Karnataka & Others (supra), the agreements entered into by a builder/promoter/developer with prospective buyers for construction of residential units in a residential complex against payments being made by the prospective buyers in instalments during construction and in terms of which the possession of the residential unit, is to be handed over to the customers on completion of the residential complex and full payment having been made, are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with prospective customers for constru....
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....ommerce or industry. In fact, health care and hospitals is one of the most profitable and fast growing service industries in the country. In view of the above, we do not find any reason to hold that the construction of hospital building of a corporate hospital is excluded from the definition of works contract service. It is clearly covered by Section 65(105)(zzzza)(ii)(b) as a new building meant for the purpose of commerce or industry. The demand on this count, therefore, needs to be upheld and we do so. (iii) The demand of Service Tax on construction of administrative building for Indian Registrar of Shipping : We find that the Indian Registrar of Shipping is regulatory body who registers ships and vessels in the country and also classifies them and does related activities. These cannot be termed as an act of commerce or industry. Learned departmental representative submits that the IRS charges fees for its activities. Even if it does so it is similar to that of other regulatory agencies such as RT officer, Transport Authority charging fees for issuing a driving license or for registering a vehicle. It is neither an organisation involved in commerce or industry nor does t....
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.... Service Tax liability and interest as above, after following principles of natural justice." 4.2 The similar issue was also considered in the case of Jagdish Pala - 2022 (65) GSTL 241 (Tri. Hyd) wherein the following order was passed: - "15. We have considered the submissions made by both the sides and perused the records. 16. We find that the Appellant are engaged in the construction of Residential and Commercial Complexes and received the booking amount as well as installment amount from his buyers. Revenue proceeded against them on the ground that they have evaded payment of Service Tax on the services rendered by them to their customers in the category of "Commercial or industrial Construction Services" during the period 2004-05 to 2008-09. Whereas, we find that an explanation was added by the Finance Act, 2010 in Section 65(105)(zzzh) of the Finance Act, 1994 which reads as under : "Construction of a Complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or....