AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 658
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2008 under 'Construction of Residential Complex Service' in respect of Sreerosh Palm Vally Project; (b) The assessee has not paid service tax of Rs.1,81,799/- under 'Construction of Residential Complex Service' on built in area built for land owner in lieu of cost of land in respect of Sreerosh Palm Valley Project; (c) The assessee has not paid service tax of Rs.12,92,806/- under 'Works Contract Service' on built in area built for land owner in lieu of cost of land in respect of Sreerosh Seascpe Project; (d) The assessee has not paid service tax of Rs.2,49,968/- under 'Construction of Complex Service' on built in area built for land owner in lieu of cost of land in respect of Sreerosh Nasheeman Project; (e) The assessee has not paid service tax of Rs.1,97,482/- under 'Works Contract Service' on built in area build for land owner in lieu of cost of land in respect of Sreerosh Sree Padmam Project; and (f) The assessee has not paid service tax of Rs.4,14,000/- under 'Construction of Complex Service' on built in area built for land owner in lieu of cost of land in respect of Sreerosh Bay Heights Project; Show cause notice dated 30.09.201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial Complex Services and under Works Contract Services. The contracts entered into by the assessee are composite contracts involving supply of material and delivery of services. The Commissioner (Appeals) has travelled beyond the show cause notice and has confirmed the entire demand under Works Contract Services. The Commissioner (Appeals) in the impugned order failed to appreciate the settled position of law that an appellate authority cannot confirm a levy under a category which is not proposed in the show cause notice. In the show cause notice the proposal is to demand service tax under Construction of Residential Complex Services and Works Contract Services for different projects which has been confirmed by the original authority. However, the Commissioner (Appeals) has confirmed the entire demands under works contract services. For this reason itself the order passed by the Commissioner (Appeals) cannot sustain. 5. The Tribunal in the case of United Telecom Ltd versus Commission of Central Excise, Hyderabad (2011) 21 S.T.R 234 has held that the liability of tax cannot be confirmed without putting a person on notice with reference to the specific statutory position. The depa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Works Contract Services. This is erroneous as it travels beyond the show cause notice. 11. The Ld. Counsel has relied upon the Board Circular as well as the decision of the Tribunal in the case of M/s. Krishna Homes (supra) to argue that prior to 01.07.2010, there is no liability to promoter/developer/builder to pay service tax. 12. In the decision of M/s Krishna Homes (supra) the Tribunal had considered the Board Circular and held that the demand of service tax against a promoter, developer, builder cannot sustain for the period prior to 01.07.2010. The said decision was followed by the Tribunal in the case of Pragati Edifice Pvt Limited versus Commissioner of CCE & ST vide Final Order No. 31010 - 31011/2019. The relevant para in the case of Pragati Edifice Pvt Limited reads as under: - 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 cases the appellant not only supplied materials but also rendered services related to the works contract. Therefore, these are all composite works contracts. It is not in dispute that the appellant has not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....islative 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 sub-clauses ...... of clause (105) of Section 65 and collected in such manner as may be prescribed." (f) The sub-clauses of clause (105) of Section 65 listed various services. With effect from 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cution 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. 44. We have been informed by Counsel for the revenue that several exemption notifications have been granted qua Service Tax "levied" by the 1994 Finance Act. We may only state that whichever ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (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 : "Coming first to the question as to whether the activity of M/s. Krishna Homes and M/s. Raj Homes was taxable during the period of dispute or not, by Finance Act, 2005, Clause (zzzh) was introduced into Secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2/35/2006-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-clause, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore, 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 construction of residential units in a residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65(105)(z....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ruction 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 the organisation make any profit. In view of the above, we find that the demand on construction of administrative building for IRS is liable to be dropped and we do so. 12. In view of the above, we fi....