TaxTMI 
TaxTMI 
2024 (8) TMI 1276
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.... real estate agents, reverse charge mechanism (RCM) on legal services, manpower supply services and works contract services. 1.2 Two appeals i.e. ST/60163/2020 & ST/60164/2020 have been filed by the department against the impugned order dated 20.02.2020 whereby the learned Commissioner has dropped the demand under RCM on manpower supply services and works contract services. 1.3 Since the issues involved in all these six appeals are identical and there is only one appellant/assessee namely M/s The Housing Board Haryana, therefore, all six appeals are taken up together for discussion and decision. For the sake of convenience, the facts of the Appeal No. ST/60139/2016 are taken up as a lead case because the extended period of limitation has also been invoked in this appeal only. 2. Briefly stated facts of the case are that the appellant/assessee M/s The Housing Board Haryana, a government authority, was created on 14.05.1971 under the Housing Board Act, 1971 with a view to satisfy need of housing accommodation of general public. The main activity of the appellant is to construct and sell Houses/Flats of various categories and various types to general public. For the purpose o....
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....ding service tax on 'Construction of Complex Services', the learned Counsel for the appellant has made the following submissions: A.1 That the Board (appellant) formulates various schemes for constructions of houses below 60 meters and each and every such scheme has sanction of the appropriate authority of Govt of Haryana, as envisaged under Sections 23 and 24 of the Housing Board Haryana Act, 1971. It is undisputed fact that the Appellant sells the houses including the rights in the land. The Appellant is not engaged in pure construction or works contract services on the land under the ownership of any other person. Further, the activity undertaken/ consideration involved include the value of land and material in the sale/ transfer of the houses to the individual buyers. A.2 That the demand has been confirmed with respect to the levy of service tax on services in relation to 'construction of complex' as defined under Section 65(105)(zzzh) of the Finance Act, 1994. A.3 That with effect from 1st July, 2012, the Act has been amended and service tax was imposed on all services other than those specified in the negative list. The services covered under Sectio....
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....ed in the immovable property, thus at that stage sale of a complex or a part thereof to a buyer constitutes an outright sale of immovable property, which admittedly is not chargeable to service tax. A.7 That the service tax is essentially a tax on the services as distinct from a tax on the value added by manufacturing goods/ trading. Construction of a complex essentially has three broad components, namely, (i) land on which the complex is constructed; (ii) goods which are used in construction; and (iii) various activities which are undertaken by the builder directly or through other contractors. The object of taxing services in relation to construction of complex is essentially to tax the various activities that are involved in the construction of a complex and the resultant value created by such activities. A.8 That it is also essential to understand the measure of tax used for the levy on the service portion of the contract. The measure of tax must have a nexus with the object of tax and it would be impermissible to expand the measure of service tax to include elements such as the value of goods or value of land for the purpose of the levy of service tax. ....
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....e value of taxable service involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in clause (8) of section 66E of the Act, shall be determined by the service provider in the following manner, namely :- (i) Value of works contract service shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Explanation. - For the purposes of this clause, - (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect's fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electrici....
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....of cost is not ascertainable, the same shall be determined on the basis of the fair market value of the goods or services that have closely available resemblance;" A.13 That the above Rule 2A of the Rules provides for mechanism to ascertain the value of services in a composite works contract involving services and goods, the said Rule does not cater to determination of value of services in case of a composite contract which also involves sale of land. The gross consideration charged by a builder/promoter of a project from a buyer would not only include an element of goods and services but also the value of undivided share of land which would be acquired by the buyer. A.14 Though Notification No. 1/2006-ST dated 01.03.2006 (as amended by Notification No. 29/2010-ST dated 22.06.2010) and Notification No 26/2012-ST dated 20.06.2012 provide for abatement to the extent of 75%. In this regard it is submitted that no machinery provision is provided under the Act or the Rules to determine the service value in construction of houses. The issue has been decided against the Revenue by the judgment in the case of Commissioner of Central Excise v. Larsen and Toubro Limited. In....
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....dicating authority that the appellant has acted as a Real Estate Agent are wrong and misstated. The appellant is not acting as a Real Estate Agent. B.3 That prior to 01.07.2012, the Service Tax was levied on the services of Real Estate Agent, w.e.f. 16.10.1998, vide Finance Act, 1994 which read as under: As per Section 65 (88)&(89) (ibid), the definition of the Real Estate Agent is given below:- (88) "real estate agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant; (89) "real estate consultant" means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance , in Relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate;" B.4 That analysis of provision of Section 65(88)/65(89) reveals that the real estate agent/consultant means a person, who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate con....
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....sfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii). Such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the constitution; or (iii). a transaction in money or actionable claim; On the perusal of above definition it can be concluded that service is any activity which is performed by one person for another person in response of consideration but in the instant case, the Appellant is charging Administrative fee and Transfer Fee as a condition of the allotment of the immovable property and maintains its own records as required by the Housing Board Haryana Act, 1971 and Regulations referred above. Housing Board Haryana does not carry out any activity for the owners of property in reciprocate of Administrative fee and Transfer Fee received from them. In absence of activity, the provision of service as defined under the Finance Act, 1994 could not be alleged. Without prejudice to the submissions made above, even if it is assumed, though not accepted, that there is an activity undertaken by the Appellant, then the same fall within t....
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....nt that is payable for the taxable services provided or to be provided;" B.8 Thus, for charging service tax the consideration should be for taxable service provided or to be provided. If any other amount is charged which is not for taxable service provided or to be provided, service tax will not be payable on such charge. The Tribunal in many cases has held that there will be no service tax on amounts not related to taxable service. The Tribunal in the case of M/s Thermax Ltd. Vs. C.C.E., Pune - 2007(8) S.T.R. 487 (Tri-Bombay) while allowing the appeal of the party, has held that interest is compensation fixed by an agreement or allowed by law for use or detention of money or for loss of money by one who is entitled its use. Interest cannot be considered as consideration for rendering any service. B.9 In this regard reliance is placed on the following decisions wherein it has been held by the Tribunal that charges collected by builder for authorizing transfer of allotment of property before sale, as part of sale agreement is on principal to principal basis and no service is provided to any person in relation to sale, purchase, leasing or renting of any real estate....
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.... "the Central Government hereby notifies the following taxable services and the extent of service tax payable thereon by the person liable to pay service tax for the purposes of the said sub-section, namely:- I. The taxable services,- (A) (i) provided or agreed to be provided by an insurance agent to any person carrying on the insurance business; ................................................... (iv) provided or agreed to be provided by,- (A) an arbitral tribunal, or (B) an individual advocate or a firm of advocates by way of support services, or (C) Government or local authority by way of support services excluding,- (1) renting of immovable property, and (2) services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of the Finance Act,1994, To any business entity located in the taxable territory; ............................................................. (v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower for any purpose or....
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....be a course of dealing with profit motive and not for sport or pleasure. C.10 That business entity means a person carrying out any activity with profit objective. Housing Board Haryana, being a non-profit organization, does not prepare Profit & Loss Account as part of Annual Statement but prepares Income & Expenditure Account. Further, the Annual Statement of Housing Board Haryana does not reflect any profit but surplus of income over expenditure. C.11 That the Constitution Bench of the Hon'ble Supreme Court in its judgment passed in the case of Shri Ramtanu Co-Operative Housing Society Ltd. Vs. State Of Maharashtra & Others on 5 August, 1970 reported as 1970 AIR 1771 has clearly distinguished between a Business corporation and a Governmental Authority Body Corporate. C.12 That on perusal of provisions of Notification No. 30/2012-ST dated 20.06.2012, it can be said that in the case of manpower and works contract, service tax is payable under reverse charge mechanism only when the service receiver is a business entity registered as body corporate. C.13 That though the Housing Board is a body corporate constituted under Housing Board Act, 1971, but....
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....e Constitution; C.18 That undisputedly the appellant has been constituted by an Act of State legislature i.e. the Housing Board Haryana Act, 1971 and it drives its authority from the same. C.19 That Entry No. 12 of the Notification No. 25/2012-ST dated 20.06.2012 exempts the construction services in relation to a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession. C.20 That this issue has been considered by the Hon'ble Punjab and Haryana High Court in the case of Bharat Bhushan Gupta & Company Vs. State of Haryana - 2016 (44) S.T.R. 195 (P&H)) wherein it has been held that Haryana Housing Board is a "Governmental Authority" as defined in the Notification No. 25/2012-ST dated the 20.06.2012 and work contract services provided by the contractors to the Board are exempt under clause 12(a) of the Notification ibid. 4.4 With regards extended period of limitation, the learned Counsel for the appellant submits that the entire demand in the case is barred by limitation because the first show cause notice has proposed to demand service tax for the period from 2009-10 to 2....
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....OI - 2016 (43) STR 3 (Del.) whereunder the explanation introduced in Section 65(105)(zzzh) of the Finance Act, 1994 has been set aside as being ultra vires of the Constitution of India; however, he has submitted that the appeal filed by the department against the decision of the High Court is pending before the Hon'ble Apex Court and further, the said decision is not applicable for the post negative list i.e. after 01.07.2012. 5.2 As regards 'Real Estate Agent Service', the learned AR submits that the adjudicating authority has rightly held that the charges were on account of transfer of houses/flats from one allottee to another and collected by the Housing Board from their customers to whom houses/flats were transferred in lieu of providing various services for facilitating the transfer of houses/flats and such services are in relation to sale and purchase of real estate only, therefore, demand of service tax is righty confirmed under the 'Real Estate Agent Service'. In this regard, he relies on the decision of the Tribunal in the case of M/s Ajay Enterprises Pvt Ltd vs. CST, Delhi - 2016 (42) STR 471 (Tri. Delhi). 5.3 As regards service tax liability under 'Reverse Charge M....
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....lity of the appellant to pay the service tax on 'Construction of Complex Services', it is necessary for us to examine the nature of the appellant and its constitution and the activities being carried out by the appellant. In this regard, we find that it is pertinent here to reproduce para 14 of the decision of Hon'ble High Court of Punjab & Haryana in the case of Bharat Bhushan Gupta & Company (supra), which is reproduced herein below: "14. The Board has been constituted in terms of the provisions of Section 3 of the Act, as was enacted by the State Legislature. It is a body corporate which consists of a Chairman, a Chief Administrator and such other members, as the State Government may, from time to time, appoint by a notification. The Chief Administrator shall be a person from amongst the officers of the rank of Head of the Department or Joint Secretary of the State Government. It is termed to be a local authority for the purposes of Land Acquisition Act, 1894. Section 20 of the Act provides that subject to control of the State Government the Board may incur expenditure on framing and execution of such housing schemes as may be considered necessary from time to time or a....
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....the buyer. Though Notification No. 1/2006-ST dated 01.03.2006 (as amended by Notification No. 29/2010-ST dated 22.06.2010) and Notification No 26/2012-ST dated 20.06.2012 provide for abatement to the extent of 75%; but no machinery provision is provided under the Act or the Rules to determine the service value in construction of houses. This issue has been decided against the Revenue by the judgment of Hon'ble Orissa High Court in the case of Larsen and Toubro Limited Vs State of Orissa and Ors. : (2008) 12 VST 31 (Orissa), wherein the Hon'ble High Court has held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute. This decision of the Hon'ble Orissa High Court has been affirmed by the Hon'ble Apex Court. The relevant extract from the judgment of the Hon'ble Orissa High Court is reproduced herein below: "This Court is of the opinion that if the Act is unworkable in the absence of necessary Rules, as has been held by several judgments referred to above, any assessment under the said Act cannot....
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....rovide for a machinery provision for excluding all components other than service components for ascertaining the measure of service tax. The abatement to the extent of 75% by a notification or a circular cannot substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract. 54. Insofar as the challenge to the levy of service tax on taxable services as defined under Section 65(105)(zzzzu) is concerned, we do not find any merit in the contention that there is no element of service involved in the preferential location charges levied by a builder. We are unable to accept that such charges relate solely to the location of land. Thus, preferential location charges are charged by the builder based on the preferences of its customers. They are in one sense a measure of additional value that a customer derives from acquiring a particular unit. Such charges may be attributable to the preferences of a customer in relation to the directions in which a flat is constructed; the floor on which it is located; the views from the unit; accessibility to other facilities provide in the complex, etc. As stated earlier, service tax is ....
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....sultancy or technical assistance , in Relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate;" 8.2 The analysis of the aforesaid definition reveals that the real estate agent/consultant means a person, who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant and a "Real estate Consultant" is one who provides advice, consultancy or technical assistance in relation to evaluation, conception, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate. 8.3 We find that the appellant is not acting as a real estate agent and therefore, the service tax is not chargeable on the amounts/fees received by it in the course of performing of statutory duties. 8.4 It has been consistently held by the Tribunal that charges collected by the builder for authorizing transfer of allotment of property before sale or as part of the sale agreement is on principle to principle basis and no service is provided to any person in relation to sale,....
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....nce, this issue is also decided in favour of the appellant. 9. Third Issue : Liability of service tax under 'Reverse Charge Mechanism' 9.1 As regards the third issue of service tax liability for services received under 'Reverse Charge Mechanism', we find that the appellant is not liable to pay service tax on legal charges/fees, on supply of manpower and on execution of work contract, because the appellant is not a business entity. The appellant is admittedly a body corporate but it does not qualify for the criteria of 'business entity' nor is it registered as such. Therefore, it cannot be held that the appellant Haryana Housing Board is liable for payment of service tax on reverse charge basis in respect of the services mentioned above. 9.2 Further, we find that the Constitution Bench of Hon'ble Apex Court in its judgment passed in the case of Shri Ramtanu Co-Operative Housing Society Ltd. Vs. State of Maharashtra & Others (supra) has clearly distinguished between a Business Corporation and a Governmental Authority Body Corporate. The relevant extracts from the said judgment from para 18 to para 20 are reproduced herein below: "18. The Corporation is not a Governm....
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....opinion that the Corporation is not a trading one." 9.3 Further, we find the Ho'ble High Court of Punjab & Haryana in the case of Bharat Bhushan Gupta & Company (supra) has categorically held that the Haryana Housing Board is a governmental authority as defined in the Notification No. 25/2012-ST dated 20.06.2012 and work contract services provided by the contractors to the Board are exempt under clause 12(a) of the Notification ibid. Relevant extracts from the said judgment from para 14 to para 21 of are reproduced herein below: "14. The Board has been constituted in terms of the provisions of Section 3 of the Act, as was enacted by the State Legislature. It is a body corporate which consists of a Chairman, a Chief Administrator and such other members, as the State Government may, from time to time, appoint by a notification. The Chief Administrator shall be a person from amongst the officers of the rank of Head of the Department or Joint Secretary of the State Government. It is termed to be a local authority for the purposes of Land Acquisition Act, 1894. Section 20 of the Act provides that subject to control of the State Government the Board may incur expenditure on f....
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....d of service being construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of; (iii) it is meant predominantly for use other than for commerce, industry, or any other business or profession. 18. "Original works" has been defined in Clause 2(y) of the notification dated 20-6-2012 to mean the meaning as assigned to in Rule 2A of the Service Tax (Determination of Value) Rules, 2000. 19. On a plain reading of the notification dated 20-6-2012, in our view, the service being provided by the petitioners would clearly fall in the exemption clause, as the Board is a governmental authority having been set up under a State Act, i.e., Haryana Housing Board Act, 1971. It is wholly controlled by the State Government. BPL houses constructed by the petitioners are meant for residential purpose and not for commerce, industry or any other business or profession. 20. Similar issue came up for consideration before a Division Bench of Patna High Court in Shapoorji Paloonji and Company Pvt. Ltd's (supra), where the contact was for construction of administrative block in Indian Institute of Technology....
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....ention to get undue benefit of availing duty exemption cannot normally be attributed to the appellants. We, therefore, hold that the demand is hit by limitation and the demand can be enforced only for a period of six months from the date of issue of show cause notice." 10.4 Further, in the case of U.P. State Sugar & Can Dev. Corpn. Ltd. vs. CCE (supra), the Tribunal has observed as under: "Since the Appellants are public-sector undertaking of the Govt. of U.P., the allegation of mis-statement, or suppression of fact with intent to evade the payment of duty does not make any sense. It is unconceivable that the Sugar Mills owned by a State Govt. owned Corpn. would try to evade the payment of duty by resorting the wilful suppression of facts - more so when the duty paid was to be reimbursed to them by the Govt. In view of these circumstances, we are of the view that the Appellant's sungar mills cannot be accused of suppression of facts and therefore, neither the provisions of Section 11AB nor the provisions of Section 11AC would be attracted." 10.5 Further, in the case of M.P. Water & Power Management Institute vs. CCE - 2009 (15) STR 164 (Tri. Delhi), the Tribunal ....