AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 1137
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....tion 65(105) (zzq) of the Finance Act, 1994 as amended and not listed in negative list regime w.e.f 01.07.2012. Accordingly, the show cause notice dated 21.04.2016 was issued demanding service tax under the category of construction of residential complex service for the period 2011 (October, 2010 to March, 2011) to 2013-2014 along with proposal for interest and penalty. In the notice an amount of Rs. 40 Lacs already paid by the appellant was proposed to be adjusted against total tax liability. The said show cause notice has been adjudicated by the adjudicating authority whereby the demand of service tax along with interest and penalties were confirmed and amount of Rs. 40Lacs paid by the appellant during investigation was appropriated. Against the said adjudication order dated 30.03.2017 passed by the Additional Commissioner, Central Excise , Customs and Service Tax- Vadodara, the appellant filed an appeal before the Commissioner (Appeals) who vide order-in-appeal No. CCESA-SRT (APP)-AT-172-2018-19 upheld the order-in-original and rejected the appeal filed by the appellant. Therefore, the present appeal is before us. 2. Shri Vipul Khandhar, Learned Chartered Accountant appearing....
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....ub or Association Service. In support, he placed reliance on the following judgments :- * Shrinandnagar -IV Co.Op Housing Society Ltd - 2011 (23) STR)439 (Guj.) * Calcutta Club Ltd - 2019 (29) GSTL 545 (SC) * Sujal Developers - 2013 (31) STR 523 (Guj.) * Rajasthan Co-Op Dairy Federation Ltd - 2022 (65) GSTL 350 (Tri.-Del) * Rajasthan Co-Op Dairy Federation Ltd - 2022 (65) GSTL 257 (SC) 2.3 He further submits that the entire demand is time bar as the same is under extended period. The show cause notice covering the period 01.10.2010 to 31.03.2014 was issued on 21.042016. Therefore, the show cause notice has invoked the extended period of limitation which in the facts of the present case is not sustainable as there is no suppression, wilful mis-statement on the part of the appellant, for the same reason penalties are also liable to be set aside. He submits that the entire demand of service tax, interest and penalty be set aside and amount of Rs.40 Lacs paid by the appellant during investigation may be ordered to be refunded. 3. Shri Mohit Agarwal, Learned Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of ....
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.... if the buyers subsequently become members of the Society. 3.5 He accordingly requested for remand back the matter. 4. We have carefully considered the submission made by both sides and perused the records. We find that in the facts of the present case the period involved is 01.10.2010 to 31.03.2014, therefore, both the periods i.e. prior to negative list regime and post negative list regime is involved. We find that the appellant vehemently argued that the relationship between the appellant and its members to whom the residential flats have been allotted are of association and its members. Therefore, there is no service as the service provider and service recipient are not existing. As per the facts of the present case we find that there is no dispute that the appellant is a co-operative housing society constituted by its members for the objective of construction of residential complex exclusively for the members of the society. Therefore, it is not a case that of the independent builder has constructed the residential complex and sold to the unrelated buyers. Since, the concept of doctrine of mutuality is involved in the present case between the appellant and its members, i....
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....erative Housing Society and its members are different legal entity or otherwise? (ii) Whether the construction activity being performed/undertaken by the Society as a service to its members, is a taxable activity or not? (iii) Whether Hon'ble CESTAT has committed error in interpreting the Board's Circular No. 108/2/009-S.T., dated 29-1-2009 by not distinguishing a co-operative housing society, which is providing service to its members from a developer/promoter? 3. We have heard learned counsel for the appellant and the respondent. Brief facts are that respondent Co.-Op. Housing Society had availed of the services of Contractor for constructing the residential units for use of the members of the Housing Society. Initially, the Society had paid service tax. Subsequently, however, the society carried a belief that it was not liable to pay service tax. Society filed refund claims which were dismissed. The issue, ultimately, reached the Tribunal. Tribunal by the impugned judgment relying on the Board's Circulars and Clarifications, formed an opinion that if the activity is undertaken by the Society for and on behalf of the members, it cannot be stated that the....
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....l as collect amounts towards the units allotted to such members. The finances for the purpose of development are to be arranged by the respondent-developer. In the circumstances, from the development agreement, it does not appear that the respondent-developer is a contractor who is executing the construction work on behalf of the society. Here, the developer is using its own finances and developing the land in question and selling the property constructed thereon to the members of the society. Thus, in the light of the clarification issued by the Board, viz., when it is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then, the ownership of the property gets transferred to the ultimate owner, in such a case, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed, would be in the nature of "self-service" and consequently, would not attract service tax. 14. In the facts of the present case, there is nothing to indicate that the respondent has been hired as a contractor by the society so as to bring the activities of the respondent....
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....pt in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the 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." 8. We are not inclined to discuss whether by virtue of such explanation legal situation in factual background arising in present appeal, would or would not be any different. Suffice it to note that the explanation was brought in the statute book long after the taxing event in the present case had arisen. 9. In absence of any indication in the amendment to make it either retrospective or explanation being merely declaratory or clarifiacatory in nature, such statutory change cannot be made applicable to the long past events. 10. In the result, we do not find that any question of law arises. Tax Appeal, is therefore, dismissed." 4.2 In an another case of Sujal Developers (Supra) Hon'ble Gujarat High Court held that service of construction of complex can be taxable only when there is service from one person to another....
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....ervice tax on the gross amount charged for the construction services provided, to the builder/promoter/ developer under "construction of complex" service falling under Section 65(105)(zzzh) of the Finance Act, 1994. It has been further clarified that if no other person is engaged for construction work and the builder/promoter/developer undertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. The Board, in the clarification dated 29-1-2001, which has also been reproduced by the Tribunal in the impugned order, has clarified that "generally, the initial agreement between the promoters/builders/ developers and the ultimate owner is in the nature of 'agreement to sell'. Such a case, as per the provisions of the Transfer of Property Act, does not itself create an interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full pa....
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....aim. 13. From the statutory provisions, circulars as well as clarifications issued by the Board referred to hereinabove, it appears that for being chargeable to tax under section 65(105)(zzzh) of the Act is that the person concerned should render service to another person in relation to construction of complex. Thus the basic requirement for falling within the ambit of the said provision is that there has to be a service provider and a service receiver. In the present case as noticed earlier, the land on which the residential complex has been constructed belongs to the society. The society has entered into a development agreement with the respondent. Under the agreement between the society and the respondent-developer, the work of construction and development of the housing project has been entrusted to the respondent. The respondent-developer has agreed to develop the said land by attending to construction and development work and to complete the scheme duly and diligently on the terms and conditions contained in the agreement. Under the agreement, the developer is required to carry out every act necessary to complete construction and development of the project directly o....
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....is, accordingly, dismissed." 4.2 The similar issue has been considered by the principal bench of the CESTAT, New Delhi In the case of Rajasthan Co-Op Dairy Federation Ltd (Supra) wherein the following order was passed :- "8. It is undisputed that the appellant is registered as a cooperative society under the Rajasthan State Cooperative Act, 2001 and the district cooperatives and milk unions are its members. As an apex cooperative society, the appellant is a legal entity by itself. The milk unions are also legal entities by themselves. The milk unions are engaged in purchasing milk, processing it and selling milk and milk products. The appellant is providing various services to support the milk unions in this endeavour and is charging a fee which is called RCDF cess at the rate of 1.25% on the turnover of the milk unions. The question which falls consideration is whether in this factual matrix the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another. 9. We find that the Constitution Bench of the Supreme Court has in State of West Bengal v. Calcutta Club Ltd. di....
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....er club to its members, to be ultra vires. Rule is made absolute with no order as to costs." 55. The appeals that are listed before us concern impugned judgments that have in essence followed these two judgments, insofar as Service Tax that is levied on members' clubs is concerned. The vast majority of cases before us concerns members' clubs that have been registered as Companies under Section 25 of the Companies Act, or registered cooperative societies under various State Acts, such societies being bodies corporate under the aforesaid Acts. xx xx xx 72. The definition of "club or association" contained in Section 65(25a) makes it plain that any person or body of persons providing services for a subscription or any other amount to its members would be within the tax net. However, what is of importance is that anybody "established or constituted" by or under any law for the time being in force, is not included. Shri Dhruv Agarwal laid great emphasis on the judgments in DALCO Engineering Private Limited v. Satish Prabhakar Padhye and Ors. Etc., (2010) 4 SCC 378 (in particular paragraphs 10, 14 and 32 thereof) and CIT, Kanpur and Anr. v. Canara Bank, (2018) ....
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....which may have initially come into existence by oral agreements, but which had subsequently been constituted under written deeds." 73. It is, thus, clear that companies and cooperative societies which are registered under the respective Acts, can certainly be said to be constituted under those Acts. This being the case, we accept the argument on behalf of the respondents that incorporated clubs or associations or prior to 1st July, 2012 were not included in the Service Tax net. xx xx xx 76. What has been stated in the present judgment so far as Sales Tax is concerned applies on all fours to Service Tax; as, if the doctrine of agency, trust and mutuality is to be applied qua members' clubs, there has to be an activity carried out by one person for another for consideration. We have seen how in the judgment relating to Sales Tax, the fact is that in members' clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when we are to construe the definition of "service" under Section 65B(44) as well. 77. However, Explanation 3 has now been incorporated, under sub-clause (a)....
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....e taxed. The fact that the club is incorporated as a separate legal entity makes no difference. We find no good reason not to apply the same principle to the appellant, which is also a cooperative federation of milk unions who are its members. Although the milk unions (district cooperative societies) and the appellant (apex society) are registered under the Cooperative Societies Act of the State and are, therefore, distinct legal entities, the nature of relationship between the appellant and the milk unions continues to that of club to its members. Therefore, no service tax is payable on the services rendered by the appellant to the milk unions. 12. Thus, in view of the judgment of the Constitution Bench of the Supreme Court in Calcutta Club, and the decision of the Tribunal in Karnataka Co-operative Milk Producers Federation Limited it has to be held that no service tax was payable by the appellant for the services rendered to its members. 13. Accordingly, the demand confirmed by the impugned order cannot be sustained. The interest on the demand and the penalties imposed also need to be set aside and are set aside. The appeal is, accordingly, allowed and impugned....