TaxTMI 
TaxTMI 
2024 (12) TMI 1407
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....ces to the potential buyers. The Appellant owns the land which is being developed by them for residential purposes. A search was carried out by Directorate General of Central Excise Intelligence (DGCEI) on 09.01.2014. The above investigation culminated in to issuance of show cause notice dated 29.09.2015 demanding service tax of Rs.1,68,97,303/- for the period 01.07.2010 to 31.03.2014. The show cause notice also proposed to appropriate the sum of Rs.66,56,702/- paid by the Appellant during the course of investigation. The show cause notice demanded the above service tax along with interest and also penalty under Section 77 and 78 of the Finance Act, 1994. 1.2 The Appellant being unsuccessful before the adjudicating authority and also before the first appellate authority is before us in the present appeals. 2. We have heard Mr. Jigar Shah learned Advocate with Shri Amber Kumrawat, Advocate for the Appellants and Mr. Tara Prakash, Ld. Deputy Commissioner and Authorized Representative of the Revenue Department. 3. Filtering out unnecessary facts for the determination of the present dispute and as points raised by the Ld. Advocate for the Appellant, the main issue to be decide....
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....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 assessees would be liable to pay Service Tax on the amounts charged by them from their customers with whom they had entered into agreements for construction of the residential units and whose possession was to be handed over on completion of the construction and full payment having been 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 legi....
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....ctive amendment. In this regard, para 5 of this judgment is reproduced below :- "5. In Maharashtra Chamber of Housing Industry v. Union of India - 2012 (25) S.T.R. 305 (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 taxable service; that prior to the explanation, the view taken was that since a mere agreement to sell does not create any interest in the property and the title to the property continues to remain with the builder, no service was provided to the buyer; that the service, if any, would be in 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 bu....
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....ellant has been given 67% abatement. This would show that the contracts are composite in nature involving supply of materials as well as rendition of services. The demand under such composite contracts can only be made under the category of WCS. The Tribunal in the case of Real Value Promoters Pvt. Ltd. (supra) had considered the issue as to whether the demand made under CICS / RCS / CCS can sustain for the period prior to 1.7.2012 for composite contracts. The said decision was followed by the Tribunal in the case of Jain Housing & Construction Ltd. (supra) whereby the Tribunal set aside the demand following the decision in the case of Real Value Promoters Pvt. Ltd. (supra). The decision of the Tribunal was maintained by the Hon'ble Apex Court by dismissing the appeal filed by the Department as reported in (2023) 10 Centax 171 (SC). 6. The Tribunal has taken similar view in the case of Sri Rosh Properties Pvt. Ltd. Vs CCE & ST vide Final Order No.40217/2014 dated 01.03.2024. 7. Following these decisions, we are of the considered opinion that the demand cannot sustain. In the result, the impugned order is set aside. The appeal is allowed with consequential relief, ....
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....tained in the 7th Schedule to the Constitution, taxation entries are to be found only in lists I and II. This is for the reason that in our Constitutional scheme, taxation powers of the Centre and the States are mutually exclusive. There is no concurrent power of taxation. This being the case, the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be struck down. In the present case, the dichotomy is between sales tax leviable by the States and service tax leviable by the Centre. When it comes to composite indivisible works contracts, such contracts can be taxed by Parliament as well as State legislatures. Parliament can only tax the service element contained in these contracts, and the States can only tax the transfer of property in goods element contained in these contracts. Thus, it becomes very important to segregate the two elements completely for if some element of transfer of property in goods remains when a service tax is levied, the said levy would be found to be constitutionally infirm." 39. In the present case, we find that there is no machinery provision for ascertaining the service element involved in ....
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....xecution of a works contract and prior to 1st July, 2012 the said Rule read as under :- "2A. Determination of value of taxable services involved in the execution of a works contract. - Subject to the provisions of section 67, the 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....
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...., levied on goods and services supplied free of cost for use in or in relation to the execution of works contract, under the same contract or any other contract : Provided that where the value of goods or services supplied free 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;" 45. Whilst 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. 46. In Mathuram Agrawal v. State of M.P. : (1999) 8 SCC 667, the Supreme Court held as under :- "In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic result....
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....tract simplicitor and not to composite contracts. The relevant extract of the said decision is quoted below :- "A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite wor....
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....greed to perform the services of constructing a complex for the buyer - and would not take within its ambit composite works contract which also entail transfer of property in goods as well as immovable property. The measure of tax assumes significance in such contracts as a levy of the service tax taking the gross amount charged by a builder for a composite contract would amount to a levy of service tax not only on the service element but also on the immovable property and the property in goods transferred or intended to be transferred to the ultimate buyer. 51. In CIT v. B.C. Srinivasa Shetty : (1981) 2 SCC 460, the Supreme Court examined the levy of capital gains tax on sale of goodwill and had noted that the machinery provisions did not provide for calculation of capital gains - which is the measure of tax for imposition of tax on gains from sale of capital assets - where the cost of acquisition was not ascertainable. The Court held that the charging sections and the computation provisions together constitute an integrated code and the transaction to which the computation provisions cannot be applied must be regarded as never intended to be subjected to charge of tax. ....
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.... of taxable turnover, the Act remains unworkable. Such gap in the statute cannot be filled up by the circulars which are purely ad hoc and administrative in nature and specially so when it relates to taxing law. It is a well-settled principle that in matters of taxation either the statute or the Rules framed under the statute must cover the entire field. Taxation by way of administrative instructions which are not backed by any authority of law is unreasonable and is contrary to Article 265 of the Constitution of India. Therefore, the impugned circulars are set aside as also the impugned orders of assessment. The assessee's liability to pay tax remains but in order to assess that the State has to act in accordance with the statutory prescription by framing Rules under its rule-making power under Section 29 of the Act and the assessing authority can pass fresh orders of assessment on the basis of such statutory Rules." 53. As noticed earlier, in the present case, neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service components for ascertaining the measure of service tax. The abatement to the e....
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....examine whether the builder has collected any amount as service tax from the petitioners for taxable service as defined in Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authorities. Any such amount deposited shall be refunded to the petitioners with interest at the rate of 6% from the date of deposit till the date of refund. 57. The petitions are disposed of in the aforesaid terms." 3.4 Therefore, on the basis of above, even if the category of service is held as "construction of complex" services as alleged by the revenue department in the show cause notice dated 29.09.2015 then also the demand of service tax is not sustainable in the facts of the present case. 3.5 We also place reliance on the decision of this Tribunal in case of Adani Estate Management Pvt. Ltd. reported in 2024-VIL-1555-CESTAT-AHM-ST wherein it is observed as under: "4. We have carefully considered the oral submissions made by both the sides and perused the records, including the written synopsis, written submissions and paper book furnished by the appellant. We have also carefully perused the facts presented in the impugned order and show cause notice an....
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....lled in the agreement executed by the appellant. Adjudicating Authority also contended that there is no mention of the appellant agreeing to construct villa on behalf of the buyer and thus the agreement was to sale of villa solely and not for the purpose of carrying construction and thus the transaction cannot be classified as works contract. We find that the adjudicating authority has deemed the transaction as that of sale of villa instead of construction whereas the adjudicating authority has classified the transaction under clause (b) which deemed "construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority". Needless to elaborate that the very applicability of clause (b) would also require services by way of construction of a complex or building and sale thereof before completion of construction, which apparently and unequivocally transpires from the plain language of clause (b). If the transaction, according to the adjudicating authority, is limited to that of sale of vi....
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....la prior to completion of construction and agreeing to construction activity is unacceptable and contrary to settled position of law. We also find force / merit in the argument placed by Shri Rahul Patel that amendment in rule 2A retrospectively by way of section 129 of Finance Act, 2017 shows the clear intention of the government to align the valuation machinery with the law settled by the Supreme Court. Thus, we do not find force / merit in the arguments and averments made by adjudicating authority in the impugned order and find that the classification adopted by the appellant under clause (h) is correct and lawful. 4.4 Another issue which requires due consideration is valuation, wherein the value of land has been included in the value of construction services by the revenue. From the impugned order and the show cause notice, we observe that the value of land was included in the value of construction services, and the taxable value was determined in terms of Sl. No. 12 of Notification No. 26/2012-ST dated 20.06.2012, which pertains to the valuation of construction services classifiable under clause (b) of Section 66E of the Act. Since we have found that the classificatio....
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....ly relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub-paras (f), (g) and (h). Under each of these paras ,a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor's accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis of a fixed percentage of the value of the entire works contract as relatable to ....
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....This being the case, the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be struck down. In the present case, the dichotomyis between sales tax leviable by the States and service tax leviable by the Centre. When it comes to composite indivisible works contracts, such contracts can be taxed by Parliament as well as State legislatures. Parliament can only tax the service element contained in these contracts, and the States can only tax the transfer of property in goods element contained in these contracts. Thus, it becomes very important to segregate the two elements completely for if some element of transfer of property in goods remains when a service tax is levied, the said levy would be found to be constitutionally infirm. This position is well reflected in Bharat Sanchar Nigam Limited v. Union of India, (2006) 3 SCC 1 - 2006-VIL-07-SC-LB, as follows:- "No one denies the legislative competence of the States to levy sales tax on sales provided that the necessary concomitants of a sale are present in the transaction and the sale is distinctly discernible in the transaction. This does not however allow the State t....
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....hat the value of land is identified in the agreement and clearly discernible therefrom and therefore the measure shall be construed as divisible in nature. We also find that the appellant had vehemently argued before the adjudicating authority that the value of land agreed upon by the parties in the agreement had not been challenged or disputed by revenue in the show cause notice. Thus, it is not a case of revenue leading to overvaluation of land by the appellant. Accordingly, we hold that the value agreed upon with the buyer with respect to land and indicated in the agreement shall be the value of land required to be separated from the works contract. Accordingly, we find force in the argument that the land value is not includable in the value of works contract irrespective of and regardless of the option exercised by the appellant for valuation of works contract services under rule 2A. Similar view has been taken by this tribunal in case of Commissioner Of CGST & Central Excise - CGST & Central Excise Ahmedabad Versus Shree Siddhi Infrabuild Pvt Ltd relevant para of which are as follows : "4. We have carefully considered the submission made by both the sides and perused ....
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....rmination of the value of service portion in the execution of works contract under this clause. (ii) Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:- (A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract; [Provided that where the amount charged for works contract includes the value of goods as well as land or undivided share of land, the service tax shall be payable on thirty per cent. of the total amount charged for the works contract.]" From the above Rule 2A(i), it is clear that for the purpose of value of service in the execution of works contract the gross value shall not include the value of land or undivided share of land. In view of this provision the value of land is not includible and service tax demand on this ground is not sustainable on merit." In view of above, the classification made by the revenue in impugned order is reje....
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....2.03.2021; personal hearings were held on 26.07.2021, 24.08.2021 and 24.09.2021; and the order was passed by the Adjudicating Authority on 14.06.2022. 12. It was incumbent upon the Adjudicating Authority to determine the amount of duty within one year from 28.04.2015, where it was possible to do so. The discussion and findings in the impugned order start from paragraph 117 but no reason has been given in the impugned order by the Adjudicating Authority for not being able to determine the duty within the stipulated period of one year from the date of issuance of the show cause notice. 13. Learned authorized representative appearing for the department has, however, submitted that the adjudication was completed within nine months from the completion of the last hearing on 24.09.2021. Prior to this hearing, it was incumbent upon the Adjudicating Authority to "scrupulously adhere to the principles of natural justice by giving ample opportunities to the noticees to make their written submissions, allow cross-examination and opportunities for personal hearing" as contemplated in section 33A of the Central Excise Act. Learned authorized representative submitted that if th....
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....t the first hearing was fixed by the Adjudicating Authority on 07.09.2016. The chart submitted by the department further shows that after the first hearing was fixed on 07.09.2016, the matter was taken up on 22.02.2018 for cross examination which period is itself after more than one year, and this cross-examination continued from 22.02.2018 to 22.03.2021 and though five dates for cross-examination were fixed in 2018, four dates were fixed in 2019 and thereafter two dates for cross-examination were fixed in 2021. There is absolutely no reason assigned in the written submissions or in the date and event chart as to why the cross-examination process continued for almost three years from 2018 upto 2021, when the adjudication itself was required to be completed within one year. Three dates for personal hearing were fixed in 2021 at an interval of almost one month and thereafter the show cause notice was adjudicated after nine months from the last date of personal hearing on 14.06.2022. 28. A clear statutory time limit of one year is provided in sub-section (11) of section 11A for the Adjudicating Authority to adjudicate the show cause notice but no reason has been given in the ....
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....se notice within one year, unless there were strong and compelling reasons for it not to adjudicate the show cause notice within the stipulated time. Learned authorized representative appearing for the department is, therefore, not justified in making this submission. Nothing has been shown which can even remotely demonstrate that there were circumstances, much less insurmountable exigencies, which prevented the Adjudicating Authority from completing the adjudication process within the stipulated term. 32. The aforesaid discussion would lead to the inevitable conclusion that the impugned order would have to be set aside only for the reason that the adjudication was not completed within the time limit prescribed under sub-section (11) of section 11A of the Central Excise Act. 33. It would, therefore, not be necessary to examine the other two contentions raised by the learned counsel for the appellants. 34. The first issue that has been decided also arises for consideration in all the remaining 209 appeals that have been filed by the assessees for setting aside the impugned order. This would be apparent from the chart annexed as "Annexure A" to this order w....