TaxTMI 
TaxTMI 
2025 (5) TMI 476
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....er investigation, a show cause notice SCN dated 07.11.2019 was issued proposing to demand service tax Rs.47.62 lakhs on providing construction of complex service on forward charge basis and Rs.13.31 lakhs on reverse charge basis on the amount paid to labour contractor on supply of labour. During adjudication /first appeal, demand of service tax on reverse charge basis had been dropped and demand on forward charge basis had been reduced to Rs.43,79,211/-. Equal penalty of Rs.43,79,211/- had been imposed under Section 78 and penalty of Rs.70,000/- has been imposed under Section 77 for non filing of ST-3 returns. 3. The learned Chartered Accountant appearing on behalf of Appellant submitted that their submission before the Adjudicating Authority as well as Appellate Authority that the Hon'ble Delhi High Court in the case of Suresh Kumar Bansal reported in 2016 (43) S.T.R. 3 (Del.) has held that there was no mechanism for ascertaining the service component and therefore the levy itself would fail. He drew my attention to the said decision, wherein it has been held that service tax could not be levied on value of undivided share of land and that neither Service Tax (Valuation) Rules,....
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....emently relied upon the judgement of Hon'ble Delhi High Court in the case of Suresh Kumar Bansal (Supra). The Hon'ble High Court held that there was no statutory mechanism to ascertain the value of service component and that service tax could not be levied on value of undivided share of land. Neither Service Tax (Valuation) Rules, 2006 nor Finance Act, 1994 have any provisions for determining value of service covered under Section 65(105)(zzzh). The relevant portion of the order reads as under :- "3. The petitioners are aggrieved by 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 (hereafter "the Act") and inter alia impugn the explanation to Section 65(105)(zzzh) of the Act (hereafter "the impugned explanation") introduced by virtue of Finance Act, 2010 as being ultra vires of the Constitution of India. Xxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxx 9. Next, Mr. Agrawal contended 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. He submitted that services covered under S....
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....ax is essentially a tax on the value created by services as distinct from a tax on the value added by manufacturing goods. 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. Xxxxxxxxxx xxxxxxxxxxx xxxxxxxxx 35. Having stated the above, it is also essential to examine the measure of tax used for the levy. 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 because that would result in extending the levy of service tax beyond its object and would impinge on the legislative fields reserved for the State Legislatures. Xxxxxxxxx xxxxxxxxxx xxxxxxxx 37. Undisputedly, the contract between a buyer and a builde....
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....m 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. Xxxxxxxx xxxxxxxxx xxxxxxxx 52. It was stated that an assessee is entitled to abatement to the extent of 75% and only 25% of the gross amount charged by a builder from a flat buyer is charged to service tax. It was suggested on behalf of the Revenue that this indicated that the value of the immovable property as well as the property in goods incorporated in the works would stood excluded. In our view, this issue also stands concluded against the Revenue by the judgment in the case of Commissioner of Central Excise v. Larsen and Toubro Limited (supra). In that case, the Supreme Court had affirmed the decision of the Orissa High Court in Larsen and Toubro Limited v. State of Orissa and Ors. : (2008) 12 VST 31 (Orissa), where....
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....component in case of composite contracts is concerned, to levy service tax, we would like to state that Section 65BB(44) of the Act defines the term "service" as an activity carried out by a person for another for consideration, and includes a declared service, but would not include an activity which constitute merely a transfer of title in case of immovable property by way of sale, gift or in any other manner, or such transfer, delivery or supply of any goods, which is deemed to be a sale within the meaning of clause (29A) of the Article 366 of the Constitution of India or a transaction in money or an actionable claim. There are two other categories also mentioned with which we are not concerned. 26. Section 66E lays down what constitute "declared services". Clause (b) thereof mentions construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale by a buyer fully or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. 27. Clause (h) of Section 66E mentions that the "service portion in the execution of a works contract" is also a de....
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....rtaining the service element involved in the composite contract and in order to sustain the levy of service tax from the services, it is essential that the machinery provisions provide a mechanism for ascertaining the measure of tax, i.e., the value of services which are charged to service tax. It referred to the Service Tax (Determination of Value) Rules, 2006 and observed that none of the rules provides for any machinery for ascertaining the value of services involved in relation to construction of a complex. Referring to Rule 2A, Division Bench stated that it provides for mechanism to ascertain the value of services in a composite works contract involving services and goods, but it does not cater to determination of value of services in case of a composite contract which also involves sale of land. According to the Division Bench, 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 and since neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than servic....