TaxTMI 
TaxTMI 
2025 (5) TMI 1019
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....gust 2012 to September 2015. b. "Non-payment of service tax on consideration received towards construction / development of parking area in 'The Promont' Project, during the period from March, 2012 to September, 2012" and the amount involved is Rs.3,19,777/-. c. Non-payment of service tax on the consideration received towards development costs from M/s. Promont Hilltop Private Limited by wrongly claiming it as 'Sale of Development Rights', in respect of 'The Promont' Project, during the period from October, 2012 to June, 2015 and the duty amount involved is Rs. 5,54,63,589/-. d. Non-payment of service tax on compensation received towards cancellation/termination of Joint Development Agreement and Power of Attorney dated 06 January, 1998 and Supplemental Agreement dated 22nd May, 1998 entered into with Smt. Divya Singh, Ms. Beejaksharee Varman and Mr. Tika Sahil Varman, on 10th April, 2013 under the declared service category listed in Section 66E(e) of the Finance Act, 1994 and the amount involved is Rs. 24,72,000/- . e. Non-payment of service tax on income recognized as forfeiture income' on account of cancellation of bookings made by the custome....
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....ibutable to retention charges is unsustainable. * Rule 4(7), as it existed during the relevant period, is linked with the invoice/bill/challan of input service, and not with payment of invoice. Thus, Appellant is entitled to CENVAT credit equal to amount of service tax. Issue is no longer res integra. (v) Demand of service tax of Rs.3,19,777/- on consideration received towards construction/development of parking area in the 'THE PROMONT' project is agreed and will be paid. * Since the Appellant is unable to retrieve documents pertaining to this issue, they are unable to effectively contest the demand. Hence, the Appellant is accepting this demand and shall undertake to pay the same. * However, it is submitted that the demand itself is based on details provided by the Appellant. Thus, imposition of penalty is contested. (vi) Demand of service tax of Rs.2,06,186/- for non-payment of tax under Section 66E(e) on forfeitures from customs on cancellation of bookings is unsustainable. * Forfeiture money is in the nature of liquidated damages received for breach of contact. The Appellant adopts the submissions made for demand (C) supra, and it applies on all fours to this issue. ....
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....ugned order made the following submissions: * There is no doubt about the fact that sale of flat after completion certificate is an exempted service and in respect of exempted service Rule 6 of CENVAT credit Rules is attracted. As they have not opted for any of the provisions contained in Rule 6 of CCR 2004 the department is left with no option but to charge 6% on the value of exempted services. * In respect of sale of parking space what is demanded is the works contract service rendered for developing the parking lot and not the sale of immovable property per se. Hence the claim of the Appellant that it is a sale of immovable property cannot be accepted. * In respect of receipt of Development cost from promount Hilltop it is to submit that the same is for works contract done uptill the point of transfer. The Appellant had incurred expenses towards developing the land and buildings instead of selling it in terms of each flat to individual buyers that same have been supplied to promount Hilltop for which a consideration has been charged. The same is liable to service tax as works contract as service portion is inherently available in the construction done. * A consideration ....
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....) of Finance Act, 1994 and Section 65B (44) specifically lays down that 'service' does not include an activity which constitutes merely a transfer in title of immovable property, by way of sale, gift or in any other manner. It is stated that for the period prior to 01.04.2016, cenvat credit availability is not hit if the eligibility is met at the time of its availment. By virtue of exception in Section 65B (44), sale of flats after grant of Completion Certificate becomes a 'non-service'. Only with effect from 1st April 2016, Explanation 3 was added to Rule 6 of Cenvat Credit Rules (CCR), 2004 vide Notification No. 13/2016- C.E. (N.T.) dated 1st March 2016, to create a deeming fiction that 'an exempted service under Rule 2(e) shall include an activity which is not a service as defined in Section 65B(44) of Finance Act, 1994'. In other words, prior to that, a 'non-service' was never treated as an exempted service, to attract mischief under Rule 6. Thus, as regards the period prior to insertion of Explanation, it is submitted that cenvat credit was legally and validly availed prior to 1st April 2016 and that an ex-post facto change in law cannot invalidate a vested right. In this rega....
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....ex 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. Therefore, Section 65B(44) read with Section 66E, construction and sale of flats for consideration are liable to pay service tax except where the entire consideration is received after issuance of completion-certificate, thus, implying that the flats sold after receipt of completion-certificate and the consideration received after that are exempted from service tax, so the question of availing cenvat credit on the flats sold after receipt of completion certificate does not arise. Rule 2(e) of the Cenvat Credit Rules, during the relevant period reads as follows: Rule 2(e) as amended by CENVAT Credit (Sixth Amendment) Rules, 2012 vide Notification No. 28/2012-C.E. (N.T.) dated 20.06.2012 w.e.f. 01.07.2012: (e) "exempted service" means a- (1) taxable service which is exempt from the whole of the service tax leviable thereon; or (2) service, on which no service tax is leviable under section 66B of the Finance Act; or (3) taxable service whose part of value is exempted on the condition that no cr....
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....e manufacturer or the provider of output service, in terms of the provisions of sub-rule (2) or sub-rule (3), as the case may be : Provided that the CENVAT credit on inputs shall not be denied to job worker referred to in rule 12AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 3. For the purposes of this rule, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a 'service' as defined in Section 65B(44) of the Finance Act, 1994. 6.4 From the above Notifications, it is clear that the Explanation under the amended Rule 6 stating that the exempted services as defined in Rule 2(e) of Cenvat Credit Rules, 2004 shall include an activity, which is not a 'service' as defined in section 65B (44) of the Finance Act, 1994 is only clarificatory in nature in as much as the pre-amended Rule 6 also defined the categories of sales which cannot fall under the exempted category and the clearances made by the appellant after receipt of completion certificate which were not liable to service tax clearly fall und....
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....nner stated hereinabove". Based on these facts, the Tribunal concluded as follows: "24. The specific questions framed in this regard therefore have to be answered as follows: a. For the above reasons, the Appellants are not liable to pay 8%/10% amount of value of service became exempted after receipt of completion certificate under Rule 6 of the CCR, 04. b. The Cenvat Credit on input services received after obtaining Completion Certificate cannot be wholly allowed to the Appellant, and since they had availed only proportionate credit by maintaining separate accounts, the same is therefore sufficient compliance of the legal obligation cast upon them. c. The Appellants can be said to have "maintained proper separate accounts" as required under Rule 6 of the CCR, 04, having availed credit only to the extent input services in taxable activity, on the scientific basis after obtaining Completion Certificate. d. The Appellants are not required to reverse Cenvat Credit availed during the period when output service was wholly taxable before receipt of Completion Certificate, in accordance with law. e. Connected to (d) above, the Appellants are eligible to seek refund of the amo....
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.... the Rules, respondent cannot avail full Cenvat credit on input services received after obtaining completion certificate. Hence, the respondent cannot be expected to pay an amount equal to 8%/10% of sale price of immovable property after obtaining such completion certificate where no service tax is paid as if it is sale of immovable property since Rule 6 of the Rules perse does not apply to the present case until 13.4.2016 at all. 15. Even after 13.4.2016, since the respondent had availed only proportionate credit, the respondent was not legally required to pay 8%/10% amount under rule 6(3) of the Rules, since it can be said to have maintained separate accounts as required under rule 6(2) of the Rules. As respondent has taken only proportionate credit on input services after receipt of completion certificate, duly backed by CA certificate and certified work sheets for the proportionate credits availed after completion certificate, it has fulfilled its obligation under Rule 3 of the Rules read with Rule 6 thereof and therefore, no liability to pay any amount equal to 8%/10% of the sale price of immovable property can be fastened after receipt of completion certificate under Rule 6....
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....h services does not arise. Therefore, the appellant has to necessarily reverse the proportionate credit availed on such flats which have been sold and consideration received on or after receipt of the Completion Certificate. At para 21.2, the learned Commissioner notes that the appellant has stated that the ineligible input credit has to be computed as per Rule 6(3A) which works out to Rs.29,67,608/- as against the demand of Rs.63,07,843/- by the Revenue. In view of the above discussions, we hold that appellants are required to reverse the cenvat credit of Rs.29,67,608/-, the proportionate credit availed on those flats which are cleared after the receipt of the Completion Certificate. Consequently, reversal of cenvat credit of Rs.63,07,843/- is set aside but reversal of proportionate credit is upheld. Hence, it is remanded for limited purpose of re-quantification of proportionate cenvat credit. (b) "Non-payment of service tax of Rs.3,19,777/- on consideration received towards construction / development of parking area in 'The Promont' Project, during the period from March, 2012 to September, 2012" 7. The demand of service tax on the consideration received for 'parking are....
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....r over the life of the Project". 8.2 The above facts are not in dispute. It is also a fact the Development Agreement dated 18th October, 2012, entered into by the appellant defined 'Development costs' means "the entire cost and expense of Development and construction, marketing and sales of the Project including cost of obtaining Approvals, third party costs to be incurred by and on behalf of PROMONT for the Project, interest paid/payable to any banks / financial institutions for any loans, finance and / or credit facilities PROMONT has availed of for the purpose of the Project, fees, direct and indirect taxes thereon or other payments (including statutory dues to workmen, employees, etc.,) payable to the Principal Architect, engineers, contractors, staff and workmen." 8.3 The fact that the appellant had incurred a total expenditure of Rs. 109,74,67,523/- including accrued land cost of Rs.50,91,58,064/- and development expenses of Rs.58,83,09,459/- towards development of the said Property, charged to 'Work-In- Progress (WIP)' in their Books of Accounts and had received consideration of Rs. 124,88,00,208/- and Rs.3,98,97,135/- as revenue from operations under '....
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....rty, Including registering the same with the concerned registration authorities." 8.6 The above Clause-G does not speak of any sale or transfer but states that PROMONT undertakes the development of the project as per the provisions of the agreement and there is no dispute that the amount received by the appellant is towards the development cost which includes development, construction, marketing, etc. Moreover, the 'Project' has been defined as development of the said premises on the said property known as 'The PROMONT'. It also states the parties that shall do all such acts implying that both are party to each and every act in terms of the agreement. The other relevant clauses are reproduced below which also emphasises the fact that both are jointly party to all the transactions: "5.1. Both Tata Housing and PROMONT shall jointly execute the agreements and sale deeds with the Transferee/s in respect of the said Premises being jointly developed in the said Property in terms of this Agreement. 5.4 In consideration of the foregoing and in consideration for grant of rights as provided in this Agreement for the Development of the Project, PROMONT shall ensure that Tata Housing rece....
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....Tata Housing agrees and confirms that it shall execute the Documents, If any, required by bank/financial institution or other parties from whom the finance will be arranged, upon the intimation of the same by PROMONT. 10.8 Together with Tata Housing, appear before the concerned registration and other Authorities for the purpose of registering any Documents and Instruments and to present the same before them and admit the execution thereof and to do all such acts, deeds, matters and things as may be necessary or advisable for that purpose. On its part, Tata Housing shall execute and register all such Documents and Instruments as are required to transfer the said Property to Transferees of the Said Premises, In undivided shares and Interest or otherwise." 8.9 From the above Clauses of the Agreement, it is clear that there is no sale of an ongoing concern as claimed by the appellant as there is nothing in the Agreement to deem it to be sale or transfer, instead it establishes the fact that the Agreement is based on sharing of 22.5% of the gross proceeds which later was revised to 2.5% of gross proceeds. The actual consideration charged as development costs, which includes construct....
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....y rights, title and interest in the said Property or any part thereof. These facts are not in dispute and a total sum of Rs.2,00,00,000/- was received by way of compensation for relinquishing its rights under the said Agreements and Power of Attorney and towards reimbursement of cost incurred towards execution of a tentative project on the said Property in full and final settlement. The Commissioner referring to Para 6.7 of the Education Guide under guidance note for Declared Services wherein it was clarified that "6.7 Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act - In terms of this entry the following activities if carried out by a person for another for consideration would be treated as provision of service. * * Agreeing to the obligation to refrain from an act. * Agreeing to the obligation to tolerate an act or a situation. * Agreeing to the obligation to do an act." The Commissioner held that the consideration of Rs.2,00,00,000/- paid as compensation to M/s. Tata Group is absolutely a Declared service covered under Section 66E(e) of the Finance Act, 1994, on the basis of above-mentioned statutory provision....
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....he appellant and the Board's circulars relied upon the appellant are reproduced below: Liquidated damages - Levy of Service Tax on declared services in "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under Section 66E(e) of Finance Act, 1994 - Clarification C.B.I. & C. Circular No. 214/1/2023-S.T., dated 28-2-2023 F. No. CBIC-110267/14/2023-CX-VIII SECTION-CBEC Government of India Ministry of Finance (Department of Revenue) Central Board of Indirect Taxes & Customs, New Delhi Subject : Leviability of Service Tax on the declared service "Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under clause (e) of section 66E of the Finance Act, 1994 - Regarding. An issue has arisen on the levy of service tax on liquidated damages arising out of breach of contract, forfeiture of salary or payment of bond amount in the event of the employee leaving the employment before the minimum agreed period and similar other issues arising out of clause (e) of section 66E of the Finance Act, 1994. Reference has also been invited to Circular No. 178/10/2022-GST, dated 3rd August....
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....A/50879/2022-CU[DB], dated 20-9-2022 in this case and also against Order A/85713/2022, dated 12-8-2022 in case of M/s. Western Coalfields Ltd. Further, Board has decided not to pursue the Civil Appeals filed before the Apex Court in M/s. South Eastern Coalfields Ltd. supra (C.A. No. 2372/2021), M/s. Paradip Port Trust (Dy. No. 24419/2022, dated 8-8-2022), and M/s. Neyveli Lignite Corporation Ltd. (CA No. 0051-0053/2022) [2022 (59) G.S.T.L. J55 (S.C.)] on this ground. 6. In view of above, it is clarified that the activities contemplated under section 66E(e), i.e. when one party agrees to refrain from an act, or to tolerate an act or a situation, or to do an act, are the activities where the agreement specifically refers to such an activity and there is a flow of consideration for this activity. Field formations are advised that while taxability in each case shall depend on facts of the case, the guidelines discussed above and jurisprudence that has evolved over time, may be followed in determining whether service tax on an activity or transaction needs to be levied treating it as service by way of agreeing to the obligation to refrain from an act, or to tolerate an act or a situat....
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....e, the law provides in Section 73 of the Contract Act 1872 that when a contract has been broken, the party which suffers by such breach is entitled to receive from the other party compensation for any loss or damage caused to him by such breach. The compensation is not by way of consideration for any other independent activity: it is just an event in the course of performance of that contract. 7.1.1 It is common for the parties entering into a contract, to specify in the contract itself, the compensation that would be payable in the event of the breach of the contract. Such compensation specified in a written contract for breach of non-performance of the contract or parties of the contract is referred to as liquidated damages. Black's Law Dictionary defines Liquidated Damages' as cash compensation agreed to by a signed, written contract for breach of contract, payable to the aggrieved party. 7.1.2 Section 74 of the Contract Act 1872 provides that when a contract is broken, if a sum has been named or a penalty stipulated in the contract as the amount or penalty to be paid in case of breach, the aggrieved party shall be entitled to receive reasonable compensation not exce....
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....ng to the obligation to refrain from further development of the residential flat booked by the prospective buyer, collection of the remaining instalments to tolerate a situation of the prospective buyer cancelling the Agreement or not paying the remaining instalments, for a consideration should be held as a 'declared service' under Section 66E(e) of the Finance Act, 1994 and thereby, the appellant is liable to pay service tax of Rs.2,06,186/- on the forfeiture income of Rs.16,68,173/- received on account of cancellation of bookings for the period from April, 2014 to March, 2015. 10.2 Contra, the appellant submits that in terms of the UDS (Undivided Share of Land) Agreement as also the Construction Agreement, any default by prospective buyer was construed as a breach of contract. Such breach gave right to the Appellant to withhold 10% of total consideration payable by such prospective buyer as 'forfeiture money'. Forfeiture money is in the nature of liquidated damages received for breach of contract and hence, as already discussed in the Board's circulars, these amounts are not taxable. 10.3 There is no dispute that the 'Agreement for sale' and 'Construction Ag....
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....paid by the builder to the buyers to compensate them for the loss that they suffer due to such delayed construction and not for getting anything in return from the buyers. Similarly, forfeiture of earnest money by a seller in case of breach of 'an agreement to sell' an immovable property by the buyer or by Government or local authority in the event of a successful bidder failing to act after winning the bid, for allotment of natural resources, is a mere flow of money, as the buyer or the successful bidder does not get anything in return for such forfeiture of earnest money. Forfeiture of Earnest money is stipulated in such cases not as a consideration for tolerating the breach of contract but as a compensation for the losses suffered and as a penalty for discouraging the non-serious buyers or bidders. Such payments being merely flow of money are not a consideration for any supply and are not taxable. The key in such cases is to consider whether the impugned payments constitute consideration for another independent contract envisaging tolerating an act or situation or refraining from doing any act or situation or simply doing an act. If the answer is yes, then it constitutes....
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....t is entitled to CENVAT credit equal to amount of service tax. It is further claimed that the issue is no longer res integra in as much as the amended Rule 4(7) w.e.f. 1st April 2011 vide Notification No. 13/2011- C.E. (N.T.) dated 31st March, 2011, availment of CENVAT credit was delinked from 'payment of invoice/bill' and was linked to 'date of invoice/bill'. The Board also vide Circular No. 122/03/2010- S.T. dated 30th April 2010 has held in favour of the appellant. The appellant also relied on the decisions in the case of CCE vs. Hindustan Zinc Ltd.: 2019 (4) TMI 480 - CESTAT New Delhi; Anantnath Developers vs. Commr.: 2018 (6) TMI 1082 - CESTAT Mumbai; CCE vs. Thermax Engineering Construction Co. Ltd.: 2017 (12) TMI 1191 - CESTAT Mumbai. 12.3 The Commissioner has confirmed demand of Rs.5,80,728/- being service tax amount to be reversed on the amount of Rs.98,45,774/- retained by the appellant as shown in their Trial Balance as on 31.03.2014, however, there is no evidence to show that these amounts were not paid to the contractors / sub-contractors on completion of the projects. Moreover, there is no dispute that cenvat credit was availed only after payment of the service tax. ....
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....r of taxable service under various categories of services, the appellant failed to comply with the provisions of the Finance Act, 1994 and rules made thereunder, as they failed to self-assess the service tax due on the services provided by them correctly and to incorporate the same in the periodical statutory returns in respect of the taxable services provided by them within the stipulated time and placed reliance in the case of U.O.I Vs Dharamendra Textile Processors 2008 (231) ELT (SC) and Hon'ble supreme court in the case of UOI vs. Rajasthan Spinning and Weaving Mills 2009 (38) ELT 3 (SC). 13.2 Countering the above, the Learned Counsel submits that non-disclosure does not amount to suppression since they had filed returns regularly and had declared all relevant factors according to them which are liable to tax. Relied on the decisions in the case of M/s. Pushpam Pharmaceuticals Co. Vs. Collector of Customs: 1995 (78) ELT 401 (S.C.) and GD Goenka Pvt. Ltd. Vs. Commissioner: 2023 (8) TMI 995 CESTAT-Delhi. The appellant also contested penalty under Section 78 since the ingredients relevant to invocation of extended period were not established. 13.3 The Tribunal in the case of GD....
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....te. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." 14. In this appeal, the case of the Revenue is that the appellant had wilfully and deliberately suppressed the fact that it had availed ineligible CENVAT credit on input services. The position of the appellant was at the time of self-assessment and, during the adjudication proceedings and is before us that it is entitled to the CENVAT credit. Thus, we find that it is a case of difference of opinion between the appellant and the Revenue. The appellant held a different view about the eligibility of CENVAT credit than the Revenue. Naturally, the appellant self-assessed duty and paid service tax as per its view. Such a self-assessment, cannot, by any stretch of imagination, be termed deliberate and wilful suppression of facts. 15. Another reason given in the SCN for invoking extended period of limitation was that the appellant had deposited the disputed amount of service tax during audit but ....
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....hat the Returns are filed online and therefore, it is also not possible to provide any details which are not part of the returns. If the format of ST-3 Returns is deficient in design and does not seek the details which the assessing officers may require to scrutinise them, the appellant cannot be faulted because as an assessee, the appellant neither makes the Rules nor designs the format of the Returns. So long as the assessee files the returns in the formats honestly as per its self-assessment, its obligation is discharged. 18. Another ground for invoking extended period of limitation is that the appellant had not sought any clarification from the department. We find that there is neither any provision in the law nor any obligation on the assessee to seek any clarification. It was held by the High Court of Delhi in paragraph 32 of Mahanagar Telephone Nigam Ltd. vs. Union of India & Ors. [2023-TIOL-407-DELHI HIGH COURT ] as follows: "32. As noted above, the impugned show cause notice discloses that the respondents had faulted MTNL for not approaching the service tax authorities for clarification. The respondents have surmised that this would have been the normal course for any ....
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.... officer has to scrutinize the returns. Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed. For this purpose, the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted the responsibility of making the correct assessment as per his best judgment. If the officer fails to scrutinise the returns and make the best judgment assessment and some tax escapes assessment which is discovered after the normal period of limitation is over, the responsibility for such loss of Revenue rests squarely on the shoulders of the officer. It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under section 72. 21. This legal position that the primary responsibility for ensuring that co....
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.... scrutiny would be conducted on all returns. This could even be undertaken online. Detailed scrutiny, on the other hand, would cover select returns, identified on the basis of risk parameters, drawn from the information furnished by taxpayers in the statutory returns (Service Tax returns or ST-3 in this case). CBEC felt that facilitating preliminary scrutiny online would enhance efficiency and release manpower for detailed manual scrutiny, which could then become the core function of the Range/Group. 2) A detailed scrutiny programme also serves a 'workload development' function by initiating referrals for audit/anti-evasion. 1.2.2 Authority and Ownership 1.2.2A The authority to conduct scrutiny of returns for verifying the assessment done by the assessee is provided in Rule 5A of the Service Tax Rules, 1994. This rule, interalia, authorizes the Commissioner to empower any officer to carry out 'Scrutiny, verification and checks, as may be necessary to safeguard the interest of revenue'. The Rule also allows the officer to call for any record maintained by the assessee for accounting of transactions, the trial balance or its equivalent, and the Income Tax Audit Report maintaine....
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....ful suppression of facts cannot be presumed because (a) the appellant was operating under self-assessment or (b) because the appellant did not agree with the audit and claimed that CENVAT credit was admissible; or (c) because the appellant did not seek any clarification from the Revenue; or (d) because the officer did not conduct a detailed scrutiny of the Returns and the availment of CENVAT credit which is alleged to be inadmissible and was discovered only during audit. 13.4 The Commissioner in the impugned order except for stating that certain disclosures were not made has not brought in any of the factors that prove misdeclaration or suppression with intent to evade payment of duty. Therefore, going by the decision of the apex court that suppression cannot be presumed needs to be proved with certainty and factual incidents to prove intention to evade payment of duty, we do not find any reason to confirm the demand beyond the normal period. 14. In view of the above discussions, issues and findings are summarised as below: a. Demand of reversal of Cenvat credit of Rs.63,07,843/- during the period from August 2012 to September 2015 is set aside but upheld the reversal of propor....