TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 841
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....that they had entered into a Joint Venture Agreement on 07.01.2010 and Supplementary Joint Venture Agreement entered on 23.05.2011. Out of 80 Nos. flats measuring a total area of 84,628 sq. ft., constructed by the appellant, developer would retain 47 flats totally measuring 50517 sq. ft. and 33 flats measuring 34111 sq. ft. would be landowner's share. The appellant agreed to construct and hand over 33 apartments to the landowners who, in turn handed over their land as consideration for the above construction activity and the consideration offered was landowners 60% of undivided share of land. As it was seen that consideration for the service was given on 23.5.2011 and completion certificate was issued on 28.11.2014, the service tax is required to be paid by the appellant. Board's Circular No. 151/2/2012-ST dated 10.02.2012 has clarified that the value of these flats would be equal to the value of similar flats charged by the builder/developer from the second category of service receivers. The relevant portion of the Circular cited supra is extracted below for ready reference: - "(A) Taxability of the construction service: (i) For the period prior to 01/07/2010: co....
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....d, the appellant filed an Appeal before the Commissioner (Appeals) which was rejected vide Order-in-Appeal No. 257/2018(CTA-II) dated 25.05.2018. 2.5 Once again, being aggrieved, the Appellant is in appeal before this forum. 3. The Ld. Counsel Mr. Sathish Chandrasekaran, for the Appellant and the Ld. Authorized Representative Mr. M. Selvakumar, appeared for the Respondent and both have made their submissions. 4.1 The Ld. Counsel has contended that: - i. There has been no wilful suppression or fraud or collusion with regard the facts of the case and hence there was no contravention of any of the provisions of the act or the rules made hereunder. Hence the Show Cause Notice is barred by limitation, as none of the ingredients set out in the provision to section 73(1) of the Finance Act, 1994, to invoke the extended period of limitation is present in the current case. ii. The bonafides of the Assessee are proved by the fact that they have paid service tax on the flats constructed by them and sold to third parties and the construction was not carried out by them for the land owner since it was more of a self-construction as 33 flats were allotted by the....
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.... (l)(iii). ii. The comparable price between the owners and the buyers arrived for calculating service tax is wrong as the same may differ since the buyers pay for both the land and the construction which is not the same in the case of the owners since the said price for the buyers would also include other expenses incurred by the Appellant. iii. Rule 3(a) is incorrect and ultra vires the Act and the same cannot be relied upon to demand Service Tax from the Appellant, Rule 3(a) should be applied only when the consideration is non-monetary and where the consideration is not ascertainable. iv. The Joint Venture Agreement and the subsequent supplementary agreement were signed during the period 2011 which forms the basis for the issue to determine the intention of the parties and hence issuing the Show cause notice in 2017 which even beyond the period of invoking the permissible extended period of limitation is not maintainable in the present case. v. The cost of construction of Flats sold by the Appellant to an independent buyer nearest in point of time as consideration to determine the value by placing reliance on the circular dated 10.02.2012 is in....
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....ransaction falls under 'works contract' or 'construction of complex' (for abatement/valuation purposes)? and, iv. Whether the Department is entitled to invoke extended period of limitation and impose penalty for suppression or fraud or misrepresentation in the facts of the appeal? 8. We take up the issues in seriatim. 8.1 As both the first and second questions are intertwined, we take up both for decision together. We find that the Developer has constructed the complex, sold part of the built up area to third party buyers and allotted the Owner's share to the land owner. The Department issued the Show Cause Notice demanding service tax on the Owner's Share on the ground that the Developer had rendered taxable construction service to the land owner and had not discharged due service tax on the value of the Owner's Share. The Department also invoked extended period and proposed penalties under the relevant provisions on the ground of alleged suppression/concealment. 8.2 But, the Developer challenged the demand raising issues as to (i) existence of taxable service, (ii) valuation of the Owner's Share, (iii) classification (works contra....
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.... Here we find that the exchange of construction services for development rights was considered a taxable service and the "consideration" was the value of the land or development rights received by the developer, which could include the value of the flats built for the landowner. The value of the flats given to the landowner, which was the consideration for the development rights, was used to determine the service tax liability. The Appellant/builder or developer was the party responsible for paying the service tax on the construction services provided to the landowner. 8.7 The contentions of the Department in this regard are that: - (a) The Developer has rendered construction service to the land owner and has not discharged service tax on the Owner's Share; therefore, tax is leviable on the value of the flats allotted to the land owner. (b) Board's Circular No. 151/2/2012-ST dated 10.02.2012 supports Department's position on liability and valuation. (c) Extended period and penalty are invocable due to suppression and non disclosure in the returns filed. 8.8 The question whether service tax is exigible on the Owner's Share under a JV....
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....ale of the said flat is nearest in point of time to 23.05.2011 i.e. on 05.12.2012, the construction cost of the said flat is adopted to arrive at the taxable value of service rendered for the said 33 flats. Here, we find that the Appellant/Developer is providing construction services to the land owner for a consideration (the Owner's Share). We also find from the records that the Appellant/Developer has not established on the basis of contemporaneous records (invoices to buyers, accounting entries, returns and bank flows) that the land component/Owner's Share value was effectively included in the price charged to independent buyers and that service tax has been discharged on the gross consideration so as entire economic incidence has been taxed. 8.11 As no evidence has been adduced on the gross consideration by the Appellant, the valuation of the Owner's Share must follow Section 67 of Finance Act, 1994 read with Rule 3(a) of Service Tax (Determination of Value) Rules, 2006 and in terms of the instructions vide Board's Circular No. 151/2/2012-ST dated 10.02.2012. The value of the allocated flats is to be ascertained by reference to the price of similar flats charged ....
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....which service tax is payable for services. It mandates that the tax is payable on the earliest of three events: issuing of an invoice, receiving payment, or completing the service. If payment is received before the date of issue of invoice or completion of service, then it is the date of receipt of payment. In case of transactions between landlord and developer, usually there is no system of issuance of invoices. Therefore, out of the above three events, the date of receipt of consideration or date of completion of service would be relevant in case of JVA. The date of JVA notifies an agreement for provision of service whereas the date of handing over of owner's share of flats not only indicates completion of service but also the date for levy of service tax. In this case, the flats constructed were handed over to the landowner on 05.08.2014. 9.2 We further find that the JVA between the appellant and the landowner got executed on 23.05.2011. In this regard, the contention of the Department is that consideration for service being provided is "Construction of 33 residential apartments" on account of the landowner's share whereby the development rights in land were transferred....