TaxTMI 
TaxTMI 
2026 (7) TMI 1129
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....16 and Shri Pradeep Krishnappa, Proprietor (SLN) against Order-in-Original No. 03/2016-2017 dated 09.05.2016 both passed by the Commissioner Service Tax-I Commissionerate, Bangalore. Against the same impugned orders, two appeals have been filed by the Revenue in appeal No.ST/21344 & 21345/2016. 2. During the original proceedings the Tribunal vide Final Order No. 20241- 20242/2014 dated 18.02.2014 remanded the matter to the original authority for a fresh consideration after making certain observations. Based on these observations, the original authority considered the classification of the service and confirmed the same under 'Site Formation and Clearance, Excavation, Earth Moving and Demolition Service' as defined under Section 65(97a) of the Finance Act, 1994. The Commissioner on the valuation front has given the benefit of deduction of cost of land and materials cost for determining the taxable value and accordingly, has confirmed the tax amount but denied cum-tax benefit. Along with the demand of service tax, the Commissioner demanded interest and imposed penalty under Section 77 and 78 of the Finance Act, 1994 and dropped penalty under Section 76 of the Finance Act, 1994. Ag....
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....in the impugned orders has rightly held that it was not a simple sale of immovable property but a composite transaction involving taxable 'Site Formation and Clearance, Excavation and Earth Moving services' under Section 65(97a) read with Section 65(105) (zzza) of the Finance act 1994. 4.1 Relying on the decision of Green House Promoters Pvt. Ltd. vs. Commissioner of Central Excise Chennai: 2024 (17) Centax 54 (Tri.-Mad), it is submitted that Site Formation activities and provision of civic amenities prior to sale, attract service tax under Site Formation Services. The Revenue also upholds suppression for the fact that the appellant had not disclosed any facts prior to the investigation and relies on Pushpam Pharmaceuticals vs. Collector of Central Excise: 1995 (78) ELT 401 (S.C.) and Cosmic Dye Chemical Vs. Collector of Central Excise: 1995 (6) SCC 117. 5. Heard both sides. During the first round of litigation the Tribunal vide Final Order No. 20241- 20242/2014 dated 18.02.2014 observed as follows: "5. We find that one of the main grounds taken by learned counsel before the original adjudicating authority that the service rendered by the appellant is to be classifie....
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....d by the appellants, the impugned orders are set aside and the matter is remanded to the original adjudicating authority for fresh adjudication. Needless to say that the appellants shall be given reasonable opportunity to present their case before passing a final order. We also request the Commissioner to consider all the issues that will be raised before him and pass a well-reasoned order so that repeated litigation can be avoided. The appeals and stay petitions are disposed of by way of remand". (Emphasis Supplied) 5.1 The above remand order clearly stipulates that the Commissioner was to consider all the issues raised before him and therefore, we are in agreement with the appellants that the limitation issue is also to be considered in the remand proceedings. Since both the appeals arise out of the common remand order the same are taken up together. 6. With regard to classification, we find that the appellant in his reply dated 22.06.2015 has submitted that 'The lands are acquired by me from the original land owner ............ by what is known in the trade as power of attorney purchase and thereafter it forms part of my land bank'. Further, he submits 'I have to conver....
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....asree Developers, M/s. SLN should comply with the statutory requirements for formation of the residential layouts i.e., obtain conversion of the use of the lands from agricultural to residential purpose, obtain layout plan approved, obtain all permissions, sanctions, approvals, no objection certificates; provide the facilities / amenities like Mettled, hard filled and chip carpeted roads, box type rain water drains with culverts, sluices, sewerage lines, underground drainage lines, sufficient number of borewells, underground reservoir and overhead tank, sewerage point to each of the sites, water connections point to each of the sites as per the approved layout plan, identification numbers and boundary stones to each of the sites; the sale consideration payable by M/s. Thejasree Developers to M/s. SLN for purchase of sites shall be at the rate of Rs. 300/- per square foot of actual sital area as per the plan approved by the BMRDA/Planning Authority. In the said value of Rs. 300/- includes both the cost of land @180 per square foot and cost of forming the layout @ 120/- square foot". 6.2 None of the above agreements have been disputed by the appellant except for stating that the l....
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....ads on the land, fixing of boundary stones etc. are part of site formation and clearance which are clearly covered by the inclusive definition of Section 65(97a) that defines 'site formation and clearance, excavation and earthmoving and demolition'. The appellants activities do not fall under any of the exclusions of the said definition. The amount received by the appellant is shown as 'development charges' in the Agreement. If any part of this charge was towards any other expenses they should have bifurcated it with the help of documents and informed the department. When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. Hence the service has been correctly classified and the value correctly determined in the impugned order." 6.6 In the instant case also, we find that the Commissioner at para 45 of the impugned Order-in-Original No.15/2016-17 dated 13.05.2016 and at para 46 of the impugned Order-in-Original No. 3/2016-17 dated 09.05.2016 has clearly brought in the details of total cost which includes land cost and development cost which is 40% of the total cost as seen from the table given below. The Agreement....
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.... a transaction, there could not be any service tax, as service tax contemplates two persons viz., service provider and service receiver. In my case in the business model, I am only a recipient of service and not a service provider." 6.8 In view of the above, it is clear that the appellant undertakes Site Formation Services on the lands procured from others and the same are sold to the societies at a price which includes the land cost and the development cost. 7. With regard to valuation, the Commissioner has rightly extended the benefit of exclusion of land/material value as per the documents placed before him. However, we find that the Commissioner has not considered the issue of limitation as pleaded by the appellants on the ground that they failed to intimate the Department the fact that they were providing taxable services and there is no other evidence to show that they had wilfully suppressed the facts. With regard to limitation, the Hon'ble Supreme Court in the case of C.C., C.E. & S.T., Bangalore (Adjudication) vs. Northern Operating Systems Pvt. Ltd.: 2022 (61) G.S.T.L. 129 (S.C.) dated 19-5-2022 observed as follows: "62. The revenue's argument that the asse....
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....eals: ST/21344/2016 & ST/21345/2016 8. The Revenue vide ST/21344/2016 and ST/21345/2016 is aggrieved to the extent of value being reduced for determining the liability of service tax to the extent of excluding the material cost based on the Chartered Accountant statement. The Revenue in their grounds of appeal submitted that the view taken by the Commissioner to exclude the value of materials/goods from the value for assessment of service tax was incorrect in as much as the value has to be determined in terms of provisions of Section 67 of the Finance Act, 1994. The activity undertaken by the appellant since confirmed under Site Formation Services and since as per the contract, there is nothing on record to indicate the sale of materials during the course of provision of services, the value of the materials/goods cannot be excluded and therefore, the benefit of the Notification No. 12/2003-ST dated 20.06.2003 cannot be extended. It is further submitted that reliance placed on the decisions of the Supreme Court by the Commissioner is misplaced since that was relevant only for works contract services. Relied on the following Tribunal's decisions in the cases of: * Agarwal....
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....ds reversed by the Hon'ble Supreme Court in the case of Safety Retreading Company Pvt. Ltd. 2017 (48) S.T.R. 97 (S.C.) wherein it was observed that "On the very face of the language used in Section 67 of the Finance Act, 1994 we cannot subscribe to the view held by the Majority in the Appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The finding of the Appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%". 8.3 In view of the above, we do not find any justification in denying the benefit of excluding the material cost in the gross value for demanding service tax, accordingly, both the revenue appeals stand dismissed. 9. Summing up: i. Classification of services upheld under 'Site Formation and Clearance, Excavation, Earth Moving and Demolition....
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....ks contract' by involving activity beyond the site formation and it is not classifiable under the category of 'Site Formation and Clearance, Excavation, Earth Moving and Demolition Service' in view of the following decisions: * M/s. Raviteja Constructions Pvt. Ltd. vs. CCE & ST: Final Order No. Final Order No.21781/2024 dated 19.12.2024 * CCE & C, Kerala vs. Larsen and Toubro Ltd.: 2016-SCC (1) 170 (SC) * Suresh Kumar Bansal vs. UOI: 2016 SCC Online Del. 3657 (Delhi) * M/s. Sem Construction vs. CCE & ST, Rajkot: Final Order No.A/11143/2020 dated 27.08.2020 * Daelim Industrial Co. Ltd. vs. CCE: 2007 (7) STT 184 (Tri.Del.) * CCE, Vadodara vs. M/s. Daelim Industrial Co. Ltd.: SLP (Civil) No.24294 of 2003 dated 02.08.2004 (SC) * CCE vs. M/s. Mohan Bakers Pvt. Ltd. in G.A. No.2185 of 2008 dated 26.08.2008 (Calcutta) * Jetex Carburettors Pvt. Ltd. vs. CCE, Vadodara: 2007 (5) STR 446 (Tri.-Ahmd.) * Circular No. 108/02/2009-ST dated 29.01.2009 13. I find that the issue was considered by this Tribunal in the matter of M/s. Ravi Teja Construction Pvt. Ltd. (supra) wherein it was observed as: "19. As ....
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.... (JUDICIAL) (R. BHAGYA DEVI) MEMBER (TECHNICAL) PER: R. MURALIDHAR : 15. The Interim Order Nos. 1-4/2026 dated 08.04.2026 has been placed before me with the following difference of opinion for reference: (i) Whether the services rendered by the appellant are to be classifiable under 'Site Formation and Clearance, Excavation, Earth Moving and Demolition Service' as held by the Member (Technical); or (ii) Whether the services rendered by the appellant are to be classifiable under 'Works Contract' as held by the Member (Judicial). 16. From the Interim Orders, it is observed that the Member (J) and Member (T) are in agreement towards time-bar aspect argued by the noticee-appellants. Accordingly, the demands have been set aside on account of time-bar wherein there is no difference of opinion. 17. So far as two Departmental appeals which have been filed by the Revenue are concerned, both the Members are in agreement that they should be dismissed. Accordingly, they have done so. Therefore, there is no difference of opinion on this count also. Hence, the only issue to be decided by me is with respect to para 15 (i) & (ii) above. 18. Today, t....
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....purpose. For this, they are required to provide their facilities like Mettled, hard filled and chip carpeted roads, box type rain water drains with culverts, sluices, sewerage lines, underground drainage lines, sufficient number of borewells, underground reservoir and overhead tank etc. These activities require huge skilled workers. As can be seen from the Chartered Accountant's certificate, almost 70% of the total value comprises of the cost of materials going towards providing these infrastructure facilities. Therefore, he submits that the adjudication authority has erred in not considering the work as a whole as 'works contract' and losing sight of the same to take a narrow view that they have provided Site Formation service which has resulted in confirmation of the present demand. 20.2. He points out that this specific issue was also before the coordinate bench of Bangalore Tribunal in the case of M/s. Raviteja Constructions Pvt. Ltd. Vs. CCE, Bangalore in Service Tax Appeal No. 22378 of 2016 dated 19.12.2024. The Hon'ble Bench has held that the service would be under the nature of 'Works Contract'. He also relies on the case-law of M/s. The Braithwaite Burn and Jessop Const....
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.... had opted for composition scheme under the KVAT Act, wherein a composition tax can be paid on the total value received, which would include materials and labour charges. This was permitted under Section 15 of the KVAT Act. Accordingly, the value of materials and labour charges cannot be ascertained from the VAT audit report. In such a scenario, they requested to take into consideration the alternate provision under Rule 3(2)(m) of the KVAT Rules. ....... 37. Now, I take the issue of classification. Although after the investigation being started against the noticee, the noticee voluntarily took registration and paid service tax of Rs. 1,36,48,321/- under the category of "works contract" services which is incorrect. I have perused the terms of the agreement between the notice and various societies and the nature of activities carried out by the noticee and conclude that all these activities are prior to construction and made to convert agricultural land into residential sites, hence appropriately classifiable under site formation and clearance service. ....... 39. From the above, it appeared that the preparation services by making sites read....
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.... Services", in view of its specific description vis-àvis works contract, as the activities undertaken are antecedent to the construction of building." 25. From the above, it gets clarified that in respect of VAT to be paid under Karnataka VAT Act, the appellant has opted for composition scheme. The Board vide its Circular F. No. B1/16/2007-TRU, dated 22.05.2007 at para 9.10 has clarified that when the state VAT is discharged on the compounded rate of tax, the same would also be eligible to be treated as 'Works Contract Service' under the service tax provisions. The relevant portion is reproduced below: "....... 9.10. Contracts which are treated as works contract for the purpose of levy of VAT/sales tax shall be treated as works contract for the purpose of levy of service tax. This is clear from the definition under Section 65(105)(zzzza)." 26. From the Para 37 of OIO reproduced above, it can be seen that the appellant also has taken the Service Tax Registration under 'works contract' and has discharged part of the service tax payable by them. From para 39 of the OIO reproduced above, it can be seen that the works involved require construction services....
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....Decorator' means any person engaged, whether directly or indirectly, in the business of providing by way of advice, consultancy, technical assistance or in any other manner, services related to planning, design or beautification of spaces, whether manmade or otherwise and includes a landscape designer. ..... 5. In the present case, the appellant's activity being of setting-up of stalls for exhibition or events cannot be considered to be classified under Interior Decorator's service for the reason that there is neither any element of beautification of space nor any provision of advice or consultancy is provided by the appellant. The pattern and design for a stall is as per the layout provided by the customers to the appellant. Therefore, the ingredient to classify the service under Interior Decorator's service, in the present case is not satisfied hence, the service cannot be classified under Interior Decorator's service. Moreover, the post Negative List regime, with effect from 01.07.2007, the definition of service was done away and there is only service portion in execution of works contract is listed as a declared service for the purpose of levy of service tax. ....
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....on and clearance, excavation and earthmoving and demolition' service. However, in the absence of any demand under 'Works Contract' Service, for the period 2009-2010 up to 01.07.2012 the demand confirmed by the impugned order under 'Site formation and clearance, excavation and earthmoving and demolition' is unsustainable. However the confirmed demand for Site formation and development under 'Service' as per Section 65B(44) read with Section 65B(51) of the Finance Act, 1994 for period effective from 01.07.2012 to March 2014 is sustainable. In the facts and circumstances the demand for the extended period and penalty imposed under section 78(2) of the Finance Act, 1994 are set aside. Thus the impugned order is modified, accordingly." 30. I find that the conclusions arrived at by the above decisions are squarely applicable to the facts of the present case. 31. So far as the arguments of the learned AR to the effect that the services provided by the appellant do not fall between the category of (ii)a to (ii)e of Section 65(105) (zzzza) is concerned, I find that in the above referred case of Praveg Communications India Limited in Ahmedabad, the issue is ....
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.... Enterprises of which Sri Pradeep Krishnappa is the proprietor, for the years 2006-07 to 2009-10 and their break-up towards value of land on which stamp duty paid/payable"under the Karnataka Stamp Act and developmental charges declared for Value Added tax Purpose in their Annual Statement of -Accounts in Form VAT-240 to the Department of Commercial Taxes, as per their of books of accounts produced before me and verified by me, are as under : Period Total receipts on which stamp duty is paid Total turnover declared on which VAT paid 2006-07 40,92,00,000 2007-08 92,16,85,517 7,66,50,368 2008-09 23,28,52,495 8,67,53,159 2009-10 14,91,59,000 10,00,000 FOR S.V. SURANA & CO. Chartered Accountants Sd/-xxx (S.V. SURANA) Bangalore Date : 13.6.2012 For Sri Lakshmi Narasimha Enterprises Sd/-xxx Pradeep Krishnappa (Proprietor) We also reproduce the paragraphs 24 & 25 of the Commissioner's order for better appreciation as under : "24. Further M/s SLN has submitted that for the year 2008-09 taxable value has been wrongly stated as Rs. 33,28,52,495/: instead of Rs. 23,28,52,495/- as reflected in the Balance Sheet and also certified by the Chartered Accountant. . I have ....