TaxTMI 
TaxTMI 
2026 (8) TMI 1800
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....in terms of Rule 5 and Rule 6 of Service Tax (Determination of Value) Rules, 2006. (iii) I appropriate the Service tax amount of Rs. 27,82,824/- (Rupees Twenty-seven Lakhs Eighty-Two Thousand Eight Hundred and Twenty-Four only) paid by the assessee against the confirmed demand at (i) above. (iv) I order recovery of interest from the assessee under Section 75 of the Finance Act. 1994 in respect of the demand confirmed at Sr. no. (i) above. (v) I appropriate the interest of Rs.3,33,939/- (Rupees Three Lakhs Thirty-Three Thousand Nine Hundred and Thirty-Nine only) paid by the assessee against the interest demanded at Sr.no. (iv) above. (vi) I impose penalty of Rs 2,48,63,164/- (Rupees Two Crores Forty-Eight Lakhs Sixty-Three Thousand One hundred and Sixty-Four only) under Section 78 of the Finance Act, 1944." 2.1 Appellant is engaged in providing Construction of Residential and Commercial Complex Services, which are among the taxable services under provisions of Finance Act, 1994, since 1st July 2010. They have Service Tax Registration No ABMFS9748QSD002. 2.2 On the basis of the intelligence gathered that they were not paying Service Tax appro....
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....ccupation Certificate" dated 23.11.2015 and copy of "Full Occupation Certificate dated 02.07.2016 issued by the "BMC" in respect of the above said project i.e. "Siddhi Enclave". 2.7 During the investigation it was observed that appellant had undertaken the said project under Re-Development Scheme. In view of above, in order to examine Service tax liability, the assessee has been asked to submit copies of agreements entered into between the land owner, the existing tenants and in respect of sale to independent customers. The assessee, vide letter dated 17.08.2016 submitted sample copies of agreements under the above referred three categories. 2.8 After scrutiny of the above documents and completion of enquiries it was observed that appellant had short paid service tax as computed in the tables below: Service tax liability in respect of Residential unit No. of Flats Area (sq. feet) Rate per sq. feet Rate per flat Total amount (No. of flats * Rate per flat) Taxable Value (30%) Service tax @ 14.5% "A" 11 750 21324 15993000 115923000 52776900 7652651 8 680 21324 14500320 116002560 34800768 504....
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.... Act, 1994, Rule 6 & 7 of the Service Tax Rules, 1994, and Rule 3 of the Service Tax (Determination of Value) Rules, 2006, in as much as they have: - ⮚ failed to assess the correct Service Tax, due on the value of taxable services provided by them, as required under Section 66/66B of the said act; ⮚ failed to pay Service Tax on the correct taxable value of services rendered by them, as required under Section 68 of the said act read with Section 66/66B of the said act & Rule 6 of the said rules; ⮚ failed to declared the correct value of taxable service rendered by them, as required under the provisions Section 67 of the Finance Act, 1994, read with Rule 3 of the Service Tax (Determination of Value) Rules, 2006; ⮚ failed to declare correct taxable value in the ST-3 returns file by them as required under the provisions Section 70 of the said act, read with of Rule 7 of the said rules; 2.11 Show Cause cum Demand Notice dated 3rd November, 2016 was issued to appellant asking them to show cause as to why: i) Service Tax amounting to Rs. 2,48,63,164/- (Rupees Two Crores forty eight lakhs sixty three thousand one h....
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....ubmits that: ⮚ The decision of Hyderabad Bench in the case of Vasantha Green Projects relied upon by the appellant has been challenged by the revenue before the Hon'ble Supreme Court. ⮚ The confirmation of duty under Rule 3 (a) is legally sustainable. Section 67 (1) (iii) explicitly provides that where the consideration is not ascertainable in money, value shall be determined in prescribed manner. Rule 3 (a) prescribes "gross amount charged for similar services". ⮚ Invocation of extended period is justifiable as appellant kept department in dark regarding completion and possession hand over in December 2015 by omitting figure in from ST-3 return. ⮚ Interest under Section 75 is an automatic statutory liability. ⮚ Since suppression with intent to evade payment of tax stands established, penalty under section 75 is justified. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records the findings as follows: 42. I have gone through the Show Cause Notice points stated in reply to Show Cause Notice, submiss....
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....ving at the value of taxable services for charging service tax, states as follows: (1) Subject to the provisions of this Chapter, where service tax is chargeable on any taxable service with reference to its value, then such value shall- (i) In a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him. (ii) In a case where the provision of services for a consideration not wholly or partly consisting of money, be such amount in money as, with the addition of service tax charged, is equivalent to the consideration. (iii) In a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. 46. Rule 3 of Service Tax (determination of value) Rules 2006 laid down the manner of determination of value. The said Rules states as follows: Manner of determination of value. Subject to the provisions of Section 67, the value of taxable service, [where such value is not ascertainable] shall be determined by the service provider in the following man....
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.... 2006 as he had not provided any similar service of redevelopment of residential complex for monetary consideration. The very act of the assessee seeking invoking of the provisions of Rule 3(b) would indicate acceptance of the fact that Rule 3 of said Rules provide a machinery for determining the assessable value of service provided in the present case. As can be seen from the said Rules, Rule 3(b) of said Rules would find application only if Rule 3(a) ibid/cannot be applied. 50. The contention of the assessee that he has not provided any similar service of redevelopment of residential complex and construction of new flat cannot be equated redevelopment is considered. As stated in the preceding paragraphs the flats redeveloped by the assessee, which are located in one wing of a complex comprise of a total of 44 flats in 11 floors which include, (i) 11 flats of 750 square feet (ii) 11 flats of 680 square feet (iii)11 flats of 430 square feet (iv) 11 flats of 572 square feet besides 2 shops having total area of 1951 square feet. Out of the said flats and shops, 41 flats and 1 shop were handed back to the existing tenants by the as....
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....se of clarification of certain matters as well as for ensuring uniformity of practice between the various field formations. In the present case even though the Show Cause Notice has referred to the circular issued by the CBEC, it is seen that the demand of duty has been made citing the provisions of the statute and not the contents of the circular. As discussed in the preceding paragraphs the value of the flats constructed and redeveloped and handed back to the tenants has been determined based on the provisions of Section 67(1) of Finance Act 1994 read with Rule 3(a) of Service Tax Determination of Value Rules 2006. This also negates the averments of the assessee that there does not exist machinery in the statute for determining the value of the service element involved in construction of residential complex which also include the value of land. Thus the contents of the assessee in this regard not sustain and are accordingly rejected. 53. Assessee had also contended that invoking of the extended period under proviso to Section 73(1) of Finance Act 1994 was incorrect in as much as Department had initiated an inquiry in this regard from January 2013 onwards which was follow....
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....ion 73(1) has been rightly invoked in the instant case. 54. As regards to imposition of penalty under Section 78 of the Act, I observe that the provisions of the said Section are as follows: "(1) Where any set vice tax has not been levied or paid, or has been short-levied or short paid, or erroneously refunded, by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice wider the proviso to sub-section (1) of Section 73 shall, in addition to the service tax anti interest specified in the notice, be also liable to pay a penalty which shall be equal to hundred per cent of the amount of such service tax" 55. I am also relying upon the following judicial pronouncements made by Courts of law/Tribunals while arriving at this decision. 1. CCE Kolkata vs Alnoori Tobacco Products 2004(170) ELT 135 SC. 2. UOI vs Rajastan Spinning & Weaving Mills in 2009 (239)ELT 3 SC. 3. Shiv Network vs CCE Damasn in 2009 (14) STR 680(T-Ahmd). 4. CCE Va....
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....s, read with Section 67 of the Finance Act, 1994 the taxable value has been determined on the basis of sale value of the flats to new buyers under the same scheme. Its not clear as to how to separate categories of recipient of services have been clubbed together for determination of the taxable value by application of the said provisions. Its settled law that for application any provisions of this type the comparison should be made between the service recipients who stand on the same footing i.e. prices of oranges could have been determined by comparing with the price of oranges and not the price of apples can be determined by any such comparison. Thus we find that the taxable value of services provided to the existing owners of the flat could not have been determined on the basis of the sale value of the flats to the new buyers. 4.4 Further we observe that the issue involved in the present case is no longer res-integra. Mumbai Bench has itself in case of Ethics Infra Development Pvt Ltd. [2025 (37) CENTAX 1 (Tri-Bom)] held as follows: "4.4 The only ground that needs to be considered is whether with effect from 01.07.2012, when the scheme of taxation of services was cha....
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....ertakes the construction). Typically, in such a model, the land owner enters into an agreement with the builder, whereby, the land owner gives either land /development rights (to construct/develop a residential complex and sell flats/houses of such complex to buyers) to the builder. The builder/developer, in turn, agrees to assign a portion of the constructed area, in the form of flats in favour of the land owner. The remaining flats are sold by the builder/developer to various buyers. The builder/developer receives consideration for the construction service provided by him, from two categories of service receivers: i. from landowner, in the form of land /development rights; and ii. from other buyers, normally in the form of money. 3. According to the CBEC Education Guide on Taxation of Services, 2012 value of construction service provided to such land owner will be the value of the land when the same is transferred and the point of taxation will also be determined accordingly. However, Circular No. 151/2/2012-ST dated 10.2.2012 states that value of land / development rights in the land may not be ascertainable ordinarily and therefore, val....
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....n para 4.5, is only for the period post 01.07.2012, and holds in favour of applicability of the Circular dated 10. 02.2012, in respect of the transactions, activities undertaken post 01.07.2012. Thus we find no error in the approach of adjudicating authority in placing reliance on the said circular for dropping the proceedings initiated. 4.7 Revenue has in their appeal relied upon the decision in case of LCS City Makers Pvt Ltd [2013 (30) STR 33 (Tri-Chennai)], and have argued that the said decision squarely covers the issue in favour of the revenue. Para 2 of the said decision is reproduced below: "2. In this connection, the department conducted verification of the appellant's liability for payment of service tax and a show cause notice dated 11-2-2008 was issued to the appellant, stating various grounds of short-levy of service tax and proposing a service tax demand of Rs. 83,98,962/- from the appellant, for the period 16-6-2005 to 31-3-2007 and also proposing imposition of penalties." It is quite evident that the in this case the period of demand was for period 16.06.2005 to 31.03.2007 i.e. prior 01.07.2012. When the entire appeal of the revenue is bas....
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....im. This read with notification No. 18/2005-S.T., dated 7-6-2005 entitles a builder/contractor an abetment of 67% on the gross amount charged, which shall include the value of goods and material supplied. Further, there is no deductions/exemptions provided for computation of such taxable value in the composite contract." (emphasis supplied) 12. It can be seen from the abovesaid instructions, the gross amount charged by the builder is liable to tax. The said instructions are in force till today and has not been withdrawn by the Board. As already detailed herein above, the appellant has discharged the service tax liability on the gross amount charged i.e. consideration received from land owners in the form of kind other than cash (value of the land/development rights) + consideration received from prospective buyers in cash by way of financial arrangements on the construction services undertaken by the appellant on joint development basis. We also note that appellant had declared the same in the books of account like IT returns and ST-3 returns which has been certified by Chartered Accountant wherein it is stated that service tax compliance is towards the payment of....