2014 (9) TMI 1044 - Commission - Service Tax

Leviability of Service tax and interest - Construction of residential complexes for the period April 2009 to December 2012 - Held that - the issue is clarified by the Board vide Circular 151/2/2012-S.T., dated 10-2-2012, which makes it clear that even in the cases where builder/developer receives consideration for the construction service provided by him from land owner in the form of land/development rights, the service would not be taxable for the period prior to 1-7-2010. Therefore, here even if there is any agreement for sale of UDS of land prior to agreement for sale of flat, the activity for the period prior to 1-7-2010 would not be taxable in terms of Circular dated 10-2-2012. The aforesaid Circulars, clarifications in Budget Instructions. Notifications, Judicial pronouncements overwhelmingly hold that the construction of residential complexes undertaken prior to 1-7-2010 is not liable for Service Tax. Therefore, the liability of the applicant requires to be decided only for the period commencing from 1-7-2010 onwards and not earlier to that results in Service Tax demanded prior to 1-7-2010 under Construction of Residential Complex Service is not payable. As the applicant has made full and true disclosure, accordingly after allowing the benefit in terms of Board s clarifications in respect of services rendered prior to 1-7-2010 of Construction of Residential Complex Services and considering value after 1-7-2010 as cum-tax value for computation of Service Tax as communicated by Revenue, Service Tax liability works out to ₹ 88,45,406/-. As such the Bench settles the Service Tax liability at ₹ 88,45,406/-. The applicant is eligible for refund of ₹ 1,40,912/- which should be dealt with in accordance with law. The Jurisdictional Commissioner would work out the interest liability and communicate to the applicant. Imposition of penalty - Non-payment of Service Tax on the various services rendered during the period April 2009 to December 2012 - Held that - out of the demand, the major portion of the demand pertains to Construction of residential complex service in respect of which the applicant admitted and paid Service Tax on the services rendered after 1-7-2010. The applicant had collected Service and had not paid the same on the services rendered by him. For the period prior to 1-7-2010, due to lack of clarity on the taxability of Construction of Residential Complex service , the applicant did not pay Service Tax. Also the applicant had admitted some amount of Service Tax liability which was not part of the SCN demand. For the Act of non-payment of Service Tax, the applicant is liable for penalty. However considering the co-operation, full and true disclosure the partial immunity from penalty to the applicant is granted. Prosecution - Section 32K of Central Excise Act, 1944 - Held that - the applicant is granted immunity from prosecution under Section 32K of Central Excise Act, 1944, as made applicable to Service Tax vide Section 83 of the Finance Act, 1994. - Matter disposed of

Summary

Issues Involved:

1. Service Tax liability on construction services prior to 1-7-2010.
2. Admissibility of cum-tax benefit.
3. Jurisdiction of the Settlement Commission.
4. Penalties and prosecution.

Issue-wise Analysis:

1. Service Tax Liability on Construction Services Prior to 1-7-2010:

The applicant contended that the "Aiswaryam Enclave" Project was completed before 1-7-2010 and hence not taxable under "Construction of Residential Complex" Service, supported by C.B.E. & C. Circular No. 108/2/2009-S.T., dated 29-1-2009, and Notification No. 36/2010-S.T., dated 28-6-2010. The Bench examined the facts, including the commencement of construction on 15-12-2008 and the sale of UDS for only three flats. The Bench concluded that the construction services provided prior to 1-7-2010 were not taxable, as supported by various clarifications and judicial pronouncements, including the C.B.E. & C. Circular No. 151/2/2012-S.T., dated 10-2-2012. Therefore, the demand of Rs. 24,55,070/- for services rendered before 1-7-2010 was dropped.

2. Admissibility of Cum-Tax Benefit:

The applicant claimed the benefit of cum-tax value as they had not charged any service tax from clients over and above the invoice value. The Bench allowed this claim, noting that the applicant had made full and true disclosure and had paid the admitted tax liabilities along with interest. The revised tax liability was worked out to Rs. 88,45,406/- after extending the cum-tax benefit.

3. Jurisdiction of the Settlement Commission:

The applicant argued that the issue was not about classification but whether the construction activity constituted a "service" per se. The Bench agreed, stating that the question of exigibility to Service Tax is within the purview of the Settlement Commission. The Bench referred to the case of M/s. Alchem International Ltd. - 2009 (247) E.L.T. 864 (Sett. Comm.), which emphasized determining liability in an equitable manner without undue technicalities.

4. Penalties and Prosecution:

The Bench noted that the applicant had collected service tax but did not pay it on time. However, considering the applicant's cooperation, full disclosure, and the complexity of the taxability issue for the period prior to 1-7-2010, the Bench granted partial immunity from penalties. A penalty of Rs. 6,00,000/- was imposed, and the applicant was granted immunity from prosecution under Section 32K of the Central Excise Act, 1944, as applicable to Service Tax.

Findings and Decision:

The Bench settled the case on the following terms:
1. Service Tax liability settled at Rs. 88,45,406/-. The applicant had already paid Rs. 89,86,318/-, and the excess amount of Rs. 1,40,912/- was ordered to be refunded.
2. Interest payable to be worked out by the Commissioner, with the applicant having already paid Rs. 9,62,384/- towards interest.
3. A penalty of Rs. 6,00,000/- imposed, to be paid within 30 days.
4. Immunity from prosecution granted.

The Bench emphasized that the immunities are liable to be withdrawn if any material particulars were withheld or false evidence was given. Copies of the order were provided to the applicant and the Jurisdictional Commissioner for implementation.