2015 (2) TMI 274 - HC - Service Tax

Waiver of pre deposit - Construction of Residential Complex service - contravention of the provisions of Section 68 of Chapter V of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994 - Held that - Tribunal on a consideration of Rule 3 of the Service Tax (Determination of Value) Rules, 2006, which provides the manner of determination of value in respect of taxable service, namely, the service defined under Section 65(105)(zzzh) of the Finance Act, 1994 came to hold that the value of taxable service should be equivalent to the gross amount charged by the service provider to provide similar service to any other person, that is to say, the value of taxable service rendered in relation to the flats sold to independent persons. Accordingly, the Tribunal held that the appellant has failed to make out a prima facie case for waiver of pre-deposit of entire amount of duty along with interest and penalty and directed to make a pre-deposit of ₹ 12.00 lakhs. In view of the specific admission by the appellant before the Adjudicating Authority that the services rendered by the appellant would fall under Section 65(105)(zzzh) of the Finance Act, 1994. Notification No.29 of 2007 dated 22nd May, 2007 relates to taxable service falling under Section 65(105)(zzzza) of the Finance Act, 1994. Even otherwise, the language of Section 65(105)(zzzh) and the nature of the services provided by the appellant is construction of flat to the land owner and the transfer of land is only for the purpose of providing such taxable service, we fail to understand as to how the appellant would say that there is no liability to pay service tax in respect of 24 flats handed over to the land owner after rendering taxable service as defined under Section 65(105)(zzzh) of the Finance, 1994. If there is no monetary consideration in the transaction, then Section 65 of the Finance Act, 1994 provides for various methods for valuation. Hence, it is for the appellant to establish that his plea that the value of the land should be taken into consideration is a matter for the Tribunal to decide on merits at the time of hearing of the appeal. - Tribunal is justified in ordering pre-deposit of ₹ 12.00 lakhs as against the demand of ₹ 27.00 lakhs in an admitted case of the appellant providing taxable service, more so, in a case where the appellant failed to pay service tax in respect of even the admitted tax. - No substantial question of law arises - Decided against the assessee.

Summary

Issues:
1. Whether pre-deposit can be ordered under Section 35 of the Central Excise Act, 1944 bypassing specific provisions and rules?
2. Whether the appellant is liable to pay service tax on the cost of 24 flats handed over to the land owner?

Issue 1:
The appellant challenged the order of the Adjudicating Authority, which confirmed a demand for service tax, interest, and penalty. The appellant argued that pre-deposit cannot be ordered under Section 35 of the Central Excise Act, 1944 by bypassing provisions of Section 67(1)(i), Section 67(1)(ii), and Rule 2A(i)(b) of the Service Tax (Determination of value) Rules, 2006. The Tribunal held that the value of taxable service should be equivalent to the gross amount charged for similar services provided to independent persons. The Tribunal directed a pre-deposit of &8377; 12.00 lakhs, which the appellant contested in this appeal.

Issue 2:
The appellant contended that they should not be liable to pay service tax on the cost of 24 flats handed over to the land owner as they did not receive any consideration for those flats. The Department argued that the appellant, as the service provider, is responsible for the service tax on the entire project, including the flats allocated to the land owner. The Court examined the definitions under Section 65(105)(zzzh) and Section 65(105)(zzzza) of the Finance Act, 1994, and noted that the appellant's services fell under construction of complex, not works contract. The Court found that the appellant admitted their services fell under Section 65(105)(zzzh) and rejected the plea for benefit under Notification No.29/2007-ST. The Court held that the appellant's liability for service tax on the flats provided to the land owner should be decided by the Tribunal based on valuation methods under Section 65 of the Finance Act, 1994.

In conclusion, the High Court dismissed the Civil Miscellaneous Appeal, stating that no substantial question of law arose for consideration. The Court found that the Tribunal's order for pre-deposit was justified in an admitted case of the appellant providing taxable service. The Court emphasized that the issue of the appellant's liability for service tax on the flats allocated to the land owner should be determined by the Tribunal based on valuation methods, and declined to make observations on the effect of amendments or rules that could influence the Tribunal's decision.