2019 (10) TMI 1258 - AT - Service Tax

Works Contract - Non-payment of service tax - suppression of value of taxable services - applicability of extended period of limitation provided for under the proviso to section 73(1) of the Act - whether the amount received by the Appellant for construction of the houses for the Rajasthan Housing Board would attract payment of Service Tax under category of Works Contract? - HELD THAT - The definition of a residential complex leaves no manner of doubt that it would be a complex comprising of a building or buildings having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of residential complex . It needs to be noticed that the Bench also examined whether construction of a new residential complex or a part thereof would be covered within the meaning of a works contract after 1 June 2007 and held that in this case also the definition of a new residential complex given in section 65(91a) of the Act was required to be looked - The Commissioner has however without examining this aspect has made a general statement that it is a common knowledge that the Rajasthan Housing Board constructs large residential complexes comprising more than twelve residential units over a well delineated area having common facilities. The photographs enclosed with the Appeal clearly demonstrate that the houses that have been constructed by the Rajasthan Housing Board are either single storey or double stories with separate entry. The confirmation of demand for construction of ADR Centre library building canals for irrigation and wooden flooring at the stadium undertaken by the Awas Vikas Parsihad under works contract cannot also be sustained. Though the impugned order does not specify whether the activity would be covered by (b) or (c) or (d) since all that has been stated is that the works carried out by the Appellant would be covered under (b) to (d) but unless the Department is able to establish that the construction was for the purpose of commerce and industry Service Tax could not have been levied under works contract - The confirmation of demand under this head for the aforesaid three construction activity cannot also be confirmed. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Applicability of Service Tax on construction activities for Rajasthan Housing Board.
2. Applicability of Service Tax on construction of ADR Centre, library building, canals for irrigation, and wooden flooring at the stadium.
3. Invocation of the extended period of limitation under section 73(1) of the Finance Act, 1994.

Detailed Analysis:

1. Applicability of Service Tax on Construction Activities for Rajasthan Housing Board:
The Commissioner confirmed the demand for Service Tax under the category of "Works Contract Service" for the construction activities carried out by the appellant for the Rajasthan Housing Board. The appellant contended that the constructed houses did not qualify as a "residential complex" as defined under section 65(91a) of the Finance Act, 1994, which requires a complex to have more than twelve residential units, common areas, and facilities. The appellant argued that the houses were independent units with separate entries and utilities, thus not meeting the criteria for a "residential complex."

The Tribunal accepted the appellant's contention, referencing the definition of "residential complex" and a precedent set by the Tribunal in Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai, which was upheld by the Supreme Court. The Tribunal concluded that the independent residential units constructed by the appellant did not fall under the definition of a "residential complex" and, therefore, were not taxable under the "Works Contract Service."

2. Applicability of Service Tax on Construction of ADR Centre, Library Building, Canals for Irrigation, and Wooden Flooring at the Stadium:
The Commissioner also confirmed the demand for Service Tax for these construction activities under "Works Contract Service." The appellant argued that these constructions were not for commercial purposes and thus not taxable. The Tribunal noted that the impugned order did not specify whether these activities fell under clauses (b), (c), or (d) of the definition of "works contract" and did not establish that the constructions were for commerce or industry.

The Tribunal held that unless the Department could prove that the constructions were for commercial or industrial purposes, the Service Tax could not be levied. Since the Department failed to provide such evidence or a positive finding, the confirmation of the demand under this head was not sustained.

3. Invocation of the Extended Period of Limitation:
The Commissioner invoked the extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, alleging that the appellant had suppressed the value of taxable services. The appellant contended that there was no willful suppression of information to evade tax.

Given that the Tribunal found the primary demands for Service Tax unsustainable, the issue of the extended period of limitation became moot. The Tribunal did not specifically address this issue in detail, as the primary findings negated the basis for the extended period's applicability.

Conclusion:
The Tribunal set aside the impugned order dated 19 September 2014, passed by the Commissioner, Central Excise, Jaipur-I, confirming the demand of Service Tax amounting to ?1,68,83,724/- along with penalties. The appeal was allowed, and the confirmation of demands for the construction activities undertaken by the appellant was not sustained. The detailed legal reasoning provided by the Tribunal emphasized the definitions and conditions under the Finance Act, 1994, and relied on judicial precedents to reach its decision.

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