2016 (5) TMI 1051 - AT - Service Tax

Waiver of pre-deposit - Business arrangement between DDA and applicant - Construction of residential complex - Service tax liability along with penalties - Section 77 and 78 of the Finance Act, 1994 - Held that - the whole issue of tax liability and exact quantification requires a close scrutiny and detailed examination at the time of deciding the appeal, the discussion leads to the conclusion that the appellant could not make out a case for full waiver of pre-deposit of adjudicated dues for admitting the appeal. No financial hardship has also been pleaded at the time of hearing. Hence, keeping in view the factual and legal position, we find that it will be fit and proper to direct the appellant to make a pre-deposit ₹ 30,00,00,000/- (Rupees Thirty crores only) within a period of 8 weeks to consider the admission of appeal in terms of Section 35 F of the Central Excise Act, 1994 read with Section 83 of Finance Act, 1994. On payment of such pre-deposit within time, there shall be a stay of recovery of remaining dues as adjudicated by the original authority. - Waiver not granted, stay petition disposed of

Summary

Issues:
Application for stay seeking waiver of pre-deposit of adjudicated Service Tax liability; Interpretation of construction of complex services under the Finance Act, 1994; Tax liability in joint development agreements; Time bar for tax demand; Valuation of taxable value for construction services.

Analysis:
1. The appellant, a private limited company, sought a waiver of pre-deposit of a significant Service Tax liability along with penalties imposed under the Finance Act, 1994. The case revolved around the construction of residential facilities for the Commonwealth Games, 2010, under a Project Development Agreement with the Delhi Development Authority (DDA).

2. The appellant contended that the transaction with DDA occurred before the introduction of Service Tax levy, and thus, the explanation inserted under the Finance Act, 1994 did not apply retrospectively. They argued that the consideration paid to DDA was for exclusive development rights, not for services rendered, citing circulars and legal precedents to support their position.

3. The Revenue, however, argued that the transaction between the appellant and DDA constituted taxable services under 'construction of complex services.' They highlighted the transfer of flats to DDA and subsequent sales to third parties, asserting a service provider-recipient relationship. The quantification of the taxable value was also disputed.

4. The Tribunal analyzed the nature of the agreement, emphasizing the public-private partnership model and joint sharing of risks and resources. They referred to legal precedents, including a Gujarat High Court decision, to determine the existence of a service provider-recipient relationship in joint development agreements.

5. The Tribunal acknowledged the need for detailed examination during the final hearing regarding tax liability, time bar issues, and valuation methods. They found the appellant's arguments insufficient for full waiver of pre-deposit, directing them to pay a specified amount within a set period to consider admission of the appeal, with a stay of recovery for the remaining dues.

6. The judgment highlighted the complexity of the case, underscoring the necessity for a thorough review of tax liability and valuation aspects during the final hearing. Both parties were encouraged to seek early resolution through an application for expedited appeal hearing.