2018 (4) TMI 844 - AT - Service Tax

Non-payment of Service Tax - construction of individual villas in two projects namely Manglam Aangan Villas and Manglam Arpan Villas . Held that - the whole case requires reconsideration by the Original Authority. It is necessary to examine, with reference to the factual details, whether the Residential Complex having individual villas is in fact having common areas as mentioned in the statutory definition. It is further required to be decided whether the activity carried out would be covered within the Construction of Complex Service or under the category of Works Contract Service. Matter remanded to the Adjudicating Authority for passing de novo orders - appeal allowed by way of remand.

Summary

Issues Involved:
1. Non-payment of Service Tax on construction of individual villas in two projects.
2. Non-payment of Service Tax on services rendered before July 2010 but payments received thereafter.
3. Short-payment of Service Tax on electricity and transformer charges.
4. Short-payment of Service Tax on club charges.
5. Service Tax liability under works contract services under reverse charge mechanism.
6. Service Tax liability as per reconciliation chart.
7. Wrong availment of Cenvat credit.

Issue-wise Detailed Analysis:

1. Non-payment of Service Tax on construction of individual villas in two projects:
The appellant argued that the levy of Service Tax under "Construction of Complex Services" (CCS) is ultra vires as per the Delhi High Court's decision in Suresh Kumar Bansal v. Union of India. The High Court stated that composite contracts involving both services and goods transfer cannot be taxed under CCS due to the absence of machinery provisions to ascertain the service element. The appellant also cited that from 01/07/2012, construction activities are under declared services, but the absence of machinery provisions continues to make the levy unsustainable. Additionally, the appellant contended that their activities should fall under "Works Contract Services" (WCS), not CCS, based on the Supreme Court's decision in L&T. The appellant further argued that individual villas do not constitute a "Residential Complex" as per Section 65(91a) since they do not comprise buildings with more than twelve residential units.

2. Non-payment of Service Tax on services rendered before July 2010 but payments received thereafter:
The appellant maintained that Service Tax is not applicable for services rendered before 01/07/2010, even if payments were received later. They cited several cases, including Reliance Industries Ltd. v. Commissioner, to support their position that the taxable event is the rendering of services, not the receipt of payment.

3. Short-payment of Service Tax on electricity and transformer charges:
The appellant argued that Service Tax on these charges, demanded under "Preferential Location Services" (PLC), was already paid under "Construction Services" with abatement claimed. Hence, no additional tax should be levied.

4. Short-payment of Service Tax on club charges:
The appellant contended that club charges should not be taxed under "Club or Association Services." They referenced cases like Sports Club of Gujarat Ltd. v. Union of India to support their argument.

5. Service Tax liability under works contract services under reverse charge mechanism:
The appellant argued that services received for road construction within townships should not attract Service Tax under WCS as the roads are public and thus exempt.

6. Service Tax liability as per reconciliation chart:
No specific arguments or details were provided in the judgment summary regarding this issue.

7. Wrong availment of Cenvat credit:
No specific arguments or details were provided in the judgment summary regarding this issue.

Conclusion:
The Tribunal noted that the core dispute revolves around the classification of the construction activities and the applicability of Service Tax under CCS or WCS. The Tribunal observed that the decision of the Delhi High Court in Suresh Kumar Bansal was not considered by the lower authority. The Tribunal also acknowledged the need to re-examine whether the construction of individual villas falls under CCS or WCS and whether the activities meet the statutory definition of a "Residential Complex." The Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for de novo consideration, ensuring all issues are re-examined with reference to relevant case laws and statutory provisions. The Adjudicating Authority is instructed to provide a fair hearing before passing a new order.

Order Pronounced:
The Tribunal pronounced the order in the open court on 14/03/2018, setting aside the previous order and remanding the matter for reconsideration.