2018 (5) TMI 889 - AT - Service Tax

Construction of houses and residential premises with different land owners in respect of one joint development agreement - Revenue has demanded service tax from appellant on the ground that it was not paid correctly on the villas which were constructed by appellant for land owner as a part of compliance of the agreement entered with the land owners - extended period of limitation - Held that - It is undisputed that appellant has provided construction services to the land owner and as a consideration received legal rights on his share of land constructed Villas on that land and sold them which would mean that appellant is investing the consideration received from first transaction of land owners right to construct in second transaction - merely because the consideration received from land owners is invested in construction of villas to other buyers on which service tax is paid it cannot be concluded that service tax paid on consideration received from land owners has to be evaluated differently. Service tax is liable to be paid on gross amount charged i.e. to say consideration received from land owners in kind and consideration received from prospective customers i.e. total gross amount. In the case in hand the amount attributable to the consideration received by appellant in the form of land rights from the land owner stands included in the value of villas sold to prospective customer which would mean that whatever consideration was received by the appellant in form of developmental right was considered in assessable value. CBEC vide circular dated 16.02.2006 in respect of collection of service tax under construction of complex services had issued instructions under section 57 (B) of Central Excise Act 1944 which are made applicable to service tax under section 83 of Finance Act 1994 - it was held that the gross amount charged by the builder is liable to tax - it is evident that appellant has complied the service tax liability on the construction undertaken on joint development basis on the value of construction which is mandated in Section 67 of Finance Act 1994 read with rules made thereunder. In our view if once the service tax liability has been discharged on the gross amount demand of service tax on the same amount again would amount to double taxation. Extended period of limitation - Held that - it cannot be held that there was a malafide intention on the part of the appellant to suppress any facts or make mis-statements with an intention to evade service tax liability - demands are also hit by limitation and extended period cannot be invoked for the demands received. Demand is not sustainable on merits as well as on limitation - appeal allowed - decided in

Summary

Issues Involved:
1. Whether the appellant correctly discharged service tax liability on villas constructed for landowners.
2. Whether the valuation method adopted by the appellant for service tax purposes was appropriate.
3. Whether the extended period of limitation for demanding differential service tax was applicable.

Issue-wise Detailed Analysis:

1. Correct Discharge of Service Tax Liability on Villas Constructed for Landowners:
The appellant argued that they had correctly discharged the service tax liability on the consideration received from landowners in the form of land. The adjudicating authority had confirmed the demands, holding that transactions between the builder and landowner and the builder and buyers should be understood as two separate transactions. However, the tribunal found that the appellant had included the cost of land in the price of villas sold to prospective customers and paid service tax on such sale price. The tribunal concluded that the service tax paid on consideration received from landowners should not be evaluated differently merely because it was invested in the construction of villas for other buyers.

2. Valuation Method Adopted for Service Tax Purposes:
The appellant contended that they had included the value of the land in the sale price of the villas and discharged service tax accordingly. They relied on Section 67 of the Finance Act, 1994, and Rule 3 of the Service Tax (Determination of Value) Rules, 2006. The tribunal observed that the consideration received in the form of land rights was included in the value of villas sold to prospective customers. The Chartered Accountant's certificate confirmed that service tax was paid on the consideration received, including the land value. The tribunal held that the valuation method adopted by the appellant was appropriate and in compliance with the statutory provisions.

3. Applicability of Extended Period of Limitation:
The appellant argued that the demand for differential service tax was time-barred. The tribunal noted that the appellant had declared the value received from prospective customers in their returns and discharged the service tax liability, including the value of consideration paid in kind towards the land. The tribunal found no evidence of deliberate intention to evade service tax liability. Consequently, the tribunal held that the extended period of limitation could not be invoked, and the demands were hit by limitation.

Conclusion:
The tribunal set aside the impugned order, holding that the demand for differential service tax was not sustainable on merits and was also barred by limitation. The appeal was allowed with consequential reliefs.