2018 (8) TMI 1509 - AT - Service Tax

Construction of residential complexes - residential complexes constructed for the Tamil Nadu Police Housing Corporation - residential complexes constructed as a sub-contractor for M/s. VGN Devadoss - non-payment of service tax - demand of service tax with Interest and penalty. Construction services provided to TNPHC - Held that - This very Bench in the case of SIMA Engineering Constructions and others 2018 (5) TMI 405 - CESTAT CHENNAI had held that the levy of service tax in respect of such construction activities cannot sustain - demand set aside. Construction of complex service provided to VGN - Held that - It is seen that the appellants had already paid up the tax liability along with interest for belated payment before the issuance of SCN. Although these payments have been effected only after the visit of the officers from the facts it emerges that the appellants had not received the payment from VGN till June 2007 - tax liability upheld penalty u/s 78 set aside - However penalty under Section 77 of the Act is not disturbed. Appeal allowed in part.

Summary

Issues:
1. Service tax liability for construction of residential complexes for Tamil Nadu Police Housing Corporation (TNPHC).
2. Service tax liability for construction of residential complexes as a sub-contractor for M/s. VGN Devadoss (HUF).

Issue 1: Service tax liability for construction of residential complexes for Tamil Nadu Police Housing Corporation (TNPHC)

The appellants were provided services under the category of "Construction of Complex Services" as per Section 65(91a) of the Finance Act, 1994. Proceedings were initiated against the appellant for non-discharge of duty liability for residential complexes constructed for TNPHC. The demand of total service tax liability of &8377; 51,04,649/- with interest and penalties was proposed. The Ld. Advocate argued that the issue had been decided in their favor in previous Tribunal decisions. The Tribunal found that the matter was covered by previous decisions, and the levy of service tax for such construction activities could not be sustained. Therefore, the demand and penalty related to the tax liability for construction services provided to TNPHC were set aside.

Issue 2: Service tax liability for construction of residential complexes as a sub-contractor for M/s. VGN Devadoss (HUF)

Regarding the service tax liability of &8377; 31,94,254/- for construction services provided to VGN, the appellants had paid the tax liability along with interest before the issuance of the Show Cause Notice (SCN). The delay in payment was attributed to delayed payments received from VGN. The Tribunal acknowledged that the appellants had not received payments from VGN until June 2007. Considering these circumstances, the penalty under Section 78 of the Act was set aside due to a reasonable cause for the failure to discharge the liability. However, the penalty under Section 77 of the Act was upheld. The appeal was partly allowed on these terms.

This judgment by the Appellate Tribunal CESTAT CHENNAI addressed the service tax liabilities of the appellants for construction services provided to TNPHC and VGN. The Tribunal ruled in favor of the appellants for the TNPHC construction services based on previous decisions, setting aside the demand and penalty. For the VGN construction services, the appellants' payment before the SCN issuance and the delayed payments from VGN were considered, leading to the setting aside of the penalty under Section 78 but upholding the penalty under Section 77.