2018 (12) TMI 1114 - AT - Service Tax

Valuation - abatement - commercial or industrial construction service - residential portion of the complex - Held that - It is clear from the proceedings that the nature of ownership of the land is not relevant and that taxability arises from any kind of agreement which does not involve outright sale that, admittedly, the present agreement is not. It, however, remains to be ascertained if the claim of the appellant to have completed the process of handing over before the date of applicability of the tax is allowable. The matter remitted back to the original authority to verify the claims of the appellant - appeal allowed by way of remand.

Summary

Issues:
1. Tax liability confirmation for 'commercial or industrial construction service' in a project.
2. Imposition of penalty under sections 76, 77, and 78 of Finance Act, 1994.
3. Dropping demand for other projects completed before service tax imposition.
4. Dispute regarding completion of a project before tax applicability.
5. Interpretation of circulars related to valuation of flats for service tax.

Analysis:

1. The appeal challenged an order confirming tax liability of ?63,12,180 for 'commercial or industrial construction service' in a specific project, along with interest and penalties under the Finance Act, 1994. However, demands related to other projects completed before the service became taxable were dropped.

2. The appellant contended that the project in question was completed before the tax imposition, citing specific clauses and circulars. The adjudicating authority based its decision on the developer not being entitled to retrospective effect as per circulars and a tribunal decision. The appellant argued that the land ownership had transferred, and sale deeds indicated completion before the tax applicability date.

3. Circulars from the Central Board of Excise & Customs were referenced to determine the valuation of flats for service tax purposes. The key aspect highlighted was whether an outright sale had occurred, as the absence of such a sale should not lead to tax evasion.

4. The Tribunal found the dispute centered on a single project, 'Shewalkar Garden,' specifically on the residential portion completed after the tax incorporation date. The ownership nature of the land was deemed irrelevant, and tax liability stemmed from agreements not involving outright sales. The Tribunal remanded the matter to verify the appellant's claim of completion before the tax applicability date.

5. The judgment highlighted the need to verify the completion date and possession handover concerning tax liability. The decision to remand the matter back to the original authority for further verification was based on the lack of clear records supporting the appellant's claim.

In conclusion, the judgment addressed various issues related to tax liability confirmation, penalty imposition, project completion dates, and the interpretation of circulars for service tax valuation, providing a detailed analysis and decision on each aspect.