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2019 (9) TMI 792 - AT - Service TaxWorks Contract Service - construction of residential and commercial/non-commercial buildings and complexes - composite works contract - Demand of service tax - Composition scheme - Invocation of Extended period of Limitation - imposition of penalties - HELD THAT - There is no dispute that in all these cases the appellant not only supplied materials but also rendered services related to the works contract. Therefore, these are all composite works contracts. It is not in dispute that the appellant has not sought or followed the procedure required for composition scheme. Demand of service tax - residential complex services - HELD THAT - It is well settled legal position that whether the service is rendered as service simpliciter or as a works contract, no service tax can be levied on construction of residential complex prior to 01.7.2010. Learned counsel would submit that for the period post 01.7.2010, they have been discharging service tax appropriately. This is a fact which can be verified to ascertain the full tax liability for the period post 01.7.2010 or otherwise - Matter on remand. Demand of service tax - construction of Mahatma Gandhi Cancer Hospital and Research Institute - HELD THAT - There are no reason to hold that the activity of a corporate hospital does not amount to commerce or industry. In fact, health care and hospitals is one of the most profitable and fast growing service industries in the country - there are no reason to hold that the construction of hospital building of a corporate hospital is excluded from the definition of works contract service. It is clearly covered by section 65 (105) (zzzza) (ii) (b) as a new building meant for the purpose of commerce or industry - demand upheld. Demand of service tax - construction of administrative building for Indian Registrar of Shipping - HELD THAT - The Indian Registrar of Shipping is regulatory body who registers ships and vessels in the country and also classifies them and does related activities. These cannot be termed as an act of commerce or industry. Learned departmental representative submits that the IRS charges fees for its activities. Even if it does so it is similar to that of other regulatory agencies such as RT officer, Transport Authority charging fees for issuing a driving license or for registering a vehicle. It is neither an organisation involved in commerce or industry nor does the organisation make any profit - the demand on construction of administrative building for IRS is liable to be dropped. Composition scheme - HELD THAT - The assessee has the option of paying service tax under the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, if he chooses to do so. The mere fact that they have not opted for this earlier does not reduce their entitlement to opt for this scheme now - The demand of service tax needs to be recomputed, after following principles of natural justice and giving the assessee an opportunity to present their case including, indicating if they desire to avail the benefit of composition scheme. Interest as applicable will have to be paid on the differential service tax, if any. Imposition of penalties - HELD THAT - All the demands, with respect to major portion, is already held in favor of the assessee - Of the demand which are upheld, the assessee claims that they have already paid service tax on residential complex services from 01.7.2010 onwards - Penalties set aside. The matter is remanded to the original authority for the limited purpose of calculation of service tax liability and interest as above, after following principles of natural justice - appeal allowed by way of remand.
Issues Involved:
1. Service tax liability on construction of residential complexes. 2. Service tax liability on construction of a cancer hospital building. 3. Service tax liability on construction of an administrative building for the Indian Registrar of Shipping. 4. Applicability of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. 5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Service Tax Liability on Construction of Residential Complexes: The appellant argued that they were not liable to pay service tax on residential complex services prior to 01.07.2010 based on the Tribunal's decisions in similar cases. The Tribunal held that prior to 01.07.2010, no service tax could be levied on construction of residential complexes, whether under "works contract service" or "construction of complex services," as such services were considered self-service until the completion certificate was issued. The Tribunal acknowledged that the appellant had been paying service tax post 01.07.2010 and directed verification of this claim to ascertain the full tax liability for the period post 01.07.2010. 2. Service Tax Liability on Construction of a Cancer Hospital Building: The appellant contended that the construction of a cancer hospital should not be taxable as it was not meant for commerce or industry. However, the Tribunal found that a corporate hospital, being a profitable and fast-growing service industry, falls under the definition of works contract service as per Section 65 (105) (zzzza) (ii) (b). Therefore, the demand for service tax on the construction of the cancer hospital building was upheld. 3. Service Tax Liability on Construction of an Administrative Building for the Indian Registrar of Shipping: The appellant argued that the Indian Registrar of Shipping, being a regulatory body, does not engage in commerce or industry. The Tribunal agreed, noting that the IRS's functions are similar to other regulatory agencies and do not constitute commerce or industry. Consequently, the demand for service tax on the construction of the administrative building for the IRS was set aside. 4. Applicability of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007: The department's appeal contended that the appellant had not followed the necessary procedure to claim the benefit under the composition scheme. The Tribunal held that the appellant still had the option to opt for the composition scheme for the payment of service tax liability, despite not having opted for it earlier. 5. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994: Given that a significant portion of the demands was set aside and the appellant had claimed to have paid service tax on residential complex services post 01.07.2010, the Tribunal invoked Section 80 to set aside all penalties. Conclusion: A. The service tax under works contract services on construction of residential complexes post 01.07.2010 is upheld; the demand for the period prior to this date is set aside. B. The demand of service tax on the construction of Mahatma Gandhi Cancer Hospital and Research Institute is upheld under works contract service. C. The demand of service tax on the construction of the building for the Indian Registrar of Shipping is set aside. D. The appellant/assessee can opt for the works contract (composition scheme) for the payment of service tax liability. E. Interest needs to be recalculated on the differential service tax. F. All penalties are set aside. The matter is remanded to the original authority for recalculating service tax liability and interest, following principles of natural justice.
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