2022 (3) TMI 592 - AT - Service Tax

Refund of service tax - applicability of retrospective amendment under Rule 2A of Service Tax Valuation Rules - works contract service - composite contract for construction of complex and sale of units - HELD THAT - There is no denial to the fact that while purchasing the different floors of a immovable property the appellants have been paying the Service Tax along with the demands which were raised by the construction company at the completion of each milestone. There is also no denial to the fact that the Hon ble High Court of Delhi in Suresh Kumar Bansal case 2016 (6) TMI 192 - DELHI HIGH COURT has held that Service Tax could not be levied on value of undivided share of land acquired by buyer of dwelling unit or value of goods which are incorporated in project by Developer. Perusal of Rule 2A of Service Tax Valuation Rules makes it clear that the said rule provides the mechanism to separately determine value of land and value of goods under a Works Contract Service. The gross consideration charged for construction of complex service by builder promoter of a project of a buyer would not only include the element of cost of Service Tax but also the value of undivided share of land which would be acquired by the buyer. In the present case admittedly the service provided is of not work contract service but is a simplicitor contract of construction of residential building. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside. It was held that if the concerned officer of respondent No. 1 shall examine whether the builder has collected any amount as service tax from the petitioners for taxable service as defined in Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authorities, any such amount deposited shall be refunded to the petitioners with interest at the rate of 6% from the date of deposit till the date of refund. It is observed that Chartered Accountant certificate of the auditor of Emaar, the builder as annexed on record is sufficient to show that Emaar has duly paid the Service Tax for the period 2011-12 to 2017-18, which includes the period in question. Further it is also acknowledged that element of Service Tax has been borne by the appellant and the letter of Emaar dated 29.8.2019 as is available on record, shows that acknowledgement of Emaar to the said fact and it also conveys their no objection in favour of the appellant to claim the said refund. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Legitimacy of the refund claims based on the decision in Suresh Kumar Bansal's case.
2. Applicability of retrospective amendment under Rule 2A of Service Tax Valuation Rules.
3. Distinction between 'Works Contract Service' and 'Construction of Complex Service.'
4. Evidence supporting the payment and bearing of Service Tax by the appellants.

Issue-wise Detailed Analysis:

1. Legitimacy of the refund claims based on the decision in Suresh Kumar Bansal's case:
The appellants based their refund claims on the Delhi High Court's decision in the Suresh Kumar Bansal case, which held that Service Tax could not be levied on the value of the undivided share of land acquired by the buyer of a dwelling unit or the value of goods incorporated in the project by the developer. The appellants argued that their refund claims were wrongly rejected, violating the court's directions. The Tribunal noted that the appellants had indeed paid Service Tax along with the construction payments, and the refund claims were filed based on the aforementioned decision.

2. Applicability of retrospective amendment under Rule 2A of Service Tax Valuation Rules:
The adjudicating authority rejected the refund claims by relying on the retrospective amendment under Rule 2A of Service Tax Valuation Rules. The Tribunal examined whether this amendment applied to the present case. Rule 2A provides a mechanism to determine the value of taxable services involved in a works contract, separating the value of land and goods. The Tribunal concluded that the service provided in this case was not a 'Works Contract Service' but a 'Construction of Complex Service,' which are distinct services under the Finance Act.

3. Distinction between 'Works Contract Service' and 'Construction of Complex Service':
The Tribunal emphasized the distinction between 'Works Contract Service' and 'Construction of Complex Service.' The Delhi High Court in the Suresh Kumar Bansal case clarified that no Service Tax could be charged on composite contracts under Section 65(105)(zzzh) of the Act. The impugned explanation that sought to include composite contracts for the purchase of units within the scope of taxable service was set aside. The Tribunal reaffirmed that the amendment to Rule 2A did not apply to 'Construction of Complex Service,' as clarified in subsequent judgments, including Ruchi Goyal vs NBCC (India) Ltd. and Vasudha Bommireddy vs Assistant Commissioner of Service Tax.

4. Evidence supporting the payment and bearing of Service Tax by the appellants:
The Tribunal considered the Chartered Accountant certificate from Emaar's auditors, which confirmed that Emaar had paid the Service Tax for the relevant period and that the appellants had borne the Service Tax. Additionally, a letter from Emaar acknowledged this fact and conveyed no objection to the appellants claiming the refund. The Tribunal also noted a similar case involving the same property portion, where the refund was sanctioned by the Tribunal.

Conclusion:
The Tribunal set aside the orders under challenge, allowing both appeals. The Tribunal found no reason to differ from the findings in similar cases and concluded that the appellants were entitled to the refunds claimed.