2024 (3) TMI 184 - AT - Service Tax

Validity of SCN - SCN suffers from incurable deficiency - Demand raised solely on the basis of Income Tax data shared by the Income Tax authorities - HELD THAT - In the present case, there is no dispute on the facts that SCN dated 25-03-2021 is issued solely on the basis of Income Tax data shared by the Income Tax authorities to the Central Excise authorities for F.Y. 2015-16 to 2017-18 upto 30-06-2017 , without causing any independent inquiry caused by Central Excise officers and that Data does not appear taken on records as provided under section 36B of the Central Excise Act, 1944. Therefore, there are force in the submission made that SCN suffers from incurable deficiency. There are force in Appellant s contention that impugned Order is beyond SCN as Service Tax demand is confirmed under Construction of Residential Complex, whereas, SCN dt. 25-03-2021 has not specified under which clause Service falls, for taxability. Order has taken into consideration declared service u/s 66E(b) of Finance Act 1994, which is for construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority. However, construction of complex intended for sale to a buyer is not correctly considered in these Orders. In the case of STATE OF WEST BENGAL ORS. VERSUS CALCUTTA CLUB LIMITED AND CHIEF COMMISSIONER OF CENTRAL EXCISE AND SERVICE ORS. VERSUS M/S. RANCHI CLUB LTD. 2019 (10) TMI 160 - SUPREME COURT , it is seen that a club and its members are one and the same and the club is formed for the purpose for mutual benefit of its members. This principle equally applies in this case to the Radhe Villa Co-Operative Society, which has constructed residential units for its members only under development agreement with Appellant. Hence, no service tax is payable on Residential units created by Co-operative Society for its Members for personal use, as it is also in exclusion clause of section 65(91a) of the Finance Act 1994. Since the demand service tax is not sustainable on its merit, the issue of limitation need not be dealt and the same is left open in this case. The Service Tax demand confirmed with interest and penalties is not sustainable in this case. The demand of Service Tax upheld by O-I-A with interest and penalties deserves to be set aside - appeal allowed.

Summary

Issues Involved:
1. Whether the Appellant is liable to pay Service Tax Demand of Rs. 18,10,742/- with interest and penalty.
2. Validity of the Show Cause Notice (SCN) based on Income Tax data without independent inquiry.
3. Applicability of Service Tax on the development of residential units for a Co-Operative housing society.
4. Whether the construction of residential units falls under the definition of "Residential Complex" under Section 65(91a) of the Finance Act, 1994.
5. Consideration of limitation and malafide intention to evade Service Tax.

Summary:

1. Liability to Pay Service Tax Demand:
The Tribunal examined whether the Appellant is liable for the Service Tax Demand of Rs. 18,10,742/- with interest and penalties as upheld by the Commissioner (Appeals). The Tribunal found that the demand was not sustainable.

2. Validity of Show Cause Notice:
The SCN issued on 25-03-2021 was based solely on Income Tax data shared by the Income Tax authorities without any independent inquiry by Central Excise officers. The Tribunal found that the SCN suffered from an "incurable deficiency" and that the Service Tax demand cannot be raised without independent evidence.

3. Applicability of Service Tax on Co-Operative Housing Society:
The Appellant developed land for "Radhe Villa Co-Operative housing society" and "Sharnam Villa" under agreements with landowners. The Tribunal noted that the Appellant did not sell any residential units and that the services provided to a registered Co-Operative housing society for its members are considered services to self. Therefore, no Service Tax liability arises under the Construction of Residential Complex services.

4. Definition of "Residential Complex" under Section 65(91a):
The Tribunal found that the construction activities carried out by the Appellant did not fall under the definition of "Residential Complex" as per Section 65(91a) of the Finance Act, 1994. The Tribunal referred to various judgments, including those involving similarly placed assessees, to support this view. The Tribunal concluded that the residential units developed for personal use by the members of the Co-Operative society are excluded from Service Tax.

5. Limitation and Malafide Intention:
Since the demand for Service Tax was found to be unsustainable on its merits, the Tribunal did not address the issue of limitation or the malafide intention to evade Service Tax.

Conclusion:
The Tribunal set aside the Service Tax demand of Rs. 18,10,742/- with interest and penalties, allowing the appeal filed by the Appellant with consequential relief in accordance with the law.