2024 (6) TMI 1414 - AT - Service Tax

Service tax on construction of Residential Complex - Payment of service tax on abated value while no abatement was admissible - non-payment of service tax on charges collected towards maintenance and repair service - wrongful availment of Cenvat credit on input services on the basis of inadmissible invoices - non-payment of service tax on the amounts received towards supply of electricity through DG Set under the category of maintenance or repair services. Demand of service tax on construction of Residential Complex - HELD THAT - The SCN proposed to disallow the exemption/abatement only on the ground that the Appellants had wrongly availed Cenvat credit on input services. There is no allegation that the gross amount charged did not include the value of land. Here also, the finding of the Commissioner is beyond the scope of SCN. It is the settled law that the order cannot travel beyond the scope of SCN - reliance placed on the decision of Hon ble Supreme Court in the case of COMMISSIONER OF CUSTOMS, MUMBAI VERSUS TOYO ENGINEERING INDIA LIMITED 2006 (8) TMI 184 - SUPREME COURT wherein it has been held that the Department cannot travel beyond the scope of the SCN. Whether the benefit of exemption under Notification No. 01/2006 dated 01-03-2006 in respect of construction of residential complex can be disallowed even if the Cenvat credit availed during the said period has been reversed alongwith interest and penalty? - HELD THAT - There is no dispute that the Appellants had reversed the entire Cenvat credit relating to Construction of Residential Complex Service even before issuance of SCN. The Hon ble Supreme Court in the case of CHANDRAPUR MAGNET WIRES (P) LTD. VERSUS COLLECTOR OF C. EXCISE, NAGPUR 1995 (12) TMI 72 - SUPREME COURT has held that debit entry in Modvat account indicates as if credit was not taken on such inputs - since the Appellants have already reversed the Cenvat credit alongwith interest, the benefit of Notification No. 01/2006-ST dated 01.03.2006 cannot be denied to them - the corresponding demand of service tax of Rs. 3,18,92,385/- set aside. Disallowance of Cenvat credit Rs. 48.93 lacs - HELD THAT - Since this demand is completely barred by limitation as it is in respect of the credit availed by the Appellant during the period July to September, 2012 it is refrained from discussing this issue on merits as it is held that demand upto the period of March 2013 is barred by limitation. Demand of service tax on sinking fund - HELD THAT - It is found that the issue regarding liability for payment of service tax on sinking fund/interest free maintenance scrutiny is no more res integra. In the case of KUMAR BEHERAY RATHI OTHERS VERSUS CCE. 2013 (12) TMI 269 - CESTAT MUMBAI , this Tribunal has held that collection of one time deposit on account of maintenance and repair of common areas is not taxable - the demand of service tax on sinking fund set aside - the demand on the said count is set aside alongwith setting aside of penalty. Demand of service tax on supply of electricity through DG Set - HELD THAT - The issue regarding liability for payment of service tax on supply of electricity generated through DG set in case of power failure is no more res integra. This Tribunal in the case of M/S ICC REALITY (INDIA) PVT LTD OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE 2013 (12) TMI 854 - CESTAT MUMBAI has held that service tax cannot be charged on electricity charges collected from the tenants - the service tax cannot be demanded on supply of electricity through D G Set. Accordingly, demand on this count is set aside alongwith setting aside of penalty. Appeal allowed.

Summary

Issues Involved:

1. Demand of service tax on construction of Residential Complex.
2. Disallowance of CENVAT credit.
3. Demand of service tax on sinking fund.
4. Demand of service tax on supply of electricity through DG Set.

Issue-wise Detailed Analysis:

1. Demand of Service Tax on Construction of Residential Complex:

The core issue was whether the appellant was eligible for the benefit of abatement under Notification No. 01/2006 despite availing CENVAT credit. The Show Cause Notice (SCN) alleged that the appellant availed abatement while also taking CENVAT credit, which was not permissible. The appellant reversed the CENVAT credit of Rs. 44,22,221/- before the issuance of the SCN. The tribunal found that the appellant had reversed the entire credit and held that the benefit of Notification No. 01/2006 could not be denied. It was emphasized that findings beyond the scope of the SCN, such as the inclusion of land cost, were not permissible. The tribunal relied on the precedent that reversal of credit effectively nullifies the credit taken, thus allowing the benefit of the exemption notification. Consequently, the demand of Rs. 3,18,92,285/- was set aside.

2. Disallowance of CENVAT Credit:

The demand concerning the disallowance of CENVAT credit amounting to Rs. 48.93 lakhs was deemed time-barred as it pertained to the period from July to September 2012. The tribunal refrained from discussing the merits of the issue due to the limitation period, thus setting aside the demand.

3. Demand of Service Tax on Sinking Fund:

The SCNs contended that amounts collected as sinking funds should be taxable under management, maintenance, or repair services. The tribunal, however, noted that the sinking fund was a liability and was transferred to the Resident Welfare Association (RWA) as interest-free maintenance security. Citing precedents, the tribunal held that such collections are not taxable, as they are not for services provided but are refundable security deposits. The demand of Rs. 5,96,360/- was thus set aside.

4. Demand of Service Tax on Supply of Electricity through DG Set:

The tribunal examined whether the supply of electricity through DG Set constituted a taxable service. It was concluded that electricity is classified as goods and not a service. The tribunal referenced previous rulings that exempted electricity charges from service tax, asserting that electricity supply is a sale of goods. Thus, the demand for service tax on electricity supplied through DG Set was set aside.

Conclusion:

The tribunal set aside the entire demand of service tax amounting to Rs. 3,82,52,113/- in Appeal No. ST/70795/2016 and Rs. 52,831/- in Appeal No. ST/71101/2018. Both appeals were allowed with consequential relief as per law, emphasizing the importance of adhering to the scope of SCNs and the principles of limitation.