2024 (4) TMI 173 - AT - Service Tax

Non-payment of Service tax - commercial rental income under immovable property service (RIPS) - Construction Service (CS) and Commercial Complex Service (CCS) - period from September 2008 to September 2009 - levy of penalty u/s 76 and 77 of FA - HELD THAT - The Principal Bench of CESTAT in the case of M/S KRISHNA HOMES VERSUS CCE, BHOPAL AND CCE, BHOPAL VERSUS M/S RAJ HOMES 2014 (3) TMI 694 - CESTAT AHMEDABAD has held the agreements entered into by a builder/promoter/developer with prospective buyers for construction of residential units in a residential complex against payments being made by the prospective buyers in instalments during construction and in terms of which the possession of the residential unit, is to be handed over to the customers on completion of the residential complex and full payment having been made, are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with prospective customers for construction of residential units in a residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65(105)(zzzh) w.e.f. 1.7.2010, and therefore, it has to be held that such contracts were not covered by Section 65(105)(zzzh) during the period prior to 1.7.2010. To tax a particular service, the liability under that head shall only be prospective and not applicable for any period prior to that date, i.e. 01.07.2010 as in the case on hand. Hence, service tax could not be levied under works contract service prior to 01.07.2010; and the levy could only be under CRCS/CCS simplicitor as the case may be. Further, as held by the Hyderabad Bench of the Tribunal in COMMISSIONER OF CUSTOMS, CENTRAL EXCISE SERVICE TAX, VISAKHAPATNAM - I VERSUS M/S PRAGATI EDIFICE PVT LTD (VICE-VERSA) 2019 (9) TMI 792 - CESTAT HYDERABAD , after 1.6.2007, the chargeability to works contract arises only if it is a composite contract and under construction of complex service if it is a service simplicitor - appeals insofar as with grounds relating to CCS and CRCS are concerned allowed. Penalty under RIPS - HELD THAT - The issue involved interpretation in as much as, the High Court of Delhi held that there was no liability to service tax insofar as the renting of immovable property was concerned and therefore, an amendment was brought in, to overcome the above judgement. Further, even as on date the issue is pending before Hon'ble Apex Court. Hence, it is a fit case where provisions of Section 80 of the Finance Act, 2012 could be exercised. The penalties imposed on the appellant also cannot sustain - the impugned order set aside - appeal allowed.

Summary

Issues involved:
1. Whether the Revenue is justified in levying penalty under Sections 76 & 77 for RIPS?
2. Whether the demand of service tax in respect of CS/CCS is correct for the period from April 2001 to September 2009?

Issue 1 - Penalty under RIPS:
The Revenue alleged non-payment of Service tax on commercial rental income under immovable property service (RIPS) and issued Show Cause Notices. The appellant denied liability but paid the tax for RIPS. The Original Authority confirmed the demand in the Show Cause Notices. The appellant contended that the penalty imposed was the only issue of concern. The Tribunal referred to a judgment stating that there was no liability to service tax for renting immovable property during the relevant period. Considering the ongoing legal proceedings, the Tribunal set aside the penalty.

Issue 2 - Demand of service tax for CS/CCS:
The Revenue claimed non-payment of Service tax under Construction Service (CS) and Commercial Complex Service (CCS) for a specific period. The appellant argued that the demand was not valid based on a decision by the Hon'ble Apex Court. The Tribunal analyzed various orders supporting the appellant's stance and concluded that the demand for service tax under residential complex service was not sustainable. The Tribunal allowed the appeals concerning CS and CCS, citing precedents and legal interpretations.

Conclusion:
The Tribunal set aside the impugned orders, allowing the appeals related to CS and CCS. The penalties imposed on the appellant were also deemed unsustainable and were consequently set aside. The appeals were allowed with any consequential benefits as per law.