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2024 (4) TMI 392 - AT - Service TaxMis-classification of ongoing construction of complex service under the head WCS - Non-payment of service tax under the head WCS on land owner s share - Short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed - Non-payment of service tax in respect of Management Consultancy service allegedly received from outside India under the reverse charge mechanism - Demand of interest on proportionate Cenvat credit reversed under Rule 6(3) of CCR, although with some delay - penalties u/s 76, 77 and 78 of FA. Mis-classification of ongoing construction of complex service under the head WCS - HELD THAT - Admittedly, the work/service done by the Appellant involves both transfer of material and transfer of labour cum services. Thus, these are complex contracts. It has been held by the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT that prior to 01.06.2007, complex contracts involving supply of labour and material are not taxable, as there was no mandate under law to bifurcate the complex contract and subject the service element to tax - the classification of the work cum service involved, done by the Appellant, in the nature of construction of residential complex, etc., is rightly classifiable under the head WCS - the issue is allowed in favour of the Appellant and against the Revenue. Non-payment of service tax under the head WCS on land owner s share - HELD THAT - The Appellant, on the basis of Joint Development Agreement cum Power of Attorney executed jointly with the land owner, develops the property on the land belonging to the land owner and further, as per the agreed ratio of sharing, they share the constructed area. Thus, the activity is in the nature of a Joint Venture/ Partnership on Principal to Principal basis. There is no relation of service provider and service receiver between the land owner and the Appellant/ builder - this issue stands decided in favour of the Appellant in the precedent order of this VASANTHA GREEN PROJECTS VERSUS CCT, RANGAREDDY GST 2018 (5) TMI 889 - CESTAT HYDERABAD . Similar view has been expressed by the CBEC vide Circular No. 151/2/2012-ST dt.10.02.2012 read with Circular No. 108/2/2009- ST dt.29.01.2009. Short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed - HELD THAT - The Appellant pays service tax only on the value agreed upon and received as per the construction agreement towards the construction/finishing of the dwelling unit. Appellant is not discharging service tax on the amount received till the date of execution of sale deed. It is found that till the date of execution of sale deed, there was no right available to the prospective buyer to the dwelling unit and hence, whatever work was done till the date of execution of the sale deed, was by way of self-service. It is only under the construction agreement, post execution of sale deed, that the relation of service provider and service receiver takes place - the appellant is justified and correct in not paying service tax on the value of sale deed for transfer of undivided share in land and the value of semi-finished construction. Even if any amount is received by way of advance from the prospective buyer, in absence of any contract/agreement for sale or execution of sale deed, the same is only by way of deposit and cannot be considered as an amount received towards any intended service. Such advance amount is not towards any taxable service but for an immovable property and as such, does not come under the scope of section 67 of the Finance Act 1994 - when the semi-finished flat/dwelling unit is sold to buyer, it is a sale of immovable property and outside the purview of Finance Act 1994 for levy of service tax. Such sale transaction is subjected to appropriate Stamp duty and VAT, as applicable - appeal allowed in favour of the Appellant and against the Revenue. Non-payment of service tax in respect of Management Consultancy service allegedly received from outside India under the reverse charge mechanism - HELD THAT - The Appellant has filed a copy of the ledger extract annexed to the appeal paper book. It is found that as admittedly Appellant has not received any service from the said M/s GJOS and have further written off the amount in their Books of Accounts as bad debts , thus, admittedly, Appellant has not received any service nor there is any chance of receiving service and the said amount has already been written off as bad debts . Accordingly, in absence of receipt of any service, no service tax is payable under the reverse charge mechanism. Accordingly, this ground also allowed in favour of the Appellant and against the Revenue. Demand of interest on proportionate Cenvat credit reversed under Rule 6(3) of CCR, although with some delay - HELD THAT - The non-reversal of proportionate credit was, according to the Appellant/Assessee, an inadvertent mistake and not with any deliberate or contumacious conduct for evading tax. Admittedly, Appellant has reversed an amount of Rs.1,43,27,894/- on 31.12.2013 prior to issue of SCN. Under such admitted fact, Revenue has not demanded reversal of any amount under Rule 6(3) but has demanded interest on the same under Rule 14(ii) of CCR, which provides where the Cenvat credit has been taken and utilised wrongly or has been erroneously refunded, the same shall be recovered along with interest from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A and 11AA of the Excise Act or section 73 and 75 of the Finance Act 1994, as the case may be, shall apply mutatis mutandis for effecting such recoveries - the appellant is not liable to pay interest as they have admittedly not utilized the amount of credit, which was to be reversed under Rule 6(3) - this ground allowed in favour of the appellant and against the Revenue. Penalties u/s 76, 77 or 78 of the Finance Act - HELD THAT - The penalties imposed under all the sections set aside. The impugned order set aside - appeal allowed.
Issues involved:
The judgment involves issues related to demand of Service Tax under Section 73(2) of the Finance Act, 1994, including mis-classification of ongoing construction of complex services, non-payment of service tax on land owner's share, short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed, non-payment of service tax on sale deed, non-payment of service tax in respect of Management & Consultancy service, demand of interest under Section 75 of the Finance Act, and penalties imposed under various sections of the Finance Act. Issue (A) - Mis-classification of ongoing construction of complex services under WCS: The Appellant's work involves both material and labor cum services, making them complex contracts. The Tribunal upheld the classification of the work as construction of residential complex under the head Works Contract Service (WCS) based on legal precedents. Issue (B) - Non-payment of service tax under WCS on land owner's share: The Tribunal found that the activity between the Appellant and the land owner was a Joint Venture/Partnership, not a service provider-receiver relationship. Precedent orders and CBEC circulars supported the Appellant's stance, leading to a decision in their favor. Issue (C) - Short payment of service tax due to non-inclusion of amounts received prior to execution of sale deed: The Tribunal ruled in favor of the Appellant, stating that until the execution of the sale deed, the work done was self-service. The Appellant was correct in not paying service tax on the value of the sale deed, as it was considered a sale of immovable property outside the scope of the Finance Act. Issue (D) - Non-payment of service tax on sale deed under WCS: Similar to Issue (C), the Tribunal allowed this ground in favor of the Appellant, as it related to the non-payment of service tax on the sale deed under WCS. Issue (E) - Non-payment of service tax in respect of Management & Consultancy service: The Tribunal found that since the Appellant did not receive any service and had written off the amount as bad debts, no service tax was payable under the reverse charge mechanism, leading to a decision in favor of the Appellant. Issue (F) - Demand of interest under Rule 6(3) of CCR: The Tribunal held that the Appellant's non-reversal of proportionate Cenvat credit was an inadvertent mistake and not deliberate tax evasion. As the Appellant had not utilized the credit to be reversed, they were not liable to pay interest under Rule 14(ii) of CCR, resulting in a decision in favor of the Appellant. Penalties: In light of the findings on the merits of all issues, the Tribunal set aside the penalties imposed under sections 76, 77, and 78 of the Finance Act. The appeals were allowed, and the impugned orders were set aside, granting the Appellant consequential benefits in accordance with the law.
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