2024 (6) TMI 1181 - AT - Service Tax

Classification of services - Construction of Residential Complex Service or not - providing construction services under different projects under works contract - construction under each of the projects were of the nature of indivisible composite contracts involving both supply of materials as well as construction activity - HELD THAT - From the perusal of the clauses extracted in the original order clear that it was for the developer to hire services of architects engineers contractors et cetera for the purposes of construction so as to develop the property into one or more residential / multistoried buildings. It is further clear that in terms of the construction agreement it was for the developer to construct the complex using its own men material. In respect of Wanlock Woods project the appellant is fastened with a liability on the ground of not recognising the said construction as under CRCS but as individual units. This very issue has been considered by the coordinate Bench in the case of COMMISSIONER VERSUS MACRO MARVEL PROJECTS LTD. 2009 (7) TMI 1222 - SC ORDER as contended by the learned Advocate which has also been affirmed by the Hon ble Supreme Court. In view of the above position of law the demand under CRCS as proposed is not sustainable and accordingly this ground of the appeal succeeds. There is no dispute that there was supply of materials as well as the service of construction and hence the same could only be taxed under WCS. However the proposal in the show cause notice is clearly under CRCS and hence confirmation of the demand under WCS is not in accordance with the decision of the Supreme Court in COMMISSIONER CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT . It is held in this case that there could be no levy of service tax under works contract service prior to 01.06.2007. In so far as the period post 01.06.2007 the proposal in the Show Cause Notice is to levy service tax under CRCS and not WCS which demand is also incorrect in the light of the decision of Larsen Toubro. The impugned order is set aside - Appeal allowed.

Summary

Issues: Classification of construction services under 'Construction of Residential Complex Service' (CRCS) or Works Contract Service (WCS), confirmation of demand beyond the Show Cause Notice, availability of CENVAT credit under composition scheme, entitlement to composition scheme for work contract, demand under CRCS for projects involving Works Contract Service.

Analysis:
1. Classification of Services: The appellant argued that their construction services should be classified under Works Contract Service (WCS) rather than 'Construction of Residential Complex Service' (CRCS) due to the nature of indivisible composite contracts involving both supply of materials and construction activity. They cited a Tribunal case affirmed by the Supreme Court to support their claim. The Tribunal noted that the demand under CRCS was not sustainable based on legal precedents, allowing the appeal on this ground.

2. Confirmation of Demand: The appellant contested the confirmation of demand for projects like Crimson Don, Emerald Vistas, and Sarvamangal on new grounds not mentioned in the Show Cause Notice, depriving them of offering a rebuttal. They argued that the impugned order deviated from the proposed demand in the Show Cause Notice, citing a Supreme Court decision. The Tribunal found that confirming demands beyond the Show Cause Notice was not sustainable in law.

3. CENVAT Credit and Composition Scheme: The appellant contended that there was no statutory bar to avail CENVAT credit on input services while opting for the composition scheme for works contract services, citing a CBEC Circular. They also argued for entitlement to the composition scheme for work contracts, highlighting discrepancies in demands raised contrary to the reasons proposed in the Show Cause Notice. The Tribunal found that demands conflicting with the Show Cause Notice were not legally sustainable.

4. Demand under CRCS for Works Contract Service: For projects like Crimson Dawn and Saffron Summers, the appellant argued that the demand under CRCS was not valid as the projects were intended for Works Contract Service. The Tribunal held that demands proposed and confirmed under CRCS for projects involving Works Contract Service could not be sustained.

5. Judicial Pronouncements: The Tribunal considered various judicial pronouncements and legal arguments from both parties. It analyzed the contracts for the projects, emphasizing the nature of joint development arrangements and the developer's responsibilities. The Tribunal referred to legal precedents and Supreme Court decisions to support its findings.

6. Final Decision: After thorough consideration of the contentions, documents, and legal precedents, the Tribunal set aside the impugned order, allowing the appeal with consequential benefits as per the law. The judgment was pronounced in open court on a specified date.