2024 (8) TMI 1276 - AT - Service Tax

Service tax on Construction and sale of Complex/Houses/Flats constructed by the appellant - Service tax on certain receipts under taxable category of Real Estate Agent service - Liability to pay service tax under Reverse Charge Mechanism on legal charges, manpower supply and works contract services - extended period of limitation. Service tax on Construction and sale of Complex/Houses/Flats constructed by the appellant - HELD THAT - This issue has been decided against the Revenue by the judgment of Hon ble Orissa High Court in the case of LARSEN TOUBRO LIMITED VERSUS STATE OF ORISSA AND OTHERS 2007 (10) TMI 579 - ORISSA HIGH COURT , wherein the Hon ble High Court has held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute - the service tax is not leviable on Construction of Complex Services . Service tax on certain receipts under taxable category of Real Estate Agent service - HELD THAT - The appellant is not acting as a real estate agent and therefore, the service tax is not chargeable on the amounts/fees received by it in the course of performing of statutory duties - It has been consistently held by the Tribunal that charges collected by the builder for authorizing transfer of allotment of property before sale or as part of the sale agreement is on principle to principle basis and no service is provided to any person in relation to sale, purchase, leasing, renting of any real estate and therefore, such charges are not covered under the head of Real Estate Agent Services - none of the receipts/income of the appellant fall under the scope of services defined under Section 65(105)(b) of the Finance Act, 1994; hence, this issue is also decided in favour of the appellant. Liability to pay service tax under Reverse Charge Mechanism on legal charges, manpower supply and works contract services - HELD THAT - The appellant is not liable to pay service tax on legal charges/fees, on supply of manpower and on execution of work contract, because the appellant is not a business entity. The appellant is admittedly a body corporate but it does not qualify for the criteria of business entity nor is it registered as such. Therefore, it cannot be held that the appellant Haryana Housing Board is liable for payment of service tax on reverse charge basis in respect of the services - the demand of service tax under Reverse Charge Mechanism is not sustainable. Extended period of limitation - HELD THAT - The appellant, which is a governmental authority constituted under the Housing Board Act, 1971, has provided all the information as required by the department. Moreover, being a statutory authority, the appellant is required to maintain proper accounts, which are duly audited by the office of the Accountant General and the audited accounts accompanied by audit report have been forwarded to the State Government as required by the Act. Further, all the figures have been taken from balance sheets. Therefore, in view of this, there is no suppression or fraud with intent to evade the payment of tax - Hon ble Supreme Court in various cases and it has been consistently held that no suppression or fraud with intent to evade the service tax could be attributed to a government authority as there is no vested interest of the government authority to evade tax - in the present case, the department has failed to establish any of the ingredients which are required to prove in order to invoke extended period of limitation; therefore, the entire demand is barred by limitation. The impugned orders are not sustainable in law, accordingly, set aside - appeal allowed.

Summary

Issues Involved:
1. Service tax on Construction and sale of Complex/Houses/Flats.
2. Service tax on receipts under Real Estate Agent service.
3. Liability to pay service tax under Reverse Charge Mechanism (RCM) on legal charges, manpower supply, and works contract services.

Issue-wise Detailed Analysis:

First Issue: Service tax on Construction and sale of Complex/Houses/Flats

7.1 The appellant, a governmental authority constituted under the Housing Board Act, 1971, constructs and sells houses/flats. The Hon'ble High Court of Punjab & Haryana in Bharat Bhushan Gupta & Company held that the Board is a governmental authority under State control.

7.2 By virtue of Finance Act, 2010, an explanation was added to Section 65(105)(zzzh) expanding the scope of taxable service. Construction intended for sale by a builder before completion certificate is deemed a service.

7.3 The Service Tax (Determination of Value) Rules, 2006, lack machinery to ascertain service value in composite contracts involving land sale. The Orissa High Court in Larsen and Toubro Limited ruled that statutory provisions must provide for tax computation.

7.4 The Delhi High Court in Suresh Kumar Bansal held that the absence of statutory machinery to exclude non-service components from taxable value invalidates service tax on composite contracts.

7.5 The Tribunal follows the Delhi High Court's decision unless overturned by the Supreme Court.

7.6 The Tribunal in M/s G S Promoters & Developers and Rajeev Chopra cases reiterated the above principle.

7.7 Conclusion: Service tax is not leviable on 'Construction of Complex Services'.

Second Issue: Service tax on Real Estate Agent Service

8.1 The appellant is not a real estate agent as defined under Section 65(88) & (89) of the Act, which involves services related to sale, purchase, leasing, or renting of real estate.

8.2 The appellant's activities do not involve providing advice, consultancy, or technical assistance in real estate transactions.

8.3 The Tribunal consistently held that charges for authorizing property transfer before sale do not constitute 'Real Estate Agent Services'.

8.4 The Tribunal in Commissioner of Service Tax, New Delhi vs. Ansal Properties and Infrastructures Ltd held that such charges are not for services provided as an agent.

8.5 Conclusion: The appellant's receipts/income do not fall under 'Real Estate Agent Services'.

Third Issue: Liability of service tax under Reverse Charge Mechanism

9.1 The appellant is not liable for service tax on legal charges, manpower supply, and works contract services under RCM as it is not a business entity.

9.2 The Supreme Court in Shri Ramtanu Co-Operative Housing Society Ltd. distinguished between a Business Corporation and a Governmental Authority Body Corporate.

9.3 The Punjab & Haryana High Court in Bharat Bhushan Gupta & Company held that the Haryana Housing Board is a governmental authority, exempting it from service tax under Notification No. 25/2012-ST.

9.4 The department accepted this decision, granting refunds to contractors.

9.5 Conclusion: The demand of service tax under RCM is not sustainable.

Extended Period of Limitation

10.1 The appellant provided all required information and maintained audited accounts, negating suppression or fraud.

10.2 The Supreme Court consistently held that government authorities lack intent to evade tax.

10.3 In Commissioner vs. Electricity Pole Manufacturing, the Supreme Court held that state-funded units typically do not evade tax.

10.4 The Tribunal in U.P. State Sugar & Cane Dev. Corpn. Ltd. held that public-sector undertakings do not suppress facts to evade tax.

10.5 The Tribunal in M.P. Water & Power Management Institute set aside demands as barred by limitation due to the absence of suppression.

10.6 Conclusion: The entire demand is barred by limitation.

Final Judgment:
The impugned orders are set aside, and the appeals filed by the appellant are allowed with consequential relief. The appeals filed by the Revenue are dismissed.