2015 (2) TMI 706 - HC - Service Tax

Service tax on builders - Construction of residential complex services - Commercial and industrial construction services - setting aside assessment order - Held that - Learned Advocate Shri Bhoot as also learned Advocate Shri Mirza have their respective contention on paragraph no. 3 of Circular No. 108/02/2009-ST dated 29/01/2009. However, impugned order does not consider the fact whether the petitioner had during relevant period executed any sale deed or not. If concept of self service is attracted in case of petitioner, the petitioner may not be liable to pay any tax under the head service tax. Similarly other factors taken note of in paragraph 3 of circular need to be looked into by the assessing authority. Advocate Shri Mirza submitted that this circular issued in 2009 cannot be corelated with facts looked into the impugned order. We find that the circular only recognizes legal position and does not lay down any new law. It explains and interprets an existing provision. The contention that it cannot operate retrospectively is erroneous. It is interpretation of legal position and it can always be applied to the facts and events at hand. The impugned order does not show any consideration of any sale deed executed by petitioner in favour of its customers or clients. There is no application of mind as required in paragraph no. 3 of CBEC circular (supra). As such, it can be seen that said order of assessment is incomplete. Current demand and assessment order set aside. - Matter remanded back to deal with assessment proceedings before competent officer. - Writ petition is partly allowed in favour of assessee.

Summary

Issues:
Challenge to assessment order under Service Tax provisions.

Analysis:
The petitioner, an assessee under Service Tax provisions, challenged the assessment order of the Assessment Commissioner dated 23/24 October, 2008. The liability was based on definitions in Section 65 clause 105(zzq) and (zzzh). The petitioner argued that circulars issued by CBEC clarified that the demand made could not have been imposed. The petitioner contended that the demand was made for the first time in 2012, and the appeal needed to be filed within three months as per Section 85, with the appellate authority having the power to condone a further three-month delay.

The respondents argued that the circulars clarifying the position were issued after 2009 and could not have retrospective operation. They emphasized that the assessment order had attained finality, and the Court should not interfere. They also highlighted the peculiar arrangement about limitation and scheme in Section 85, stating that the finality of assessment would be frustrated if the Court intervened under Articles 226 of the Constitution of India.

The impugned order found the petitioner liable to pay service tax for providing services in both residential and commercial categories. The demand and penalty were imposed under Sections 73 and 78 of the Finance Act, respectively. A circular issued by CBEC in 2009 clarified that services rendered until the execution of a sale deed would be considered as "self service" and would not attract service tax.

The Court noted that the impugned order did not consider whether the petitioner had executed any sale deed during the relevant period. It was observed that if the concept of "self service" applied to the petitioner, they might not be liable to pay any tax under the service tax head. The Court emphasized the need for the assessing authority to consider other factors mentioned in the circular.

The Court held that the circular issued in 2009 could be applied to the facts at hand as it interpreted existing provisions and did not lay down new law. It was found that the impugned order of assessment was incomplete as it did not consider the application of the circular's principles to the petitioner's case. The Court set aside the demand and assessment order dated October 2008, directing the petitioner to appear before the competent officer for assessment proceedings. The petitioner was given the opportunity to file a reply to the show cause notice and produce necessary material for assessment purposes. The writ petition was partly allowed and disposed of with no costs.