2019 (1) TMI 1115 - AT - Service Tax

Construction of residential complex Service - Sai Sharnam Project - Laboni Project - In respect of Sai Sharnam Project at Sirdi in Maharashtra, he has refused the contention of service provider that the project was completed before 01.07.2010 - In respect of Laboni Project the contention of service provider was that the architect had issued certificate on 05.05.2010 that the said project was completed and such certificate issued by architect was submitted to Ghaziabad Development Authority - whether service tax was leviable in respect of Sai Sharnam Project and Laboni Project? Held that - In respect of Sai Sharnam Project the original authority has refused to accept date of completion as 31.03.2010 in the absence of mention of name of the said project in the certificate issued by architect - However, we note that during the proceedings it was not establish through positive evidences by revenue that any activity of construction in respect of Sai Sharnam Project was continued after 01.07.2010 - the levy of service tax introduced w.e.f. 01.07.2010 is not applicable to Sai Sharnam Project. In respect of Laboni Project the Original Authority has stated that though service provider has referred to certificate issued by architect on 05.05.2010 he will go by the certificate issued by Ghaziabad Development Authority on 13.07.2011. The learned Counsel for service provider has submitted a copy of certificate dated 05.05.2010 issued by architect in respect of Laboni Project stating that the project was complete in all respect. We note that Central Board of Excise & Customs through Circular dated 01.07.2010 had clarified that certificate issued by architect serves the purpose to establish that the project is complete. We, therefore, hold that Laboni Project was also completed before 01.07.2010 - the service tax was not liable to be paid in respect of Laboni Project. The demand of ₹ 34,79,175/- in respect of Sai Sharnam Project and demand of ₹ 1,88,94,825/- in respect of Laboni Project is set aside - demand of ₹ 1,68,37,388/- in respect of Technocity Project and imposition of penalty of ₹ 1,39,200/- under Section 70 of Finance Act, 1994 for late filing of ST-3 returns also set aside - the Original Authority had allowed refund of amount excess paid by the appellant. The said refund now needs to be worked out taken into consideration the service tax of around ₹ 4.17 crores paid and ₹ 1.68 crores service tax confirmed and ₹ 1.39 lakhs penalty imposed - appeal disposed off.

Summary

Issues Involved:
1. Service tax liability on Sai Sharnam Project.
2. Service tax liability on Laboni Project.
3. Service tax liability on Technocity Project.
4. Denial of Cenvat credit.
5. Imposition of penalty under Section 78A of the Finance Act, 1994.
6. Inclusion of parking charges, security charges, and external development charges in the assessable value.
7. Penalty for late filing of ST-3 returns.

Issue-wise Detailed Analysis:

1. Service Tax Liability on Sai Sharnam Project:
The Original Authority refused the service provider's contention that the Sai Sharnam Project was completed before 01.07.2010. The service provider presented a letter from the architect dated 31.03.2010 and a completion certificate from the Gram Panchayat dated 15.02.2011. The Original Authority concluded the project was not completed before 01.07.2010 and confirmed the demand after allowing 75% abatement. However, the Tribunal noted that the revenue did not provide positive evidence to establish ongoing construction after 01.07.2010 and thus held that the levy of service tax was not applicable.

2. Service Tax Liability on Laboni Project:
The service provider argued that the Laboni Project was completed as per the architect's certificate dated 05.05.2010, which was submitted to the Ghaziabad Development Authority. The Original Authority rejected this, relying instead on a certificate from the Ghaziabad Development Authority dated 13.07.2011. The Tribunal accepted the architect's certificate, referencing a CBEC Circular clarifying that such certificates are valid for determining service tax liability, and set aside the demand for the Laboni Project.

3. Service Tax Liability on Technocity Project:
The service provider accepted the service tax liability of around ?1.68 crores for the Technocity Project, which started in 2012 and was completed in 2017. The Tribunal confirmed the demand and noted that the service provider had filed all required ST-3 returns and paid the service tax and interest before the issuance of the show cause notice.

4. Denial of Cenvat Credit:
The Original Authority allowed Cenvat credit of around ?75 lakhs on service tax paid on input services. The Tribunal did not find any grounds to interfere with this decision.

5. Imposition of Penalty under Section 78A of the Finance Act, 1994:
The Original Authority did not impose a penalty on Shri Rajeev Arora under Section 78A, as the provision was inserted with effect from 01.05.2013, and the show cause notice did not discuss his specific role. The Tribunal upheld this decision, finding no merit in the revenue's appeal on this issue.

6. Inclusion of Parking Charges, Security Charges, and External Development Charges in the Assessable Value:
The Original Authority excluded parking charges, security charges, and external development charges from the assessable value. The Tribunal found the Original Authority's reasoning sound and upheld the exclusion, dismissing the revenue's appeal.

7. Penalty for Late Filing of ST-3 Returns:
The Original Authority imposed a penalty of ?1.39 lakhs under Section 70 of the Finance Act, 1994, for the late filing of ST-3 returns. The service provider accepted this penalty, and the Tribunal confirmed it.

Conclusion:
The Tribunal partially modified the impugned order, confirming the service tax demand for the Technocity Project and the penalty for late filing of returns while setting aside the demands for the Sai Sharnam and Laboni Projects. The Tribunal also upheld the Original Authority's decisions on Cenvat credit and the non-imposition of penalties under Section 78A. The revenue's appeal was dismissed for lack of merit.