2019 (11) TMI 1164 - AT - Service Tax

Short payment of service tax - Works Contract Services - Department alleges that the appellant has done certain construction activities after execution of the sale deed and therefore such construction activities ought to be subject to levy of service tax - period April 2014 to March 2015 - demand alongwith interest and penalty - HELD THAT - As explained by the Learned Consultant appearing for the appellant, an amount of ₹ 42,29,075/- which is the amount shown as sale value in the sale deed is included for ascertaining the short payment of tax. It is also seen that the said sale deed was executed after occupation certificate was obtained by the appellant. Thus, the transaction would indeed be sale of immovable property and the value of ₹ 42,29,075/- shown in the sale deed cannot be subject to levy of service tax. However, certain construction works have been carried out by appellant for an amount of ₹ 11,985/-. The appellant has conceded that they are liable to pay service tax on this amount. The demand of service tax to the tune of ₹ 1,92,667/- cannot sustain. The demand of service tax on ₹ 42,29,075/- is set aside. The demand is confined to the service tax liable to be paid on ₹ 11,985 only - penalties set aside - appeal allowed in part.

Summary

Issues:
Demand of service tax under Works Contract Services for the period April 2014 to March 2015 - Inclusion of sale value in the demand calculation - Applicability of service tax on construction activities post sale deed execution - Validity of penalties imposed.

Analysis:
The Appellant was issued a show cause notice for demanding service tax under Works Contract Services for a specific period. The original authority confirmed a demand of &8377; 1,92,667 along with interest and imposed penalties. In the appeal, the Commissioner (Appeals) upheld the decision, leading to the current appeal.

During the proceedings, the Appellant argued that the Department included the sale value from the sale deed in the demand calculation, even though the construction activities were completed before the sale deed execution. The Appellant contended that only the amount collected for post-sale deed construction activities, &8377; 11,985, should be subject to service tax, not the entire sale value.

The Department, represented by the Learned AR, argued that the date of the occupation certificate issuance was irrelevant as the demand was under Works Contract Services, not Residential Complex Services. The Department supported the original decision.

After hearing both sides, the Tribunal observed that the sale value in the sale deed, &8377; 42,29,075, was included for tax calculation, despite the construction being completed before the sale deed. The Tribunal determined that only the amount of &8377; 11,985, related to post-sale deed construction activities, was liable for service tax. Therefore, the demand for &8377; 1,92,667 was unsustainable, and the demand was limited to the &8377; 11,985 amount. Consequently, the imposed penalties were also set aside.

In conclusion, the appeal was partly allowed, and the demand was adjusted to reflect only the service tax liability on the post-sale deed construction activities, excluding the sale deed value.