2020 (10) TMI 1065 - AT - Service Tax

Construction Services - full amount received towards provision of services - N/N. 1/2006 -ST dated 01.03.2006 - benefit denied on the ground that Cenvat credit was availed under N/N. 15/2004 dated 10.09.2004, in the month of March 2006 - construction of residential complexes - period from 16.06.2005 to 30.09.2007 - Time Limitation. Whether the demand of service tax of ₹ 1,03,22,449, on the full amount received towards provision of services, is justified denying the benefit of notification 1/2006 -ST dated 01.03.2006 claimed, on the ground that Cenvat credit was availed under Notification 15/2004 dated 10.09.2004, in the month of March 2006? - HELD THAT - The contention of the appellant is not correct because the Notification No.15/2004 dated 10.09.2004 automatically gets nullified after the introduction of notification No.01/2006 dated 01.03.2006; therefore the question of availment of notification no.15/2004 and notification no 01/2006 for the month of March 2006 does not arise; even though the cenvat credit pertained to the period only upto 28.02.2006 the same is not eligible for utilization for the month of March 2006 and onwards. Whereas the appellant submits that the restriction in taking cenvat credit of service tax on input services has commenced only from 01.03.2006; from this date onwards the appellant is barred from taking cenvat credit of service tax on input services; cenvat credit, availed, on input services under the provisions of Rule 3(1) of the Cenvat Credit Rules, 2004 till 28.02.2006 does not lapse; the appellant is permitted by Rule 4 of the Cenvat Credit Rules, 2004 to utilize such cenvat credit; Rule (4)(e) allows the appellant to utilize the cenvat credit so taken for payment of service tax on any output service. The issue is no longer res integra; there is no provision under Notifications 1/2006 or 15/2004 that such credit legally availed prior to 1.3.2006, under the provisions of CCR,2004, would lapse. Therefore, the appellants are eligible to utilise the cenvat credit, availed by them, on inputs/input services, prior to 1.3.2006. we find that to that extent demand is not sustainable. Whether the Appellant is a service provider rendering services of construction of residential complexes , in terms of Section 65 (30) (a) of the Finance Act, 1994 read with Section 65 (105) (zzzh)ibid and as to whether, the demand of Service Tax of ₹ 6,79,14,900 for the period from 16.06.2005 to 30.09.2007 against the appellants is tenable? - HELD THAT - The learned adjudicating authority has relied heavily on the fact that the agreement is a tripartiate agreement; the appellants are rendering service to the ultimate buyers of the flats; suitable advances were taken from the customers, therefore, the appellants cannot be held to be developers doing service to themselves as explained in Board Circular No.108/02/2009 dated 29.1.2009 and to that extent the Circular is not applicable in their case - what is to be seen is whether the contract was a service contract simplicitor or a works contract. Learned Commissioner had no occasion to follow the judgment of Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT - Going by the facts and circumstances of the case, it is found that the contracts are composite contracts and therefore, not leviable to service tax before 1.6.2007. The show-cause notice proposes to demand service tax on construction of residential complexes service after 1.6.2007, even though they are works contracts being composite in nature. Whether the show cause Notice is time barred? - HELD THAT - The show-cause notice proposes to demand service tax on construction of residential complexes service after 1.6.2007, even though they are works contracts being composite in nature. Therefore, service tax demand after 1.6.2007 also cannot be confirmed - Learned advocate for the appellants has also raised the issue of limitation and submits that the facts are known to the Department when the audit was conducted in 2007 and therefore, the show-cause notice is time barred. Appeal allowed.

Summary

Issues Involved:
1. Whether the demand of service tax of ?1,03,22,449 on the full amount received towards provision of services is justified by denying the benefit of Notification 1/2006-ST dated 01.03.2006.
2. Whether the appellant is a service provider rendering services of "construction of residential complexes" in terms of Section 65(30)(a) of the Finance Act, 1994 read with Section 65(105)(zzzh) and whether the demand of Service Tax of ?6,79,14,900 for the period from 16.06.2005 to 30.09.2007 is tenable.
3. Whether the show cause notice is time-barred.

Issue-wise Detailed Analysis:

1. Demand of Service Tax of ?1,03,22,449:
The tribunal examined whether the denial of abatement under Notification No.1/2006-ST and the consequent demand of Service Tax on the full amount is justified. The appellants argued that the restriction on taking Cenvat credit of service tax on input services commenced only from 01.03.2006 and that Cenvat credit availed on input services under Rule 3(1) of the Cenvat Credit Rules, 2004 till 28.02.2006 does not lapse. The tribunal referred to the case of Shapoorji Pallonji & Co Ltd Vs CCE, where it was held that the Cenvat credit availed for services rendered before 01.03.2006 cannot be faulted. The tribunal concluded that there is no provision under Notifications 1/2006 or 15/2004 that such credit legally availed prior to 01.03.2006 would lapse. Therefore, the appellants are eligible to utilize the Cenvat credit availed on inputs/input services prior to 01.03.2006, and the demand to that extent is not sustainable.

2. Demand of Service Tax of ?6,79,14,900:
The tribunal assessed whether the appellant is a service provider rendering services of "construction of residential complexes" and liable to pay service tax for the period from 16.06.2005 to 30.09.2007. The adjudicating authority had relied on a tripartite agreement and concluded that the appellant was rendering service to the ultimate buyers and, therefore, liable for service tax. However, the tribunal referred to the Supreme Court's decision in the appellant's own case, which held that works contracts are not chargeable to service tax before 01.06.2007. The tribunal further referred to the case of Ashwini Apartments, which concluded that services involving composite works contracts cannot be taxed under commercial or industrial construction service or construction of complex service. The tribunal found that the contracts in question were composite contracts and not leviable to service tax before 01.06.2007. The tribunal also noted that the show-cause notice proposed to demand service tax on construction of residential complexes service after 01.06.2007, even though they were works contracts. Therefore, the demand for service tax after 01.06.2007 also could not be confirmed. The tribunal concluded that the department cannot traverse beyond the show-cause notice, and the case laws cited by the department were not applicable.

3. Time-barred Show Cause Notice:
The tribunal noted that the appellants argued the entire demand was barred by limitation as all facts were known to the department during the audit in 2007. The department contended that the show-cause notice was issued within five years after the facts became known, relying on the Supreme Court's judgment in Mehta and Company. However, since the tribunal decided the issue on merits, it did not record findings on the issue of limitation.

Conclusion:
The appeals were allowed, and the impugned order was set aside. The tribunal found that the demand of service tax of ?1,03,22,449 was not sustainable as the appellants were eligible to utilize the Cenvat credit availed on inputs/input services prior to 01.03.2006. The tribunal also concluded that the contracts were composite contracts and not leviable to service tax before 01.06.2007, and the demand for service tax after 01.06.2007 could not be confirmed. The tribunal did not address the issue of limitation as the appeals were decided on merits.