2020 (11) TMI 285 - AT - Service Tax

Classification of services - construction of residential flats - to be classified under construction of residential complex service or under the Works Contract Service? - HELD THAT - The adjudicating authority must be given an opportunity to examine the case in the light of (a) The order of this bench in the case of VASANTHA GREEN PROJECTS VERSUS CCT, RANGAREDDY GST 2018 (5) TMI 889 - CESTAT HYDERABAD and PNR INFRA INDIA PVT LTD VERSUS CCCE ST, HYDERABAD - IV 2018 (12) TMI 1243 - CESTAT HYDERABAD with respect to the land owner s share of the flats. (b) Letter F.No.332/22/2015-TRU dt.05.09.2016 of TRU regarding classification of work undertaken. (c) Examine if there is any provision in the Works Contract (Composition Scheme for payment of service tax) Rules, 2007 whereby the department can, in the absence of any request from the assessee, impose the composition scheme or calculate the amount of service tax based on it. Appeal allowed by way of remand.

Summary

Issues:
Appeal against Order-in-Original regarding service tax on land owner's share of flats, misclassification under Works Contract Service, applicability of Works Contract Composition Scheme.

Analysis:
1. The appellant, a builder, entered into joint development agreements with landowners to construct residential building complexes. The appellant constructed flats on the land and sold them, giving some flats to the landowner without any cash consideration. The dispute arose regarding the service tax liability on the land owner's share of flats.

2. The appellant filed a declaration under the VCES for service tax on the land owner's share. However, a show cause notice reclassified the service under Works Contract Service, demanding differential duty. The Commissioner confirmed a demand and appropriated amounts paid under VCES and earlier service tax.

3. The appellant contended that no separate service tax is payable on the land owner's share as the entire project value, including land value and services, is subsumed in the builder's share. Referring to precedents, the appellant argued against the tax liability on the land owner's share.

4. Regarding misclassification under Works Contract Service, the appellant cited a letter clarifying Construction of Complex Service as the appropriate classification. The appellant sought the benefit of enhanced abatement and a refund due to excess payment.

5. The appellant challenged the valuation based on the Works Contract Composition Scheme, emphasizing that the scheme is optional and cannot be imposed by the revenue department without the assessee's consent.

6. The departmental representative supported the impugned order, mentioning an appeal against a similar case pending in the Supreme Court. The Tribunal directed a fresh examination by the adjudicating authority considering relevant precedents and rules.

7. The Tribunal remanded the matter to the adjudicating authority for a reevaluation based on specific points, without expressing any opinion on the case's merits. The impugned order was set aside, and the appeal was allowed for reconsideration.

This detailed analysis highlights the key arguments, legal interpretations, and directions given by the Appellate Tribunal CESTAT HYDERABAD in the judgment, addressing the issues raised in the appeal comprehensively.