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2021 (11) TMI 175 - AT - Service TaxTaxability - Construction of residential complex for personal use - staff quarters/ said residential units - excluded under Explanation II to Section 65(91a) read with Section 65(30a), 65(105)(zzzza) and 65(105)(zzzh) or not - work done by the sub-contractor - falls under the Exclusion Clause of Section 65 (91a) or not - difference of opinion - Majority Decision HELD THAT - Apparently and admittedly, the nature of construction in the present case is that of staff quarters. Therefore, more precise definition will be as given under section 65(91a), Finance Act. Bare perusal makes it clear that construction of residential complex, should have more than 12 residential units with common area and facilities in the same premises. Sub-clause (iii) of this section contains the exclusion clause by virtue of which the service rendered for construction of residential complex is exempted from the tax liability provided it meets the following criteria (i) Residential complex is constructed by a person; (ii) Who has directly engaged another person for designing or planning of the layout and its construction; and (iii) The complex is intended for personal use as residence by such person. It is observed from the show cause notice itself that the appellant was observed to have been engaged in providing construction of the residential complex service to M/s. PGCIL, Patna for constructing the complex for staff quarters of M/s. PGCIL at three different locations viz. Madhubani, Phulparas and Darbanga in Patna. M/s. PGCIL, in turn, admittedly, has given these quarters to its staff free of charge. Thus it becomes clear that there is no element of commerce /industry when M/s. PGCIL received services of construction of residential complex from the appellant. Admittedly the staff quarters/ said residential units were not meant for the employees of M/s. BSEB. Though Letter of Award was executed in association with M/s. BSEB, but for the only reason that the land required for the impugned residential complex is owned by BSEB as is found clearly mentioned in clause 3.0 of the said letter of Award. Sub-clause (iii) Section 65(91a) of Finance Act do not require a person to be the owner. The only requirement is that a person should be one who needs the residential complex for its personal and he shall directly engage the service provider of construction of residential purposes. As already observed above, it is M/s. PGCIL and not M/s. BSEB who required quarters for the residence of its own staff and M/s. PGCIL only has directly engaged the appellant. The another requirement of said clause(iii) is that the other person engaged should be the service provider of the Construction of Residential Complex service - In the present case, the said other person is the appellant and not M/s. PGCIL. Later is rather a person who in association with owner of the requisite land, M/s. BSEB, directly engaged the service provider, the appellant. The circular both of 2004 and 2007 which clarifies that if the builder is constructing the complex for someone including Government from which no commercial benefit has to be derived, such construction is not to be taxed under section 65(105(zzza). The services provided by the appellant to M/s. PGCIL are covered under the exclusion part of said sub clause (iii) of section 65(91a) of the Act, M/s. PGCIL being a person of the said sub clause and appellant being the any other person . Hence, irrespective the impugned service is the service of construction of residential complex but is the one as stands exempted from the tax liability due to the exclusion given to the residential complex which is meant for personal use as residence by the person who directly engaged the service provider and that no element of commerce or industry is involved - Board s circulars No. B2/8/2004-TRU dated 10.9.2004 and Circular No. 80/10/2004/ST, dated 17.09.2004 also clarifies the same. The appellant is a sub-contractor or not - HELD THAT - M/s. PGCIL was not engaged by M/s. BSEB for providing the construction services but was authorized to act on their behalf to engage any other person who may provide the construction of residential complex services. Apparently and admittedly, PGCIL is not the concern which is engaged in providing services of construction of residential complex. This particular finding is sufficient for me to hold that the appellant cannot be called as sub -contractor of PGCIL. PGCIL rather was the agent acting on behalf of BSEB and as such is to be classified as a person as mentioned in sub-clause (iii) of 65(91(a). In view of this finding, CBEC Circular No. 25/2010 as relied upon by Hon ble Member (Technical) has no significance. The said circular talks only about the sub-contractor being engaged by the provider of service of construction of residential complex for providing the said services to the persons for him he was otherwise engaged as the service provider. In the present case, facts and circumstances are that the appellant was directly engaged by M/s. PGCIL for construction of staff quarters to be used by M/s. PGCIL. Service receiver is M/s. PGCIL and service provider is the appellant. The work of providing the service of construction of residential complex has not further been awarded by the appellant to anyone else. This particular fact, to my opinion, distinguishes the present case from COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CUSTOMS, BANGALORE-II VERSUS NITHESH ESTATES LTD., 2018 (7) TMI 1135 - KARNATAKA HIGH COURT , thus also gets out of the scope of Circular dated 24.5.2010 - In the present case, none is the sub-contractor, as already discussed under Issue No. 1, service provided by the appellant falls under the exclusion part of Section 65 (91a)(iii). The appellant is not liable to pay the service tax. Otherwise also the services rendered are apparently and admittedly in the nature of composite contract or work contract service. Though the period in dispute is pre as well as post the said date, even for the post dated period, the appellant is not liable to pay the service tax, the service being covered under exclusion part of 65(90a)(iii), Finance Act. Extended period of limitation is attracted or not - HELD THAT - The show cause notice of 11.8.2010 raising the demand for the period from 2006-2008 is beyond the normal period of issuing the show cause notice raising the demand - I draw my support from the decision in the case titled as M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I 2007 (8) TMI 11 - SUPREME COURT , wherein Hon ble Apex Court has held that omission by a party to do what he might have done would not render it suppression. As far as fraud, collusion are concerned, it is evident that the intent to evade duty, is build into these words. So far as the mis-statement or suppression is concerned, they are clearly clarified by the word wilful preceding the words mis-statement or suppression of facts which again means intent to evade duty. Apparently, there is no deliberate intent on part of appellant to not to pay the duty. Whether the appeal has been rightly allowed by way of remand for re-determination of quantum of duty liability? - HELD THAT - The appellant not being the sub contractor, but the service provider of construction of residential complex service being directly engaged by a person i.e. M/s. PGCIL who require the said residential complex for their own personal use, was not liable to pay the service tax. The Board s circular of May, 2010 and the proviso to section 73 of Finance Act invoking the extended period of limitation are observed to be not applicable to the facts and circumstances of the present case - I am in agreement with the findings of Hon ble Member (Judicial) setting aside the order of Departmental Adjudicating authority confirming the demand. I do not deem fit that the case be remanded back for redetermination of the quantum of duty liability. The findings of Hon ble Member Judicial is confirmed - appeal allowed.
Issues Involved:
1. Taxability of construction of staff quarters under "Works Contract Service" and "Construction of Residential Complex Service." 2. Applicability of extended period of limitation. 3. Classification of the appellant as a sub-contractor. 4. Interpretation of "personal use" under Section 65(91a) of the Finance Act. Issue-wise Detailed Analysis: 1. Taxability of Construction of Staff Quarters: The appellant contended that the construction of staff quarters for Power Grid Corporation of India Ltd. (PGCIL) is not liable to tax, asserting that such construction falls under "construction of residential complex" for personal use, which is excluded from service tax. The Tribunal noted that the construction was for residential use by PGCIL employees and not for commercial purposes. The Tribunal relied on the Board’s Circular No.B2/8/2004-TRU dated 10.09.2004, which exempts non-commercial government constructions from service tax. The Tribunal concluded that the appellant’s activities were not taxable under Section 65(30a) read with Section 65(91a) and Section 65(105)(zzzza) and Section 65(105)(zzzh) of the Finance Act. 2. Applicability of Extended Period of Limitation: The Tribunal found no deliberate intent to evade tax on the appellant’s part. It was held that the extended period of limitation under Section 73 of the Finance Act was not applicable as the issue involved was one of interpretation rather than suppression or willful misstatement. The Tribunal observed that the appellant had taken registration and there was no evidence of deliberate non-compliance. 3. Classification of the Appellant as a Sub-contractor: The Tribunal determined that PGCIL was not acting as a contractor for Bihar State Electricity Board (BSEB) but as an authorized representative. Therefore, the appellant was not a sub-contractor. The Tribunal distinguished the case from the precedent set in CCE Vs. Nitesh Estates Ltd., where subcontractors were held liable for service tax. The Tribunal concluded that the appellant was directly engaged by PGCIL, making the exclusion clause applicable. 4. Interpretation of "Personal Use" under Section 65(91a): The Tribunal interpreted "personal use" to include use by employees of PGCIL, thus falling under the exclusion clause of Section 65(91a). The Tribunal cited the Board’s Circulars and previous judicial decisions, affirming that residential complexes constructed for personal use by employees of an organization do not attract service tax. The Tribunal emphasized that the residential quarters were allotted free of cost, reinforcing the non-commercial nature of the construction. Separate Judgments: The Tribunal noted a difference of opinion between the Members on certain issues, which was resolved by a third Member. The majority opinion aligned with the Member (Judicial), confirming that the construction of residential complexes for personal use is excluded from service tax, the appellant is not a sub-contractor, and the extended period of limitation is not applicable. The appeal was allowed, and the impugned order was set aside. Conclusion: The Tribunal allowed the appeal, setting aside the impugned order and confirming that the construction of staff quarters for PGCIL is not taxable under the relevant provisions of the Finance Act. The appellant was entitled to consequential benefits in accordance with the law.
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