2022 (1) TMI 1015 - AT - Service Tax

Effect of negative regime on Construction of Complex Services - tri-partite agreement - providing free of cost flats (FOC) to all the existing members of the Society in lieu of the development rights - whether with effect from 01.07.2012, when the scheme of taxation of services was changed from the positive definition of the taxable services to the negative list of taxable services, was there any material change in the provisions relating to services chargeable to tax under the category of Construction of Complex Services? - applicability of clarifications as given by the par 6.2.1 of the Education Guide 2012 - clarification dated 10.02.2012 rejected - HELD THAT - The instruction referred to in para 4.5, is only for the period post 01.07.2012, and holds in favour of applicability of the Circular dated 10.02.2012, in respect of the transactions, activities undertaken post 01.07.2012. Thus there are no error in the approach of adjudicating authority in placing reliance on the said circular for dropping the proceedings initiated. In the present case the respondent has discharged the complete service tax liability on the gross amount received by him for providing the taxable services. Once he have discharged the tax liability on the gross consideration received by him by the sale of flats to new buyers, the demand of service tax for the flats handed over to the existing members of the societies without any consideration cannot be sustained. There are no merits in the appeal filed by the revenue - appeal dismissed.

2022 (9) TMI 1058 - AT

Issues Involved:
1. Taxability of services under the "Construction of residential complex" category post-01.07.2012.
2. Whether the services provided to existing members of the society in redevelopment projects are taxable.
3. Applicability of CBEC Circular No. 151/2/2012-ST dated 10.02.2012 post-01.07.2012.
4. Valuation of service tax on flats given to existing members of the society.
5. Whether the adjudicating authority erred in dropping the service tax demand.

Issue-wise Detailed Analysis:

1. Taxability of Services Under the "Construction of Residential Complex" Category Post-01.07.2012:
The core issue is whether the services rendered by the appellant, categorized under "Construction of residential complex," are taxable after the introduction of the negative list of services on 01.07.2012. The adjudicating authority concluded that there was no material change in the statutory provisions before and after 01.07.2012. The provisions under Section 66E(b) were found to be identical to those under Section 65(105)(zzzh) of the Finance Act, 1994. The taxing principle for the levy of service tax remained the same, and thus, the services provided by the appellant were not taxable if the consideration was received before obtaining the completion certificate from the competent authority.

2. Services Provided to Existing Members of the Society in Redevelopment Projects:
The appellant provided flats to existing members of the society free of cost as part of redevelopment agreements. The adjudicating authority determined that this transaction did not meet the basic requirement of 'sale' since the flats were given free of cost. Consequently, these services were not considered taxable. The CBEC Circular No. 151/2/2012-ST dated 10.02.2012 clarified that reconstruction undertaken by a building society for its members is not chargeable to service tax if it is meant for the personal use of society members.

3. Applicability of CBEC Circular No. 151/2/2012-ST Dated 10.02.2012 Post-01.07.2012:
The adjudicating authority relied on CBEC Circular No. 151/2/2012-ST dated 10.02.2012, which clarified the tax implications of redevelopment projects. Despite the changes in the service tax regime post-01.07.2012, the circular was deemed applicable. This position was reinforced by the Ministry of Finance's instructions issued on 20.01.2016, which affirmed that the guidelines of the 2012 circular remained appropriate even after the introduction of the negative list.

4. Valuation of Service Tax on Flats Given to Existing Members of the Society:
The valuation issue was addressed by referencing the CBEC Circular No. 151/2/2012-ST dated 10.02.2012, which stated that the value of flats given to landowners should be determined based on the value of similar flats sold to other buyers. The adjudicating authority found that the appellant had discharged service tax on the gross amounts received from the sale of flats to new buyers. Hence, no additional service tax could be demanded for the flats provided free of cost to existing society members.

5. Whether the Adjudicating Authority Erred in Dropping the Service Tax Demand:
The revenue argued that the adjudicating authority erred in considering the provisions of Section 66E(b) and Section 65(105)(zzzh) as identical. They contended that the redevelopment services provided by the appellant were taxable post-01.07.2012. However, the adjudicating authority's reliance on the 2012 circular and subsequent instructions from the Ministry of Finance was found to be correct. The tribunal concluded that there was no error in the adjudicating authority's approach and dismissed the revenue's appeal.

Conclusion:
The tribunal upheld the adjudicating authority's decision to drop the service tax demand against the appellant, affirming that the services provided to existing society members in redevelopment projects were not taxable. The reliance on CBEC Circular No. 151/2/2012-ST dated 10.02.2012 and the Ministry of Finance's instructions from 2016 was deemed appropriate. The appeal by the revenue was dismissed, and the cross-objections filed by the respondent were disposed of accordingly.

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