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2022 (4) TMI 706 - AT - Service TaxConstruction of residential and commercial complexes - service tax registration not obtained - non-payment of service tax - period in dispute is 2004-2005 to 2008-09 - explanation added by the Finance Act, 2010 in Section 65(105)(zzzh) of the Finance Act, 1994 - HELD THAT - Prior to 1-7-2010 builders/developers are not liable to pay service tax for the Construction Service and in the present case, the period involved is from 2004-2005 to 2008-09. Consequently, it is held that the impugned order is not sustainable in law. In the case of COLLECTOR OF C. EX., VADODARA VERSUS DHIREN CHEMICAL INDUSTRIES 2001 (12) TMI 3 - SUPREME COURT , the Apex Court held that We need to make it clear that regardless of the interpretation that we have placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue. In COLLECTOR OF CENTRAL EXCISE, MEERUT VERSUS MARUTI FOAM (P) LTD. 2004 (1) TMI 328 - SUPREME COURT , the Apex Court held that the construction of statutory phrase, placed by a circular issued by the Central Board of Excise and Customs, although different from the one placed by the Supreme Court, was binding on the Revenue till the same was withdrawn. It becomes clear that the circular, is binding on the department and this circular makes it more than abundantly clear that construction service provided by the builder/developer will not be taxable for the period prior to 01.07.2010 - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether the Commissioner (Appeals) exceeded the scope of the Show Cause Notice. 2. Applicability of Service Tax on construction activities prior to 01.07.2010. 3. Interpretation of relevant circulars and statutory provisions. 4. Invocation of the extended period for demand of Service Tax. Issue-wise Detailed Analysis: 1. Scope of the Commissioner (Appeals): The appellant argued that the Commissioner (Appeals) traveled beyond the scope of the Show Cause Notice and the grounds of the department's appeal. The Commissioner (Appeals) erroneously interpreted the explanation under clause (zzq) of sub-section (105) of Section 65 of the Finance Act, 1994, as retrospective, which was not an issue before him. The appellant contended that the explanation is clarificatory and does not introduce a new taxable service but explains an existing one. 2. Applicability of Service Tax Prior to 01.07.2010: The appellant highlighted that the Service Tax on "Construction Service" was introduced on 10.09.2004 and defined under Section 65(30a) of the Finance Act, 1994. This definition was substituted on 16.06.2005 to include "Commercial or Industrial Construction Service" and "Construction of Complex." The appellant argued that according to CBEC Circular No. 151/2/2012-ST dated 10.02.2012, construction services provided by builders/developers were not taxable prior to 01.07.2010. This was supported by earlier circulars and judicial decisions, such as Magus Construction Pvt. Ltd. vs. UOI and Commissioner of Service Tax vs. Sujal Developer. 3. Interpretation of Circulars and Statutory Provisions: The appellant referred to multiple circulars, including Circular No. 108/02/2009-ST dated 29.01.2009, which clarified that agreements between builders and buyers during construction were in the nature of "self-service" and not subject to Service Tax. The Finance Act, 2010, introduced an explanation deeming construction services taxable if any payment was received before the issuance of the completion certificate. The appellant argued that this explanation expanded the scope of existing services only from 01.07.2010. 4. Invocation of Extended Period for Demand: The appellant contended that the extended period for demanding Service Tax could not be invoked as there was no suppression of facts. The demand beyond one year was not justified, supported by the judgment in M/s Adhikrut Jabti Evam Vasuli vs. Commissioner of Central Excise, Indore. Tribunal's Findings: The Tribunal reviewed the submissions and records, noting that the appellant engaged in constructing residential and commercial complexes and received payments from buyers. The Tribunal found that the explanation added by the Finance Act, 2010, in Section 65(105)(zzzh) clarified that construction services were taxable only if payments were received before the completion certificate issuance. Circular No. 151/2/2012-ST dated 10.02.2012 further clarified that construction services by builders/developers were not taxable before 01.07.2010. The Tribunal cited the Supreme Court's decisions in Collector of Central Excise, Vadodara v. Dhiren Chemical Industries and Collector of Central Excise, Meerut vs. Maruti Foam P. Ltd., affirming that CBEC circulars are binding on the Revenue. The Tribunal concluded that the impugned order was unsustainable as it contradicted the binding circulars and judicial precedents. Conclusion: The Tribunal set aside the impugned order and allowed the appeal with consequential relief, emphasizing that construction services provided by builders/developers were not taxable before 01.07.2010. The judgment was pronounced in open court on 12.04.2022.
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