2023 (12) TMI 1003 - AT - Service Tax

Levy of service tax - Construction of Residential Complex services (CRC) - Commercial or Industrial construction (CIC) - demand prior to 1.6.2007 - HELD THAT - The contracts are entirely composite in nature involving both element of service as well as supply of goods. The 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 has held that the demand of service tax on composite contracts cannot be made prior to the introduction of WCS (1.6.2007). Following the said decision, it is opined that the demand prior to 1.6.2007 requires to be set aside. After the period 1.6.2007 the department has raised the demand under the category of Construction of Residential Complex services and Construction of Commercial or Industrial Construction services - HELD THAT - The said demand cannot sustain for the reason that the contracts involved are again, composite in nature, involving both rendering of services as well as supply of goods. The Tribunal in the case of Real Value Promoters Pvt. Ltd. and Others Vs. CGST and Central Excise, Chennai 2018 (9) TMI 1149 - CESTAT CHENNAI had observed that even after 1.6.2007 the demand of service tax on composite contracts has to be under works contract services and the demand under Construction of Residential Complex services or Commercial and Industrial Construction services cannot sustain. The decision rendered by the Tribunal in the case of Real Value Promoters was followed by the Tribunal in the case of Jain Housing and Construction Ltd. Vs. CST 2018 (9) TMI 1149 - CESTAT CHENNAI In the said decision, the Tribunal set aside the demands raised under Residential Complex Services observing that the demand raised under such services after 1.6.2007 on composite contracts cannot be sustained. The demands raised under construction of Residential Complex Services and Commercial or Industrial Construction Services for the disputed period cannot be sustained and requires to be set aside - the impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Classification of services provided by the appellant.
2. Applicability of service tax on composite contracts prior to and post 01.06.2007.
3. Invocation of the extended period for issuing the Show Cause Notice (SCN).
4. Liability to pay service tax on the landowner's portion and builder's portion.

Summary:

1. Classification of Services:
The appellant argued that their activities should be classified under "works contract service" rather than "Construction of Residential Complex service" or "Commercial or Industrial Construction service." The Tribunal agreed, stating that the appellant's contracts are composite in nature, involving both material and services, and are thus not classifiable under the latter categories.

2. Applicability of Service Tax on Composite Contracts:
The Tribunal referenced the Supreme Court's decision in *Larsen & Toubro Ltd. (2015) 39 STR 913*, which held that service tax on composite contracts cannot be levied prior to the introduction of works contract services on 01.06.2007. Consequently, the demand for service tax prior to this date was set aside. For the period post 01.06.2007, the Tribunal followed its own decision in *Real Value Promoters Pvt. Ltd.* and others, which stated that composite contracts should be taxed under works contract services and not under construction services.

3. Invocation of Extended Period:
The appellant contended that the SCN dated 24.10.2011 was time-barred as the extended period under Section 73(1) of the Finance Act, 1994, could only be invoked in cases of fraud, collusion, or suppression of facts. The Tribunal found that the department was already aware of the appellant's activities as early as 2010, and thus, the extended period was not applicable. The SCN was deemed time-barred.

4. Liability to Pay Service Tax on Landowner's and Builder's Portions:
The department argued that the appellant had not discharged service tax on the landowner's portion of the built-up area and had short-paid service tax on the builder's portion. The Tribunal, however, held that the contracts were composite in nature and thus not liable for service tax under the categories of Construction of Residential Complex services or Commercial or Industrial Construction services. The demand for service tax on both portions was set aside.

Conclusion:
The Tribunal set aside the demands raised under Construction of Residential Complex services and Commercial or Industrial Construction services for the disputed period, following the decisions in *Larsen & Toubro Ltd.*, *Real Value Promoters Pvt. Ltd.*, and *Jain Housing and Construction Ltd.* The appeal was allowed with consequential reliefs.