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TMI Blog2014 (9) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... )(zzzh) and that brought about a change in the manner in which the business transactions of the assessee was to be considered. During the relevant period, the appellant executed four projects, namely, Sundarbans, Sudarsana, Nakshatra and Inseli Park. 3.2. The Department issued three show cause notices proposing to levy service tax on the ground that the activity undertaken by the assessee is liable to service tax under the category of Construction of Complex service as defined under Section 65(30a) of the Finance Act, 1994, as amended. The assessee filed its objections to the show cause notices relying upon various decisions of the Co-ordinate Benches of the Tribunal and the circulars issued by the Department, on the prima facie plea that the activity undertaken by the appellant is in the nature of works contract as defined under Section 65(105)(zzzza) of the Finance Act, 1994. The assessee also pleaded that the nature of transaction in the present case would not attract service tax in terms of the Finance Act, 1994 in view of the various circulars issued from time to time clarifying the position. The assessee specifically relied upon the circular in D.O.F.No.334/1/2010-TRU, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer to pay the required consideration are incorporated. 8.5 These different patterns of execution, terms of payment and legal formalities have given rise to confusion, disputes and discrimination in terms of service tax payment. 8.6 In order to achieve the legislative intent and bring in parity in tax treatment, an Explanation is being inserted to provide that unless the entire payment for the property is paid by the prospective buyer or on his behalf after the completion of construction (including its certification by the local authorities), the activity of construction would be deemed to be a taxable service provided by the builder/promoter/developer to the prospective buyer and the service tax would be charged accordingly. This would only expand the scope of the existing service, which otherwise remain unchanged. 3.3. However, the first respondent, vide Order-in-Original Nos.13 to 15 of 2012, dated 29.3.2012, confirmed the demand of service tax on the ground that the activity is in the nature of Construction of Complex Service, which is liable to service tax and the appellant was directed to pay a sum of Rs. 11,28,85,825/- under various heads. 3.4. Challenging the said ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgo Properties private Ltd. v. Commissioner of Service Tax, Chennai, 2010 TIOL 1142 wherein the case was remanded to the original authority to consider relevance of Board Circular dated 29.1.2009?" 3.6. In the meanwhile, the appellant filed a modification application before the Tribunal seeking modification of the Misc. Order No.41959-41961/2013, dated 29.7.2013. However, the Tribunal disposed of those applications by Miscellaneous Order No.40412 to 40414 of 2012, dated 27.1.2014 extending the period for compliance of the earlier order dated 29.7.2013 by two weeks an directed the appellant to report compliance on or before 11.2.2014. As the appellant reneged on compliance of the pre-deposit as ordered, the Tribunal by Final Order Nos.40170 to 40172 of 2014, dated 17.3.2014 dismissed the appeals filed by the appellant. Challenging this order passed by the Tribunal, the appellant has filed C.M.A.Nos.1419 to 1421 of 2014 raising the following substantial questions of law: "1. Whether in the facts and circumstances of the case, the Tribunal was right in dismissing the appeal for non-compliance when the CMA challenging the Misc. order directing the pre-deposit is pending b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant and Mr.V.Sundareswaran, learned Standing Counsel appearing for the first respondent and perused the orders passed by the Tribunal and the authorities below. 5. The appellant in this case has promoted four projects, as stated above, and in all these projects, the appellant entered into Memorandum of Agreement with the intending purchaser for construction of a residential flat and along with that an Agreement of Sale is entered into between the parties. Thereafter, in many a cases, sale deeds are executed insofar as the undivided share of the land is concerned. The sale of undivided share is post the Memorandum of Construction and Agreement for Sale. In identical manner in all these projects, the appellant entered into agreements with the intending buyers and it on the basis of these documents, construction was taken up. 6. The view of the Department as well as the Tribunal, prima facie, appears to be that when undivided share is sold, the person to whom the undivided share is sold becomes the legal owner of the undivided share. At this juncture, it is relevant to refer to the said observation made by the Tribunal in Misc. Order No.41959 to 41961 of 2013, dated 29.7.2013, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lds a residential complex, having more than 12 residential units, by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay service tax on the gross amount charged for the construction services provided, to the builder/ promoter/developer under construction of complex service falling under section 65(105)(zzzh) of the Finance Act, 1994. If no other person is engaged for construction work and the builder/ promoter/developer undertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. Service tax exemption for small service providers upto an aggregate value of taxable services of Rs. 4 lakh provided in any financial year vide notification No. 6/2005-Service Tax dated 1.3.2005 is applicable for construction of complex service also. 8. The Tribunal, however, took a different view and stated that the facts in Sanghvi and Doshi Enterprises case, referred supra, does not apply to the case on hand, as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on issued at the earliest point of time, namely, Circular F.No.332/25/2006-TRU, dated 1.8.2006, would favour them. The relevant portion of the circular, with the risk of repetition, is extracted hereunder: Sr.No. Issue Legal Position 1. Is service tax applicable on Builder, Promoter or Developer who builds a residential complex with the services of his own staff and employing direct labour or petty labour contractors whose total bill does not increase 4.0 lacks in one P/Y? In a case where the builder, promoter or developer builds a residential complex, having more than 12 residential units, by engaging a contractor for construction of such residential complex, the contractor shall be liable to pay service tax on the gross amount charged for the construction services provided, to the builder/ promoter/developer under construction of complex service falling under section 65(105)(zzzh) of the Finance Act, 1994. If no other person is engaged for construction work and the builder/ promoter/developer undertakes construction work on his own without engaging the services of any other person, then in such cases in the absence of service provider and service recipient r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complex, he becomes the owner of the residential unit and subsequent activity of a builder for construction of residential unit is a service of construction of residential complex to the customer and hence service tax would be applicable to it. A contrary view has been expressed arguing that where a buyer makes construction linked payment after entering into agreement to sell, the nature of transaction is not a service but that of a sale. Where a buyer enters into an agreement to get a fully constructed residential unit, the transaction of sale is completed only after complete construction of the residential unit. Till the completion of the construction activity, the property belongs to the builder or promoter and any service provided by him towards construction is in the nature of self service. It has also been argued that even if it is taken that service is provided to the customer, a single residential unit bought by the individual customer would not fall in the definition of residential complex as defined for the purposes of levy of service tax and hence construction of it would not attract service tax. 3. The matter has been examined by the Board. Generally, the initial agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an that initial transfer was not complete. The taking over is a separate transaction arising because of subsequent financial transactions and conditions attached to such transactions. Therefore, the Tribunal took the view that the land stood transferred to the intending buyer and, therefore, there was a service provided by the appellant to the intending buyer and, therefore, liable to tax. 15. In the Circular F.No.332/25/2006-TRU, dated 1.8.2006, it is clearly provided that in a case where the builder, promoter or developer builds a residential complex having more than twelve residential units by engaging a contractor for the construction of such residential complex, the contractor shall be liable to pay service tax to the builder, promoter or developer under the construction of complex service falling under Section 65(105)(zzzh) of the Finance Act, 1995 and in a case where the the builder, promoter or developer undertakes construction work on his own without engaging the services of any other person, there is no service provider and service recipient relationship and, therefore, the question of providing taxable service to any other person by any other person does not arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar states that if the ultimate owner enters into a contract for construction of a residential complex with a promoter / builder / developer, who himself provides service of design, planning and construction; and after such construction the ultimate owner receives such property for his personal use, then such activity would not be subjected to service tax, because this case would fall under the exclusion provided in the definition of residential complex . However, in both these situations, if services of any person like contractor, designer or a similar service provider are received, then such a person would be liable to pay service tax. 19. The first part of the circular, as set out above, applies to a case where there is an initial agreement between the promoter, builder, developer in the nature of an agreement of sale. The circular holds that the property remains under the ownership of the seller, namely, promoter, builder or developer. It is only after completion of the construction or full payment of entire sum, the sale deed is executed and then ownership gets transferred to the ultimate owner. It, therefore, holds that any service provided by such seller in connection with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel that only 843 flats out of 4252 flats have been sold and thereby huge amount is locked up and therefore, the assessee is suffering extreme undue financial hardship and this has not been considered by the Tribunal. He further pleaded that at the time of adjudication a sum of Rs. 1,17,91,287/- was appropriated. Thereafter, a further sum of Rs. 2 Crores was paid on 28.3.2014 and 20.6.2014. Thereafter, on 16.7.2014, attachment notices were issued to the banks and Rs. 70 Lakhs were appropriated from bank accounts. In the light of the above, he pleaded that the balance amount of duty, fine and penalty may be waived. 23. The learned Standing Counsel appearing for the Revenue reiterated the stand taken by the Department before the Tribunal and also relied upon a decision of a Division Bench of this Court in C.M.A.Nos.392 and 393 of 2014, dated 5.2.2014 (South India Shelters Pvt. Ltd. v. Commissioner of Service Tax, Chennai and another). 24. In South India Shelters Pvt. Ltd. case, the plea of undue hardship was rejected as there was no material placed before the Court in support of the said plea and the same is evident from paragraph (6) of the order itself. We find mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicating authority the duty demanded or the penalty levied: Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal, may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of the Revenue: Provided further that where an application is filed before the Commissioner (Appeals) for dispensing with the deposit of duty demanded or penalty levied under the first proviso, the Commissioner (Appeals) shall, where it is possible to do so, decide such application within thirty days from the date of its filing." 11. Two significant expressions used in the provisions are undue hardship to such person and safeguard the interests of the Revenue . Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interests of the Revenue have to be kept in view. 12. As noted above there are two imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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