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TMI Blog2019 (9) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... mit that for the period post 01.7.2010, they have been discharging service tax appropriately. This is a fact which can be verified to ascertain the full tax liability for the period post 01.7.2010 or otherwise - Matter on remand. Demand of service tax - construction of Mahatma Gandhi Cancer Hospital and Research Institute - HELD THAT:- There are no reason to hold that the activity of a corporate hospital does not amount to commerce or industry. In fact, health care and hospitals is one of the most profitable and fast growing service industries in the country - there are no reason to hold that the construction of hospital building of a corporate hospital is excluded from the definition of works contract service. It is clearly covered by section 65 (105) (zzzza) (ii) (b) as a new building meant for the purpose of commerce or industry - demand upheld. Demand of service tax - construction of administrative building for Indian Registrar of Shipping - HELD THAT:- The Indian Registrar of Shipping is regulatory body who registers ships and vessels in the country and also classifies them and does related activities. These cannot be termed as an act of commerce or industry. Learned departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contract Service 10.3% Advances Received 3 James Enclave 33,46,934/- Works Contract Service 10.3% Advances received 4 Indian Registrar of Shipping 5,40,430/- Works Contract Service 4.12% (composition scheme) Reverse charge mechanism on agreement dt.14.12.2009 5 Mahatma Gandhi Cancer Hospital & Research Institute 1,04,88,599/- Works Contract Service 12.36/10.3% Reverse charge mechanism on agreement dt.28.12.06 & 25.10.08 * In respect of the owner share, service tax is calculated on the highest amount received by the Assessee/Owner for the similar flats of the apartment. 2. Extended period of limitation was invoked in demanding the aforesaid service tax and interest was demanded under Section 75 of the Finance Act, 1994. Penalties were proposed to be imposed under Section 76, 77 & 78 of the Finance Act, 1994. After following due process, learned Commissioner, by the impugned order, confirmed the demands partly and dropped the differential demand of duty to the extent of ₹ 1,53,17,746/- He also demanded interest under section 75 on the confirmed demand and imposed penalties under section 77 & 78 of the Finance Act, 1994. Aggrieved by this order, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax and accordingly, the amount so paid has been appropriated in the impugned order. 7. With regard to the second item of demand viz., construction of cancer hospital building, he would submit that they have constructed cancer hospital and administrative building for Mahatma Gandhi Cancer Hospital and Research Institute, Visakhapatnam on works contract basis. He would argue that the definition of works contract under section 65 (105) (zzzza) is as follows. "(zzzza) to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation.-For the purposes of this sub-clause, "works contract" means a contract wherein,- (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out,- (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Composition Scheme for payment of Service Tax) Rules, 2007 without following necessary procedure. Therefore, department's appeal is on this ground which may be allowed and the assessee's appeal may be rejected and the demand, interest and penalties as indicated in the SCN may be upheld. 11. We have considered the arguments on both sides and perused the records. The demands in all these cases are under the works contract. There is no dispute that in all these cases the appellant not only supplied materials but also rendered services related to the works contract. Therefore, these are all composite works contracts. It is not in dispute that the appellant has not sought or followed the procedure required for composition scheme. Now, we proceed to decide each of the demands on merits. i. The demand of service tax on residential complex services: At this stage, it would be profitable to examine the various legal provisions and to issue decisions with regard to levy of service tax on construction of residential complex services. a. The Constitution of India divided the legislative powers between the Union and States listing them in three lists of the Seventh Schedule. Service Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are Section 66 and 66A. While Section 66 provides for charging services within India, 66A provides for charging the recipient of a service for services received from outside India. e. Section 66 reads as follows: "There shall be levied a tax (hereinafter referred to as the Service tax) at the rate of ten percent of the value of taxable services referred to in subclauses............. of clause (105) of section 65 and collected in such manner as may be prescribed." f. The sub-clauses of clause (105) of Section 65 listed various services. With effect from 1st June 2007, 'Works Contract Service' has been introduced in this clause by sub-clause (zzzza) of clause 105 of section 65. Even before the introduction of this sub-clause, Revenue sought to charge service tax under various other heads on composite works contracts allowing abatement towards the cost of materials as per applicable notifications. Hon'ble Apex court held that 'works contract is a separate species of contract distinct from the contract for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. It was further held that prior to the introduction of clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of. 45. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the revenue. g. Thus, the established legal position is that 'Works Contract Service' can be charged as 'works contracts' only under Section 65 (105) (zzzza) and only with effect from1.6.2007. h. In the case of Real Value Promoters Pvt Ltd and others as reported in 2018 (9) TMI 1149-CESTAT, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such contract is leviable to tax as sale of goods, and (ii) Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" l. Before the introduction of the explanation in (zzzh) w.e.f 01.07.2010, in all cases where the builder entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Homes v CCE Bhopal (2014 (34) STR 881 (Tri-Del) is as follows: "Coming first to the question as to whether the activity of M/s. Krishna Homes and M/s. Raj Homes was taxable during the period of dispute or not, by Finance Act, 2005, Clause (zzzh) was introduced into Section 65(105) of Finance Act, 1994, so as to bring within the purview of the term 'taxable service', a service provided or to be provided to any person by any other person "in relation to construction of complex". The expression "construction of complex" was defined in sub-section (30a) of Section 65 and accordingly this expression covered - "(a) construction of a new residential complex or a part thereof or (b) completion of finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex". The expression residential complex was defined in Section 65(91a) of the Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er :- "Explanation. - For the purposes of this sub-clause, the construction of a new building which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or the person authorized by the builder before grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer." Thus, in terms of this explanation, when a builder/promoter/developer got a residential complex constructed for his customers with whom he had individually entered into agreements, in terms of which the prospective customers were required to make payments for the residential units to be constructed in instalments and the possession of the residential units was to be given to the customers on completion of the complex and full payment having been made, the builder/promoter/developer was to be treated as a deemed provider of construction of residential complex service to his customers. Thus, by this explanation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h prospective customers for construction of residential units in a residential complex. Such works contracts involving transfer of immovable property were brought within the purview of taxable service by adding explanation to Section 65(105)(zzzh) w.e.f. 1- 7-2010, and therefore, it has to be held that such contracts were not covered by Section 65(105)(zzzh) during the period prior to 1-7-2010." n. To sum up, as far as construction of 'residential complexes' by the builders are concerned: i. Prior to 1.6.2007, if it is a composite works contract, no service tax is leviable in view of the judgment of the Hon'ble Apex Court in the case of Larsen & Toubro (supra). ii. After 1.6.2007, it is chargeable as 'works contract' only if it is a composite contract and under Construction of complex services' if it is a service simpliciter. iii. However, after 1.6.2007 but prior to 1.7.2010, whether it is a service simpliciter or a works contract, if the service is rendered prior to issue of completion certificate and transfer to the customer, it is not taxable being in the nature of self service. iv. Further, whenever the service is rendered for completion or construction of a flat fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the above, we find that the demand on construction of administrative building for IRS is liable to be dropped and we do so. 12. In view of the above, we find that the demand under works contract on construction of residential complexes post 01.7.2010 and on construction of cancer hospital building need to be upheld and the rest of the demands need to be set aside. As far as the composition scheme is concerned, the assessee has the option of paying service tax under the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007, if he chooses to do so. The mere fact that they have not opted for this earlier does not reduce their entitlement to opt for this scheme now. The demand of service tax needs to be recomputed as above, after following principles of natural justice and giving the assessee an opportunity to present their case including, indicating if they desire to avail the benefit of composition scheme. Interest as applicable will have to be paid on the differential service tax, if any. 13. As far as the imposition of penalties is concerned, we find that of all the demands, with respect to major portion, we have already held in favour of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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