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TMI Blog2019 (9) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... een held that For the period post 1.6.2007, service tax liability under the category of commercial or industrial construction service under Section 65 (105) (zzzh), Construction of complex service under Section 65 (105(zzzq) will continue to be attracted only if the activities are in the nature of services simpliciter. Thus, if the services rendered are in the nature of composite works contracts, they cannot be charged to service tax prior to 1.6.2007 and can be charged post this date only under this head 65 (105) (zzzza) and not under any other head. Thus, as far as service tax, under construction of complex service in respect of residential complexes is concerned, prior to 1.7.2010 (when the explanation was inserted), no tax could be levied. This was also clarified by the CBEC in circular No. 108/2/2009-ST dated 29.1.2009 - thus, with respect to construction of complex services were rendered prior to 01.7.2010, no service tax is chargeable and the demand to this extent needs to be set aside. Renting of Immovable Property Service - the relevant period is 2007-08 to 2009-10 and the SCN was issued on 22.10.2010 invoking extended period of limitation - HELD THAT:- Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also need to be upheld. Appeal is remanded to the original authority for the limited purpose of re-computation of liability - appeal allowed by way of remand. - Service Tax Appeal No. 26126/2013 - A/31012/2019 - Dated:- 18-9-2019 - MR. S.S. GARG, MEMBER (JUDICIAL) AND MR. P. VENKATA SUBBA RAO, MEMBER (TECHNICAL) Shri Y. Srinivasa Reddy, Advocate for the Appellant. Shri A.V.L.N. Chary, AR for the Respondent. ORDER 1. This appeal is filed against Order-in-Original No. 52/2013-Adjn-ST (Commr) dt.31.12.2012. 2. Heard both sides and perused the records. The facts of the case in brief are that the appellant is a builder engaged in construction of residential complexes and have been issued a show cause notice dt.22.10.2010 demanding service tax along with interest as follows. Sl. No. Demand Amount Period 1 Construction of Residential Complex Services 97,55,315 1.4.05 to 31.3.10 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice rendered to any person by any other person by renting of immovable property or any other service in relation to such renting, for use in the course of or furtherance of business or commerce. The key difference, he explains is prior to this amendment the renting of immovable property was per se not taxable but any service rendered in relation to renting of immovable property only was taxable. After the amendment made with retrospective effect, renting itself became a taxable service. This amendment was made with retrospective effect with effect from 2007. He would argue that it is a well settled position of law that where the amendment is made with retrospective effect, extended period of limitation alleging fraud, collusion, wilful misstatement, suppression of facts, etc., cannot be invoked because the assessee could not have anticipated the legislative change and paid tax. With specific reference to renting of immovable property, he relies on the following case laws to say that extended period of limitation cannot be invoked to give effect to the retrospective levy and demand. 1) Shri Thadi Satya Ramalinga Reddy v CCE ST, Visakhapatnam [2017 (4) TMI 1024 CEST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. At this stage, it would be pertinent to discuss various judicial decisions with regard to taxability of services rendered by builders as works contract services and as services simpliciter. 10. The Constitution of India divided the legislative powers between the Union and States listing them in three lists of the Seventh Schedule. Service Tax is levied by the centre as per its legislative competence under Article 265 read with Entry 97 of List I of this Schedule. Tax on sale or purchase of goods, falls in the competence of States as per List II. Initially, Constitution of India (as well as its predecessor Government of India Act, 1935) did not provide for taxing the goods used in executing composite, indivisible works contracts treating such use of goods as sale. The State s attempt to tax in such a manner was struck down by the Constitutional bench of Hon ble Supreme Court in the case of State of Madras vs Gannon Dunkerley Co. (Madras) Ltd. 1959, SCR 379. After examining this judgement, the Law Commission of India, in its 61st Report suggested three alternative amendments to the Constitution to bring the goods used in execution of works contracts within the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to charge service tax under various other heads in the case of composite 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 (zzzza) of clause 105 of Section 65, there was neither any charging section nor machinery to levy and assess service tax on indivisible works contracts. The relevant paras of this landmark judgement are as below: 17 . We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :- To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und 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. 16. 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. 17. In the case of Real Value Promoters Pvt Ltd and others as reported in 2018 (9) TMI 1149-CESTAT, Chennai, the question which arose was whether a demand can be made on commercial and industrial construction service under Section 65 (105) (zzzh) of the Finance Act, 1994 after 1.6.2007 where the nature of contract is a composite contract involving both supply of materials and rendition of services. It has been held that For the period post 1.6.2007, service tax liability under the category of commercial or industrial construction service under Section 65 (105) (zzzh), Construction of complex service under Section 65 (105(zzzq) will continue to be attracted only if the activities are in the nature of services simpliciter. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator, 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; 21. Before the introduction of the explanation in (zzzh) w.e.f 01.07.2010, in all cases where the builder entered into an agreement to sell flats and collected advances, but the actual transfer of the property took place only after the completion certificate is issued, the service was considered as self service by the builder only and not the service provided to the customer and hence was not taxable. Similarly, where the semi-built flats are sold and then the customer enters into an agreement with the builder for its completion, such agreement, being in the nature of service for a flat for personal use, was also excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act, 1994 as any complex comprising of - (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a premises and the layout of such premises is approved by any authority under law for the time being in force, but does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, the scope of the Clause (zzzh) of Section 65(105) has been expanded and this amendment by adding an explanation has been held by this Tribunal in the case of CCE, Chandigarh v. U.B. Construction (P) Ltd. (supra) as prospective amendment. In this regard, para 5 of this judgment is reproduced below :- 5. In Maharashtra Chamber of Housing Industry v. Union of India - (Bom.), the validity of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or to 1-7-2010. 23. To sum up, as far as construction of residential complexes by the builders are concerned: 1. 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). 2. 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. 3. 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. 4. Further, whenever the service is rendered for completion or construction of a flat for personal use of the service recipient, no service tax is payable in view of the exclusion in the definition of residential complex service. 5. After 1.7.2010, service tax is chargeable under the head of construction of complex services if it is service simpliciter and under works contract service if it is a composite works contract. ..... 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 under the head management, maintenance and repair services invoking extended period of limitation is sustainable and needs to be upheld. 27. On the question of extended period of limitation, we find this is invokable in the case of management, maintenance and repair services and is irrelevant in respect of the construction of residential complex services and construction of complex services as the same has been held to be not taxable at all. As far as renting of immovable property is concerned, the extended period of limitation, as discussed above, cannot be invoked. Consequently, the amount on interest, if any, is payable and the penalties under Section 77 78 also need to be upheld. In view of the above, the appeal is disposed of as follows. 1) The demand under Construction of Residential Complex Services is set aside. 2) The demand under the head of Construction of Complex Services on the Landowners portion is set aside. 3) The demand of service tax on Renting of immovable property is upheld within the normal period of limitation and the demand of extended period of limitation is set aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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