9911796707
TMI Blog2019 (9) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on the above demands. Further, penalties were proposed to be imposed upon the appellant. After following due process, the learned Commissioner confirmed the demands and interest as proposed and imposed penalties under Section 78 & 77 of the Finance Act, 1994. 4. Learned Counsel for the appellant submits that of the aforesaid four demands, Sl.No.1 & 2 pertain to demands on Construction of Residential Complex Services which are chargeable to service tax with effect from 01.07.2010 on insertion of an explanation to the definition of taxable service under Section 65(105)(zzzh) of the Finance Act, 1994. He further submits that even advances received prior to this date are exempted vide notification 36/2010-ST dt.28.6.2010. He further submits that they have undertaken all these constructions only as works contracts i.e., they not only provided the services but also provided the materials required for rendering these services. He would argue that if at all service tax has to be charged on these services, they can be charged only under works contract service. Therefore, the demand of service tax under Construction of Complex Services or Construction of Residential complex service is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this amount, it has been wrongly mentioned in their ledgers that this amount pertains to management services when in fact, it includes other income such as income on interest, etc. Lastly, he would argue that the entire demand is time barred and therefore, needs to be set aside. 6. Learned departmental representative reiterates the findings in the Order-in-Original and asserts that the demands have been correctly raised and the impugned order calls for no interference and needs to be upheld. 7. We have considered the arguments on both sides and perused the records. The demands are under four heads; (1) Construction of Residential Complex Services, (2) Landowners portion of Construction of Residential Complex Services, (3) Renting of immovable property and (4) Management, Maintenance or Repair Services. 8. The first two services pertain to the services allegedly rendered by the appellant in construction of the complexes. The appellant obtains land from land owners and constructs complexes on the same. In consideration of the land, some flats are built and given to the land owners. Remaining flats are sold by the builder in semi-constructed form along with the undivided share of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person to whom such transfer, delivery or supply is made; 11. This 46th Constitutional amendment was challenged in Builders' Assn. of India v. Union of India, (1989) 2 SCC 645 and it was upheld by the Apex court. Thus, the goods component of the indivisible works contracts fell within the legislative competence of the states to tax. 12. The legislative competence of the Union to tax works contract services itself is not in doubt because the service tax itself is under the residuary power under entry 97 of List I (Any other matter not enumerated in List II or List III including any tax not mentioned in either of those Lists). 13. The question as to whether such taxation is covered by the charging section of the Service Tax provisions (Finance Act, 1994) or otherwise was examined by the Hon'ble Supreme Court in the case of Commissioner of Central Excise and Customs vs Larsen & Toubro Ltd. [2015 (39) STR 913 (SC)]. The charging sections in this Act 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. 14. Section 66 reads as follows: "There shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and untouched by the present judgment." (at page 427) 27. In fact, the speech made by the Hon'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated :- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." 42. It remains to consider the argument of Shri Radhakrishnan that post 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case. 43. We need only state that in view of our finding that the said Finance Act lays down no 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 elem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 20. The definition of 'Works Contract Service' 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 ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplex for use as residence by another person on rent or without consideration; (b) "residential unit" means a single house or a single apartment intended for use as a place of residence; (Section 65(91a) of the Finance Act, 1994)" 22. 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. The question as to whether this limitation on taxation prior to insertion of the explanation in 'construction of complex services' also extends to cases where such services are rendered as 'works contract service' was examined and answered in affirmative in the case of Krishna Homes (supra) by the Tribunal. This ratio has been followed in subsequent orders including by this bench. The relevant portion of the order in the case of Krishna 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislation work, had vide Circular No. 332/35/2006-TRU, dated 1-8-2006 clarified that in case where a builder, promoter, 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 service provided to the builder/promoter/developer under construction of complex service falling under Section 65(105)(zzzh) of the Finance Act, 1994 and that if no person is engaged by the builder, promoter, developer for construction work who undertakes construction work on his own without engaging the services of any other person than in such cases, in absence of the service provider and service recipient relationship, the question of providing taxable service to any person by any other person does not arise. W.e.f. 1-7-2010 an explanation was added to Section 65(105)(zzzh) which was as under :- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable property before, during or after the construction and therefore the provision is expansive of the existing intent and not clarificatory of the same; and is consequently prospective". 9. In view of the above, though in view of the Apex Court judgment in the case of M/s. Larsen & Toubro Limited and Others v. State of Karnataka & Others (supra), the agreements entered into by a builder/promoter/developer with prospective buyers for construction of residential units in a residential complex against payments being made by the prospective buyers in instalments during construction and in terms of which the possession of the residential unit, is to be handed over to the customers on completion of the residential complex and full payment having been made, are to be treated as works contracts, it has to be held that during the period of dispute, there was no intention of the Government to tax the activity in terms of such contracts a builder/developer with 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 Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of service tax. Respectfully following the case laws of Shri Thadi Satya Ramalinga Reddy (supra) and M/s Nagpal Traders (supra), we therefore, hold that the demand on this head is not sustainable beyond the normal period of limitation. 26. As regards the last demand of management, maintenance or repair services, this demand was made based on the information available in the books of accounts of the appellant themselves and their ledgers which show the amounts as having been received from management services. The audited balance sheets of the appellant themselves show that they have earned income on maintenance and repair services. They cannot now claim that the income is not so. Learned counsel for the appellant tried to impress upon the bench that the income is actually income from interest etc. However, from the papers presented before us, he could not establish that the income which was recorded in their audited balance sheets as maintenance and repair services was not so and in fact, it has been misdeclared by their auditor and it pertains to interest income. It is also not in dispute that the appellants have neither declared these amounts as services rendered by them nor have ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
