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TMI Blog2021 (11) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 77 and 78 of the Act. The show cause notice further states that as per the information received from CERA (Review) vide letter No.CERA/Review/ST/54/09-10 dated 17.06.2009, the appellant was engaged in construction of staff quarters for Power Grid Corporation of India Ltd. at Madhubani, Phulparas and Darbhanga, received gross amount of Rs. 2,75,44,600/-, which includes cost of materials. It further appeared that construction of the residential complex service was brought into the Service Tax net and charge were created vide notification no.15/2005-ST w.e.f. 07.06.2005. It further appeared that Works Contract Service has been introduced by the Finance Act, 2007 w.e.f. 1.6.2007, which also includes construction of residential complex. Further, reference was made to Section 65 (30a) of the Finance Act, as substituted w.e.f. 16.06.2005, under which construction of complex means construction of a new residential complex or a part thereof, etc. Accordingly, service tax liability was calculated by allowing abatement of 67% on gross value towards material component and on the balance taxable value, service tax has been calculated. It was further alleged that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the appellant falls under the category of "construction of residential complex" as defined under Section 65(30a) read with Section 65(91a) and accordingly, the proposed demand was confirmed along with interest and further penalties of Rs. 5,000/- was imposed under Section 77 and Rs. 10,83,961/- under Section 78 of the Act. 6. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals), who was pleased to dismiss the appeal agreeing with the adjudication order. 7. Being aggrieved, the appellant is before this Tribunal. 8. Reiterating the grounds already taken before the court below, it is further emphasised by the ld. Counsel for the appellant that construction of residential unit(s) for personal use does not come under the purview of "Taxable Service" under Clause (30a) and Clause (91a) of Section 65 of the Act. 9. It is further urged that admittedly, it is the case of composite service (labour plus material) and hence, not taxable prior to 1.6.2007 when the works contract service was brought to tax as per law laid down by the Hon'ble Supreme Court in the case of CCE Vs. Larsen & Toubro Ltd. - 2015 (39) STR 913. It is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. Hence, the buildings constructed by the appellant cannot be considered to be 'residential complex' taxable under service tax law. Thus, I find that no service tax liability on this account is attached to the appellant." 12. It is further urged that extended period of limitation is not invokable as there is no case of deliberate non-compliance or suppression etc. At best, the issue is of interpretation. It is further urged that under the facts and circumstances, the penalty imposed is fit to be set aside. Further, reliance is placed by the appellant on the Division Bench's ruling of this Tribunal in the case of CCE Vs. Mall Enterprises - 2016 (41) STR 119, wherein under the fact that assessee had constructed residential quarters for staff of Principal. It was case of Revenue that such construction of staff quarters fall under the residential complex services. In the order-in-original, the demand was dropped and in appeal by the Revenue the grounds taken that the activity does not fall within the ambit of Exclusion Clause under section 65(30) read with Section 65 (91a) was rejected, and appeal dismissed and the same was further upheld by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Having considered the rival contentions, we find that admittedly, it is a case of composite contract, as held by the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd. (supra). No service tax is chargeable on composite contracts prior to 1.6.2007 when works contract service was introduced. The Hon'ble Supreme Court also held that such composite contract are classifiable only under the head "Works Contract Service". I further find that under Section 65 (105) (zzzza)(ii)(b), construction of a new building or civil structure or part thereof, primarily for the purpose of commerce or industry and further, clause (c) provides construction of a new residential complex. We further find that Clause 65(91a), which defines, "residential Complex" provides exclusion of construction for personal residential use. Further, under Explanation II to Clause (91a), it is provided that "personal use" includes use as residence by another person on rent or without consideration. 15.1 We further find that in the facts of the present case, the Power Grid Corporation is not the contractor of Bihar State Electricity Board, but as a duly authorised representative of the Bihar State El ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the revenue. 2.0 The Section 65 (91a) of the Finance Act, 1994 is reproduced below: "(91a) "residential complex" means 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 an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing or planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause,- (a) "personal use" includes permitting the complex for use as residence by another person on rent or without consideration; (b) "residential unit" means a single house or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Package-)) under Group-II, associated with Bihar Sub-transmission System as per BOQ, specifications & direction of Engineer-in-Charge. For the execution of the contract, the contractual actions on the part of the owner shall be performed by POWERGRID for and on behalf of BSEB. Wherever reference to POWERGRID is made in the bidding documents, Letter of Award or any related paper/ documents, it shall be deemed to be "for and on behalf of BSEB". Under this Letter of Award, Owner' shall mean 'Bihar State Electricity Board' (BSEB) and shall include their legal representatives, successors and assigns. 'Employer"/POWERGRID' shall mean Power Grid Corporation of India Ltd and shall include their legal representatives, successors and assigns. 3.1 The scope of work under this package shall include but not be limited to the following: - You shall perform the work under this contract complete in all respects as per terms & conditions and specifications stipulated in various documents listed in para 1.1, 2.0 read in conjunction with the agreements reached between you and POWERGID in the above Record Notes of Discussions referred to at para 2.1 above, and any amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r own use or for letting them out on rent, is not supported by any documentary evidence. Hence the claim made by the appellants that these residential quarters are covered by the exclusion clause of the definition of residential complex as per Section 65 (91a) of the Finance Act, 1994, as it existed then is not substantiated. 5.0 In the present case under consideration the Appellant has not been engaged by Bihar State Electricity Board, the owner of residential quarters as per the letter of award. Undisputedly the appellants have been engaged by M/s Powergrid Corporation for construction of these residential quarters, hence the case of appellants will fall in the category indicated in bold in para 3 of the said clarification. This entire scheme has been considered by the CESTAT, Bangalore in case of Nitesh Estates Ltd. [2016 (40) STR 815 (Tri- Bang)] and after examining these provisions and the Board Clarification, CESTAT has observed as follows: 7.1 In this case there is no dispute and it clearly emerges that the residential complex was built for M/s. ITC Ltd. and appellant was the main contractor. Appellant had appointed sub-contractors all of whom have paid the tax as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact of sub-contract of the entire 'Residential Complex' in question by the respondent assessee M/s. Nithesh Estates Limited to M/s. Larsen and Toubro Limited is not disputed by the Revenue. It is also not disputed that due Service Tax on the payments made to the sub-contractor M/s. L & T Limited stood paid to the Government. 19. The Central Board of Excise and Customs (C.B.E. & C.) for the pre- amendment period prior to 1-7-2010 has issued the aforesaid Circular No. 108/2/2009-S.T., dated 29-1-2009 clarifying this position, that in such cases, where the ultimate owner (M/s. ITC Limited in the present case) enters into a Contract for construction of a 'Residential Complex' with the Promoter/Builder/Developer (M/s. Nithesh Estates Limited in the present case) which itself provides service of Design, Planning and Construction and after such construction, the ultimate owner receives such property for 'Personal use', then such activity would not be subjected to Service Tax, because this case would fall under the 'Exclusion Clause' provided in the definition of 'Residential Complex'. 20. However, in such a situation, if the Service of any person like the Contractor o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have entered into agreement with M/s Powergrid Corporation. In turn M/s Powergrid Corporation has engaged the Appellants for execution of these works through them. Thus the appellants become sub contractor to the main contractor for construction of these residential quarters for Bihar State Electricity Board. In the case of Nithesh Estate, referred above, the sub contractors viz L & T had discharged the entire tax liability for construction of the residential complex for ITC, for which the main contractor was M/s Nithesh Estates. 8.0 Appellants have relied upon other decisions to support their case. These decisions are taken up for discussion in flowing paragraphs: * Mall Enterprises [2016 (41) STR 119 (T)] The facts as have been stated in the decision are reproduced below and are clearly distinguishable from the facts of present case: 3. The issue involved in this case is regarding the taxability of the services rendered by the respondent assessee. Respondent assessee had constructed residential quarters for staff of New Parli Thermal Power Station and it is the case of the Revenue that such construction of staff quarters could be categorized under Residential Complex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case under consideration, the appellant is sub contractor to the main contractor. Hence the facts of these case are clearly distinguishable. * Kasana Builders Pvt Ltd [2019 (24) GSTL 231 (T)] In this case tribunal has observed as under: "2. We note that the grounds raised by Revenue is that the Central Board of Excise & Customs through clarification dated 24-5-2010 had clarified that if NBCC constructed residential houses for Central Govt. then the same were not taxable, but if NBCC further awards a contract to sub-contractors, then sub-contractors were liable to pay Service Tax. On careful consideration of the definition of 'residential complex service' we note that flats constructed for personal use are not covered by the definition of residential complex." The decision of the tribunal do not consider the decision of the Hon'ble High Court of Karnataka in case of Nithesh Estates referred to above and has been rendered stating that "flats constructed for personal use are not covered by the definition of residential complex" is contrary to the express finding recorded by the Hon'ble Karnataka High Court, that residential complex that was constructed by the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their own case [843/PAT/S.Tax/Appeal/2014 dated 23.07.2014 to support their case. The appeal filed by the revenue against the said decision was withdrawn by the revenue on monetary grounds as per the Litigation Policy of the Government, as per tribunal order No 14/07/2016 [in appeal No ST/&5054/2015] dated 14.07.2016. We do not find any merits in the submissions made in view of the provision of Section 35 R of the Central Excise Act, 1944 which reads as follows: "SECTION 35R. Appeal not to be filed in certain cases. - (1) The Central Board of Excise and Customs may, from time to time, issue orders or instructions or directions fixing such monetary limits, as it may deem fit, for the purposes of regulating the filing of appeal, application, revision or reference by the Central Excise Officer under the provisions of this Chapter. (2) Where, in pursuance of the orders or instructions or directions, issued under sub-section (1), the Central Excise Officer has not filed an appeal, application, revision or reference against any decision or order passed under the provisions of this Act, it shall not preclude such Central Excise Officer from filing appeal, application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial Complex as per Section 65 (91a). The submission made by the appellants is contrary to the letter of award referred earlier. By doing so appellants have intentionally avoided payment of Service Tax due. For the act of suppressing these facts with intention to evade payment of service tax due, extended period of limitation as per Section 73, has been rightly invoked against the appellants. Adjudicating Authority has for invoking extended period held as follows: "It is also established that noticee did not take registration within thirty days of starting the taxable service as they provided service during the material period 2006-08 and took Service Tax Registration on 14.08.09 in inappropriate category, thus contravened the provisions of Section 69 of Finance Act, 1994. Further, it is an admitted fact that the noticee did not file the statutory half yearly ST 3 Return and thus willingly suppressed the facts from the department with intent to evade Service Tax. The information regarding the service being provided by the noticee to M/s Powergrid Corporation of India Ltd., Patna by way of building quarters at Madhubani, Phulparas and Darbhanga during the material period 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Gannon Dunkerley case in segregating the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Supreme Court in re Larsen & Toubro and Ors. We, therefore, have to merely determine the scope of taxability of 'works contract service' rendered before and after 1st June, 2007 under the Finance Act, 1994." 14.0 Both the decisions, rendered in the case of M/s Larsen &Tubro and M/s URC Constructions were not before the concerned authorities for consideration. Since no finding has been rendered by the original and first appellate authority on the applicability of the ratio of these decisions, in the present case the matter needs to be remanded back to the original authority for limited consideration of this argument. 15.1 Thus we allow the appeal filed by the Appellant and remand the matter back to the original authority for reconsideration of matter in light of the Hon'ble Supreme Court in case of Larsen & Tubro and tribunal decision in case of URC Construction referred above for the period in dispute. All other arguments advanced by the appellants challenging the demand both on the merits and limitation are rejected and the scope in remand proceedings is limited to the consideration of the arguments that are made on the basis of these two decisions. 15.2& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not taxable, as held by the learned Member (Judicial) OR In view of the CBEC Circular dated 24.05.2010 (para 3 of the circular) - where work is done by the sub-contractor, it does not fall under the Exclusion Clause of Section 65 (91a) and hence is taxable, as held by the learned Member (Technical). 2. On this issue it is submitted on behalf of the appellant that the residential complex services have been provided by the appellant to Power Grid Corporation India Ltd. (hereinafter referred as PGCIL) for construction of its staff quarters at Madhubani, Phulparas and Darbanga. It is submitted that M/s. PGCIL is a Government authority, hence is exempted from the tax liability. Section 30A read with subsection (91 a) of section 65 of Finance Act has been impressed upon. Learned Counsel has also impressed upon Board's circular dated 10.9.2004 and 17.9.2004 which clarifies that the Government building or civil construction for residence/office purpose or for providing the general Government Accommodation would not be taxable except in case the government is using the said building for Commercial purpose. It is submitted that since the service provided for constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions, findings rendered by Hon'ble Member (Technical ) have been impressed upon. 4. To adjudicate this issue foremost reference to the legal provisions defining the impugned service of construction of complex/ residential complex and those providing taxability of these services need to be looked into: 5. Section 65(30a) of the Finance Act, 1994 define 'construction of complex' as under: a. Construction of a new residential complex or a part thereof; or b. Completion and 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. 6. Section to 65(91a) of the Act defines Residential Complex as under: "Section 65(91a) "residential complex" means any complex comprising of - (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structing the complex for staff quarters of M/s. PGCIL at three different locations viz. Madhubani, Phulparas and Darbanga in Patna. M/s. PGCIL, in turn, admittedly, has given these quarters to its staff free of charge. Thus it becomes clear that there is no element of commerce /industry when M/s. PGCIL received services of construction of residential complex from the appellant. Further, I observe that the appellant was engaged by M/s. PGCIL only vide the letter of Award for Construction of Quarters dated 20.01.2005. 9. I further observe that it is not the case of the department that the complex was for less than 12 number of residential units and it lacked common facilities and services as are mentioned in sub-clause(iii) of section 65(91a) of Finance Act. From the submissions of learned Departmental Representative the only challenge is that M/s. PGCIL is not 'a person' as is mentioned in exclusion part of said sub-clause (iii) it is rather Bihar State Electricity Board (BSEB). But from the letter of award for construction dated 20.01.2005, I observe that the appellant, the provider of construction service has been directly engaged by M/s. PGCIL who required the constructed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. 13. Relevant para 13.2 in both the Board circulars are reproduced herein below:- "13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is 'used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax." Significantly Trade Notice dated may 27, 2015 also clarifies the afore stated legal position. Relevant para is reproduced herein below: "As per Union Budg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCE & ST vs Kasana Builders Pvt Ltd. [2019 (24) GSTL 231 (Tri-All)]; 2) M/s. Rama Construction Company vs CCE, Delhi I [2018 (9) TMI-917(T)] 18. It is submitted on behalf of the appellant that as it is an admitted fact that the appellant constructed staff quarters for Power Grid Corporation India Ltd., Patna. During the period from 2006-08 at Madhubani, Phulparas and Darbanga who in turn has given these quarters to its staff, free of charge and for the purpose M/s. PGCIL has engaged the appellant. This fact conclusively establishes that present is not the case of existence of main contractor and sub-contracts relationship. It is submitted that the issue of sub contract is not otherwise raised in the show cause notice. Learned Counsel further submitted that M/s. PGCIL has engaged the appellant on behalf of M/s. BSEB, rather it was duly authorized representative of M/s. BSEB. While laying emphasis on the decision of M/s. Rama Construction Company vs CCE, Delhi I(supra) has mentioned that the issue of sub contractor has wrongly been raised by Hon'ble Member (Technical). Findings by Hon'ble Member (Judicial) upon this count are impressed upon. The findings to the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o hold that the appellant cannot be called as sub -contractor of PGCIL. PGCIL rather was the agent acting on behalf of BSEB and as such is to be classified as " a person" as mentioned in sub-clause (iii) of 65(91(a). In view of this finding, CBEC Circular No. 25/2010 as relied upon by Hon'ble Member (Technical) has no significance. The said circular talks only about the sub-contractor being engaged by the provider of service of construction of residential complex for providing the said services to the persons for him he was otherwise engaged as the service provider. 22. As already discussed under issue No. 1, clause (iii) of Award of Contract is not about M/s. PGCIL being engaged by M/s. BSEB for constructing the staff quarters for M/s. BSEB. It is the contract of M/s. PGCIL on behalf of M/s. BSEB for engaging the builder i.e. the present appellant for getting the construction of residential staff quarters for M/s. PGCIL. This fact itself is sufficient to hold that Board's Circular of 24.5.2010 as relied upon by the Hon'ble Member (Technical) is not applicable to the given facts and circumstances of the case. The said circular was issued after the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax cannot be charged for such services for the period prior to 7.2.2012. Though the period in dispute is pre as well as post the said date, even for the post dated period, the appellant is not liable to pay the service tax, the service being covered under exclusion part of 65(90a)(iii), Finance Act. In the light of above discussion, not only on this issue but on the Issue No. 1 as well, I am in consonance with the findings rendered by Hon'ble Member (Judicial) on this issue in the impugned order. Issue No. 3 Extended period of limitation is not attracted, as held by the learned Member (Judicial) OR Extended period of limitation is attracted, as held by the learned Member (Technical) 23. So far as the third issue of extended period of limitation is concerned, the findings given by Member (Judicial)have been impressed upon by the appellant. It is submitted that the extended period can be invoked if any only if the tax has not been paid or short paid for the reason of fraud or collusion or willful mis-statement or suppression of facts or contravention of provisions of section 73 of Finance, 1994 thereof. 24. The arguments have been objected by learned Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) setting aside the order of Departmental Adjudicating authority confirming the demand. I do not deem fit that the case be remanded back for redetermination of the quantum of duty liability in terms of decision of M/s. Larsen and Toubro (supra) and in the case of URC Construction Pvt. Ltd. reported in [2017 (50) STR 147] Once the facts of this case stand distinguished absolutely from the finding and the facts of the case of Nitesh Estates Limited (supra) and from relied upon the Circular dated 24.5.2010, the question of redetermination of duty liability did not at all arise. Hence I am in consonance with the findings of Hon'ble Member (Judicial) on this issue as well 27. Consequent to the above discussion on the issues under reference I confirm the findings of Hon'ble Member Judicial. The reference stands answered in the aforesaid terms. (Pronounced in the open Court on 24.09.2021) Majority/Final Order of the Tribunal The opinion of ld. Third Member have been received by the Division Bench. On all the questions/points of difference, the ld. Third Member have agreed with the view of Member(Judicial). Thus, the final order by majority is as follows:- 1. Const ..... X X X X Extracts X X X X X X X X Extracts X X X X
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