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TMI Blog2022 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... m 01.07.2012, Section 66F have been added to the Finance Act, which deals with classification of service in case of bundled services. Section 66 F (1) provides that - unless otherwise specified, reference to a service (hereinafter referred to as main service) shall not include reference to a service which is used for providing main service. Further, where a service is capable of differential treatment for any purposes based on its description, the most specific description shall be preferred over a general description. From the facts on record and on perusal of the RUDs, it is found that although the appellant may have prepared a price list showing preferential location charges, car parking charges etc. separately, but it is evident from the buyer-agreements (sample buyer agreement produced at the time of hearing), that the appellant have charged the negotiated sales price per sq. ft. and in addition have charged IFMS and EDC/IDC per sq. ft. basis. In addition, there is power back up charges in some of the cases. Evidently, it is found that Revenue have calculated preferential location charges, IFMS charges, EDC/IDC, power back up charges based on the price list. It is found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d demand under this head of ₹ 1,57,467/-. It is further evident from the record that the appellant has not collected any service tax on this account. Short payment of tax in respect of advance received from the customer for buying the flats - HELD THAT:- The appellant has paid the service tax on the full consideration received at the time of finalisation of the sale or execution of sale deed, on the total consideration received. However, in view of the tax liability which arises on the event of receipt of advance consideration, there is only case of deferment in deposit of tax. Thus, the appellant is only liable for interest on the delay deposit of tax in respect of advance received, in accordance with law. Excess abatement claim as per Notification No. 26/2012-ST - HELD THAT:- From perusal of the purchase deed and other documents produced before us, we find that the purchase agreement and the sale deed mentions the area sold as super area in sq. ft, and not the carpet area. Whereas the rate of abatement under the said notification is based on two criteria (i) carpet area not more than 2000 sq. ft. and (ii) sale consideration not more than ₹ 1 crore. We find t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia stated that M/s Vardhman Developers is a HUF and filed IT returns and maintains proper books of accounts. When flat is booked and agreement is made with the customer, a customer ledger is opened. The amount received from the customer is credited to his account and debited to the concerned bank. On receipt of complete / final payment from the customer, the sales ledger is credited and customer ledger is debited. The amount received from the customer under the head namely deposit, IFMS charges (Interest Free main charges), External Internal development charges, are not included in the total cost of the flat shown in the ledger. Further, he also provided copy of balance sheet and sales ledger for the financial year 2013-14 to 2016-17 as well as copy of four buyer agreements and customer ledger details and details regarding number of flats sold during the period under enquiry. The officer also obtained the current price list for the various categories of flats. In the price list there appeared to be separate charges for covered car parking, power back up, club membership and preferential location charges. 3. Further, in compliance to summons the appellant filed written su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid service tax on the consideration received by them from their prospective buyers towards these services. 7. It further appeared that w.e.f. 01.07.2012, the term Service is defined under Section 65B (44) means any activity carried out for consideration, includes a declared service. Further, under Section 66E clause (b) it appeared that services specified include construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. 8. Accordingly, based on the price list it appeared to Revenue that appellant is liable to pay service tax on Preferential Location service, Car parking service, Club Membership service, Security deposit, Interest Free Maintenance Security service (IFMS), Internal or External Development service, Electrical service, Power Back up service etc. provided by the party to their prospective buyers. Revenue also referred to TRU letter D.O.F. No. 334/1/2020-TRU dt. 25.02.2010, where it is observed that the Preferential Location service/ service provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short payment of service tax for the period under dispute of ₹ 1,39,80,663/-. 11. On perusal of the ST-3 return and price list in respect of flat/ residential complex as submitted, it appeared that appellant has claimed excess abatement on flat-residential complex, having carpet area more than 2000 sq. ft., and cost more than ₹ 1 crore, for the purpose of calculation of tax liability inasmuch as vide Notification No. 26/2012-ST, the rate for calculation of taxable value for the purpose of service tax liability, on construction of residential complex was revised. 12. On the basis of price list of the flats, it was observed that four BHK multi-storeyed duplex was constructed and sold, having area of 2575 sq. ft. and 2710 sq. ft. and their cost is ₹ 1,06,25,000/- and ₹ 1,18,42,500/- respectively. Number of such flats are sold during the period of dispute, hence as per Notification the appellant was required to pay service tax on the 30% of the gross amount received towards the construction of these duplex flats, wherein it appeared that they have taken abatement of 75% from the gross receipt and have paid service tax on 25% of the value only. Thus, appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause notice was adjudicated on contest and the proposed demand was confirmed vide order-in-original dt. 30.04.2020 alongwith interest and further equal amount of penalty was imposed under Section 78(1). Further, penalty was imposed of ₹ 10,000/- under Section 77 (1)(c). Further, also imposed penalties of ₹ 26,000/- for late filing of returns. 16. Learned Counsel for the appellant Sh. Abhinav Kalra, inter alia urges that the demand have been confirmed on vague and flimsy ground by observing that the alleged additional amount collected from the customers would be taxable at full rate of service tax without even classifying and mentioning the category of service under which the same will be taxable. 17. The Commissioner further fails to justify as to how a particular receipt fell under the service head. The Commissioner have erred in relying upon the so-called price list and have computed the tax liability under various heads like PLC, Car Parking, Club Membership charges, IMFC charges, Security deposit, EID Charges, Power Back-up charges, Electrical charges as well as alleged short payment of tax in respect of advances received from the customer. Further, have u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department, which is not permissible under law. 17.5 It is further urged that in respect of IFMS charges collected, such amount is collected by the appellant builder as a trustee of the buyers of the flat. Later on, after completion of the building or property such amount is transferred to the managing body of the apartment (RWA) for future repair, maintenance or any emergency expenditure, etc. 17.6 It is further urged that admittedly appellant have paid service tax each year on the amount received from their customers during the period under dispute. Thus, by charging service tax again on the advances received from the customers, on the allegation that the appellant was required to pay service tax as and when advance was received has resulted in double demand of service tax on the same amount, which is fit to be set aside. 17.7 It is further urged that abatement under Notification No. 26/2012-ST as amended, is applicable with respect to the carpet area of the flat, being less than 2000 per sq. ft. or more, and the second criteria being the sale value more than or less than ₹ 1 crore. Higher abatement of 75% is available if both the conditions are met or fulf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant was under bonafide belief that service tax is not payable. 17.10. However, the appellant have accepted their tax liability with respect to service tax on rent received. It was also urged that the receipt in the ledger includes amounts which are non taxable in nature like income. It was also urged that delay in filing of return was not intentional but due to non availability of the accountant being on leave, the return could not be prepared in time. 17.11 In the course of hearing before the Court below, in response to query by the Commissioner, the appellant informed that Sh. Umesh Jain is Karta of the HUF. Further, Sh. N. Jain is the son-in-law of Sh. Umesh Jain, and not the member of HUF. In response to the query - if there is any club or power back up, covered car parking in the project, it was answered that yes there is existence of club, power back up and covered car parking in the project, it was further informed that IFMS charges are @ 25/- per sq. ft.. Further, it was informed that IFMS was included in the buyer agreement. It was also urged that there is evidence of IFMS in a project being handed over to the welfare society or RWA. It was further informed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges in some of the cases. Evidently, we find that Revenue have calculated preferential location charges, IFMS charges, EDC/IDC, power back up charges based on the price list. We find that there is no such mention in the buyer agreement, nor there is any amount collected towards such heads in the books of accounts maintained by the appellant, as is evident from their balance sheet/ P L account/ trial balance. Thus, we hold that service tax is not payable on such hypothetical calculation, there being no actual consideration towards these, which is an admitted fact. We hold that service tax levied in this manner based on the price list is wrong, when there is no actual receipt of consideration under these heads. Accordingly, we set aside the demand as follows:- 1 Preferential Location charges 2,35,56,977/- 2 Car parking charges 95,00,700/- 3 Club Membership charges 31,66,900/- 4 Interest Free Maintenance Security charges 17,59,052/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not given the break-up of the rent received from residential flats and commercial space, we confirm demand under this head of ₹ 1,57,467/-. It is further evident from the record that the appellant has not collected any service tax on this account. 24. So far the demand with respect to short payment of tax in respect of advance received from the customer for buying the flats, we find that the appellant has paid the service tax on the full consideration received at the time of finalisation of the sale or execution of sale deed, on the total consideration received. However, in view of the tax liability which arises on the event of receipt of advance consideration, there is only case of deferment in deposit of tax. Thus, we hold that the appellant is only liable for interest on the delay deposit of tax in respect of advance received, in accordance with law. 25. So far the allegation of short payment on account of alleged excess abatement claim as per Notification No. 26/2012-ST, we find that the appellant have submitted before the Commissioner that they have not sold any flat having carpet area in excess of 2000 sq. ft. and they have also produced Chartered Engineer certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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