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TMI Blog2024 (8) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... vices as a promoter/developer/builder - the demand of service tax cannot sustain. The impugned order is set aside to the extend of confirming the demand of service tax and interest. The appeal filed by the assessee is allowed - HON BLE MS. SULEKHA BEEVI.C.S., MEMBER (JUDICIAL) And HON BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL) Ms. Radhika Chandrasekaran, Advocate, for the Asseessee Shri. N. Satyanarayanan, Authorised Representative for the Revenue ORDER Per Ms. Sulekha Beevi. C.S These appeals arise out of the same impugned order and therefore heard together and disposed of by this common order. For the sake of convenience, the parties are referred to as Assessee and Department. 2. Brief facts are that the assessee is registered under Construction of Residential Complex Services with the Service Tax Commissionerate. On verification of accounts it was noted that (a) The assessee has not paid service tax of Rs.10,28,419/- for the period from May 2007 to May 2008 under Construction of Residential Complex Service in respect of Sreerosh Palm Vally Project; (b) The assessee has not paid service tax of Rs.1,81,799/- under Construction of Residential Complex Service on built in area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2009 had clarified that the promoter/developer/ builder is not liable to pay service tax under Construction of Residential Complex Services for the period up to 01.07.2010. The Ld. Counsel stated that the very same issue was considered in the assessee's own case for the subsequent period from October 2008 to June 2010. The Tribunal after considering the Board s Circular as well as the decision in the case of M/s. Krishna Homes versus CCE, Bhopal 2014 (34) S.T.R. 881 (Tribunal-Delhi) had set aside the demand. The Ld. Counsel argued that the Finance Act 2010 has for the first time brought developers into the ambit of service tax net with effect from 01.07.2010 through the introduction of explanation to Section 65 (105) (zzzh). Hence there can be no demand of service tax on developers prior to 01.07.2010. 4. Further the original authority has confirmed the service tax under Construction of Residential Complex Services and under Works Contract Services. The contracts entered into by the assessee are composite contracts involving supply of material and delivery of services. The Commissioner (Appeals) has travelled beyond the show cause notice and has confirmed the entire demand unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, though the show cause notice proposes to demand service tax for different projects under the category of Construction of Residential Complex Services and Works Contract Services separately, the Commissioner (Appeals) vide order impugned herein has held that the service tax demand has to be confirmed under Works Contract service only, since the period is with effect from 01.06.2007. This view taken by the first appellate authority is definitely beyond the show cause notice. The foundation of a proceeding is the show cause notice which is putting the assessee to notice in regard to the allegations and the basis for demand of tax. The original authority confirmed the demand under the categories as proposed in the show cause notice. However, the Commissioner (Appeals) has taken the view that since Works Contract Services was introduced w.e.f. 01.06.2007, all demands should be under Works Contract Services. This is erroneous as it travels beyond the show cause notice. 11. The Ld. Counsel has relied upon the Board Circular as well as the decision of the Tribunal in the case of M/s. Krishna Homes (supra) to argue that prior to 01.07.2010, there is no liability to promoter/developer/b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in 1983 by inserting clause (29A) to Article 366, the definition clause as follows : 366(29A) tax on the sale or purchase of goods includes - (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made; (b) 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. (c) The legislative competence of the Union to tax 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). (d) The question as to whether such taxation is covered by the charging section of the Service Tax provisions (Fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omposite Works Contracts rendered in connection with construction of complex services prior to 1-7-2010 was examined. Construction of complex services was covered in Section 65(105)(zzzh) and in this clause an explanation was added w.e.f. 1-7-2010. This reads as follows : (zzzh) to any person, by any other person, in relation to construction of complex; 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. (k) 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. Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de 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 single apartment intended for use as a place of residence; [Section 65(91a) of the Finance Act, 1994] (m) 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 C.B.E. C. in Circular No. 108/2/2009-S.T., 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hom they had entered into agreements for construction of the residential units and whose possession was to be handed over on completion of the construction and full payment having been made by the customers. It is seen that on this point, the Tax Research Unit of the Central Board of Excise Customs, which is a wing of the C.B.E. C. dealing with legislation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty and the title to the property continues to remain with the builder, no service was provided to the buyer; that the service, if any, would be in the nature of a service rendered by the builder to himself; that the explanation expands the scope of the taxable service, provided by builders to buyers pursuant to an intended sale of immovable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity 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. In view of the above, we do not find any 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. The demand on this count, therefore, needs to be upheld and we do so. (iii) The demand of Service Tax on construction of administrative building for Indian Registrar of Shipping : We find 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 departmental representative submits that the IRS charges fees for its activities. Even if it does so it is similar to that of other regulatory agencies such as RT officer, Transport Authority charging fees for issuing a driving license or for registering a vehicle. It is neither an organisation inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r following principles of natural justice. 13. The Tribunal in the above decision has also considered the issue as to whether the demand of service tax can be made under Construction of Complex Services/ Construction of Residential Complex Services for the period prior to 01.07.2012. The decision of the Tribunal in the case of Real Value promoters Pvt Limited 2018 (9) TMI 1149 Cestat-Chennai was referred to by the coordinate bench of the Tribunal to observe that in the case of composite contracts involving both supply of materials and rendition of services the demand can be made only under WCS and not under construction of residential complex services or construction of complex services. 14. In the assessee's own case for the period subsequent to the disputed period the demand has been set aside following the decision in the case of M/s. Krishna homes observing that the assessee has provided services as a promoter/developer/builder. 15. After appreciating the facts of the case and following the decisions cited above we are of the considered opinion that the demand of service tax cannot sustain. 16. In the result the impugned order is set aside to the extend of confirming the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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