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TMI Blog2024 (8) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... A HIGH COURT ], wherein the Hon ble High Court has held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute - the service tax is not leviable on Construction of Complex Services . Service tax on certain receipts under taxable category of Real Estate Agent service - HELD THAT:- The appellant is not acting as a real estate agent and therefore, the service tax is not chargeable on the amounts/fees received by it in the course of performing of statutory duties - It has been consistently held by the Tribunal that charges collected by the builder for authorizing transfer of allotment of property before sale or as part of the sale agreement is on principle to principle basis and no service is provided to any person in relation to sale, purchase, leasing, renting of any real estate and therefore, such charges are not covered under the head of Real Estate Agent Services - none of the receipts/income of the appellant fall under the scope of services defined under Section 65(105)(b) of the Finance Act, 1994; hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Commissioner has confirmed the demand of service tax under various services viz. construction and sale of houses, real estate agents, reverse charge mechanism (RCM) on legal services, manpower supply services and works contract services. 1.2 Two appeals i.e. ST/60163/2020 ST/60164/2020 have been filed by the department against the impugned order dated 20.02.2020 whereby the learned Commissioner has dropped the demand under RCM on manpower supply services and works contract services. 1.3 Since the issues involved in all these six appeals are identical and there is only one appellant/assessee namely M/s The Housing Board Haryana, therefore, all six appeals are taken up together for discussion and decision. For the sake of convenience, the facts of the Appeal No. ST/60139/2016 are taken up as a lead case because the extended period of limitation has also been invoked in this appeal only. 2. Briefly stated facts of the case are that the appellant/assessee M/s The Housing Board Haryana, a government authority, was created on 14.05.1971 under the Housing Board Act, 1971 with a view to satisfy need of housing accommodation of general public. The main activity of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing service tax on Construction of Complex Services , the learned Counsel for the appellant has made the following submissions: A.1 That the Board (appellant) formulates various schemes for constructions of houses below 60 meters and each and every such scheme has sanction of the appropriate authority of Govt of Haryana, as envisaged under Sections 23 and 24 of the Housing Board Haryana Act, 1971. It is undisputed fact that the Appellant sells the houses including the rights in the land. The Appellant is not engaged in pure construction or works contract services on the land under the ownership of any other person. Further, the activity undertaken/ consideration involved include the value of land and material in the sale/ transfer of the houses to the individual buyers. A.2 That the demand has been confirmed with respect to the levy of service tax on services in relation to construction of complex as defined under Section 65(105)(zzzh) of the Finance Act, 1994. A.3 That with effect from 1st July, 2012, the Act has been amended and service tax was imposed on all services other than those specified in the negative list. The services covered under Section 65(105)(zzzh) are thereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a buyer constitutes an outright sale of immovable property, which admittedly is not chargeable to service tax. A.7 That the service tax is essentially a tax on the services as distinct from a tax on the value added by manufacturing goods/ trading. Construction of a complex essentially has three broad components, namely, (i) land on which the complex is constructed; (ii) goods which are used in construction; and (iii) various activities which are undertaken by the builder directly or through other contractors. The object of taxing services in relation to construction of complex is essentially to tax the various activities that are involved in the construction of a complex and the resultant value created by such activities. A.8 That it is also essential to understand the measure of tax used for the levy on the service portion of the contract. The measure of tax must have a nexus with the object of tax and it would be impermissible to expand the measure of service tax to include elements such as the value of goods or value of land for the purpose of the levy of service tax. A.9 That Section 67 of the Act provides for valuation of taxable services. The said section as amended by Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the service provider in the following manner, namely :- (i) Value of works contract service shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract. Explanation. - For the purposes of this clause, - (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and architect s fees; (iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract; (v) cost of consumables such as water, electricity, fuel used in the execution of the works contract; (vi) cost of establishment of the contractor relatable to supply of labour and services; (vii) other similar expenses relatable to supply of labour and services; and (viii) profit earned by the service provider relatable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite contract which also involves sale of land. The gross consideration charged by a builder/promoter of a project from a buyer would not only include an element of goods and services but also the value of undivided share of land which would be acquired by the buyer. A.14 Though Notification No. 1/2006-ST dated 01.03.2006 (as amended by Notification No. 29/2010-ST dated 22.06.2010) and Notification No 26/2012-ST dated 20.06.2012 provide for abatement to the extent of 75%. In this regard it is submitted that no machinery provision is provided under the Act or the Rules to determine the service value in construction of houses. The issue has been decided against the Revenue by the judgment in the case of Commissioner of Central Excise v. Larsen and Toubro Limited. In that case, the Supreme Court had affirmed the decision of the Orissa High Court in Larsen and Toubro Limited Vs State of Orissa and Ors. : (2008) 12 VST 31 (Orissa), wherein the Court held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sale, purchase, leasing or renting of real estate and includes a real estate consultant; (89) real estate consultant means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance , in Relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate; B.4 That analysis of provision of Section 65(88)/65(89) reveals that the real estate agent/consultant means a person, who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant and a Real estate Consultant is one who provides advice, consultancy or technical assistance in relation to evaluation, conception, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate. B.5 The appellant in no manner render advice or consultancy or technical assistance in respect of Sale or purchase of real estate. The Board is not acting as a real Estate Agent hence Service tax is not chargeable on amounts/fees received by it in the course of performing of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds as required by the Housing Board Haryana Act, 1971 and Regulations referred above. Housing Board Haryana does not carry out any activity for the owners of property in reciprocate of Administrative fee and Transfer Fee received from them. In absence of activity, the provision of service as defined under the Finance Act, 1994 could not be alleged. Without prejudice to the submissions made above, even if it is assumed, though not accepted, that there is an activity undertaken by the Appellant, then the same fall within the exclusions to the definition of service as defined under Section 65B(44) of the Finance Act, 1994. As any activity which merely constitutes transfer of immovable property is excluded from the definition of service as defined under Section 65B (44) of the Finance Act, 1994. In the present case, Housing Board Haryana (Appellant) changes the name of the owner in the records as required by the Housing Board Haryana Act, 1971 and Regulations and which results into the transfer of title of immovable property in the records of Housing Board Haryana. It is submitted that any amount charged under any statute for any permission would not constitute any service. The Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be considered as consideration for rendering any service. B.9 In this regard reliance is placed on the following decisions wherein it has been held by the Tribunal that charges collected by builder for authorizing transfer of allotment of property before sale, as part of sale agreement is on principal to principal basis and no service is provided to any person in relation to sale, purchase, leasing or renting of any real estate and therefore such charges are not covered under head of Real Estate Agent services . Ansal Buildwell Ltd Vs Commissioner of Service Tax, New Delhi - 2019 (25) GSTL 96 (Tri. Del.) Ajay Enterprises Pvt Ltd Vs Commissioner of Service Tax, Delhi 2016 (42) STR 471 (Tri. -Del.) Commissioner of S.T., New Delhi Vs Ansal Properties and Infrastructures Ltd - 2018 (8) GSTL 58 (Tri. Del.) B.10 In light of the above mentioned facts and provisions of law along with the description of receipt/income stated above reveals that none of the receipts/income of the Appellants fall under the scope of services defined under Section 65(105)(b) of the Finance Act,1994. 4.3 Regarding service tax liability under Reverse Charge Mechanism , the learned Counsel for the appellant ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in the similar line of business or supply of manpower for any purpose or service portion in execution of works contract by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as body corporate , located in the taxable territory; C.5 That the department has made the allegations on the appellant that the appellant has not discharged service tax liability on Legal charges, man power supply and works contract services received by the appellant which are liable to be taxed under reverse charge mechanism. It is further submitted that the reverse charge mechanism is not applicable on the appellant, the same has been demonstrated in subsequent paragraphs. The appellant is not a business entity C.6 The common condition in respect of all the three services for the applicability of RCM is that such services should have been provided to a business entity C.7 In the instant case, the appellant is admittedly a body corporate but it does not qualify for the criteria of business entity nor it is registered as such. It is submitted that Housing Board Haryana, bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h authority viz. Registrar of Companies, where such registration is required. Since the Housing Board is not registered as a body corporate, it does not come under the purview of the Notification No. 30/2012-ST ibid as the notification stipulates that the service to be provided to a business entity registered as body corporate , hence, the appellant is not liable to pay Service Tax under the Reverse Charge Mechanism for the Work Contract Services or any other services received by them, which are covered under the ambit of above Notification. C.14 From the above, it is clear that Haryana Housing Board, being (a) a Governmental Authority and (b) being a body corporate constituted under the Housing Board Act of Haryana Government, but not registered with any Department including Registrar of Companies, is not covered under the Notification No. 30/2012-ST dated 20.06.2012 for payment of service tax under RCM. The term body corporate is not defined under the Finance Act, 1994. However, the same is defined under the Companies Act Works Contract services provided by the contractor to the Appellant is otherwise exempted C.15 That the Construction Services provided by Contractors, under Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not been levied or paid or has been short levied or short paid or erroneously refunded, within eighteen months from the relevant date. He further submits that extended period of limitation i.e. 5 years can be invoked only if there is evasion of tax due to fraud or collusion or wilful miss-statement or suppression of facts or contravention of any of the provisions of the Act or the rules made there under with intent to evade payment of duty. He further submits that the appellant has maintained proper accounts which have been duly audited by the office of the Accountant General and all the receipts of construction and sale of houses, administrative charges and transfer fees etc are duly disclosed in the Financial Statements, which are audited by the office of the Accountant General of the State. He further submits that the non-payment of service tax on the impugned activities has been discovered from the Financial Statements of the appellant, hence, no suppression or fraud with intent to evade tax could be attributed to the appellant. In this regard, he relies on the following case-laws: CCE Vs. Chemphar Drugs Liniments - 1989 (40) ELT 276 (SC) T.N. Dadha Pharmaceuticals Vs. CCE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t services in terms of Notification No. 30/2012-ST dated 20.06.2012. He further submits that in respect of show cause notices dated 19.04.2016 and 17.04.2018 the adjudicating authority has confirmed the demand only in respect of legal charges and dropped the demand in respect of other services viz. works contract services and manpower supply services by holding that the Housing Board is established by the Housing Board Act, 1971 is a business entity and a body corporate by the statute that created it, but cannot be held to be a business entity registered as body corporate and does not qualify as a person who is required to pay service tax under RCM and Entry 12 of the Notification No. 30/2012-ST dated 20.06.2012. Against the said dropping of demand, the department has filed the appeals bearing nos. ST/60163/2020 and ST/60164/2020 on the ground that the appellant/assessee is business entity registered as a body corporate. 5.4 The learned AR also justifies the invocation of extended period of limitation on account of the fact that the appellant is not registered under the Service Tax despite the fact that they are providing taxable services. 6. We have carefully considered the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with prior approval of the State Government. Section 72 of the Act provides that the State Government shall exercise superintendence and control over the Board and its officers. The aforesaid provisions of the Act clearly show that the Board is a governmental authority, as it is fully under the control of the State Government. 7.2 Further, we find that by virtue of Finance Act, 2010, an explanation was added to Section 65(105)(zzzh) and the same expands the scope of taxable service as envisaged in sub-clause (zzzh) of the Act. By a legal fiction, construction of complex which is intended for sale by a builder or any person authorized by him before, during or after construction is deemed to be a service provided by the builder to the buyer. The only exception contemplated is where no sum is received from the prospective buyer prior to grant of the completion certificate. The grant of completion certificate implies that the project is complete and at that stage all services and goods used for construction are subsumed in the immovable property, thus at that stage sale of a complex or a part thereof to a buyer constitutes an outright sale of immovable property, which admittedly is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of the provisions under which they are purportedly made, no purpose would be served by filing appeal against the said order and this question cannot be decided by the appellate authority under the Act. In the instant case, both the assessing officer and the appellate authority are bound to follow the instructions contained in the circulars. Therefore, no purpose would be served by filing appeal before the appellate authority. In order to constitute valid basis for taxation, the rate of deduction, specially a flat rate of deduction cannot be applied to calculate the taxable turnover in works contract. So those circulars cannot hold the field. As stated in the judgments referred to above, in the absence of any statutory basis for calculation of taxable turnover, the Act remains unworkable. Such gap in the statute cannot be filled up by the circulars which are purely ad hoc and administrative in nature and specially so when it relates to taxing law. It is a well-settled principle that in matters of taxation either the statute or the Rules framed under the statute must cover the entire field. Taxation by way of administrative instructions which are not backed by any authority of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, we negate the challenge to insertion of sub-clause (zzzzu) in Clause (105) of Section 65 of the Act. However, we accept the petitioners contention that no service tax under Section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the petitioners with the builder. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside. 7.5 We further find that the Revenue has filed an appeal against the above said decision of the Delhi High Court before the Hon ble Apex Court, but no stay has been granted in favour the department, therefore, the ratio of the Delhi High Court s judgment is binding on the Tribunal unless the same is set aside or stayed. 7.6 Further, we find that the above said decision of the Hon ble Delhi High Court has been followed by this Tribunal in the case of M/s G S Promoters Developers Vs CCE ST, Chandigarh (supra) and in the case of Rajeev Chopra Vs. CE ST, Shimla (supra). 7.7 In view of our discussion on this issue, we are of the view that service tax is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace of earlier owner of the flat, was in relation to sale or purchase of such property and accordingly liable to service tax. To levy service tax first of all the provider of service should be a real estate agent and second while acting as such agent the person concerned should have provided service in relation to sale, purchase, leasing or renting of real estate. There is nothing in the show cause notice or the relied upon documents to show that the respondent acted in a capacity of real estate agent between the earlier owner and the new buyer of the flat. The changes made in the records of the respondent are not causative factors for such sale or purchase. We are in agreement with this observation of the Original Authority. In RIICO - 2017-TIOL-1725-CESTAT-DEL., the Tribunal held that the transfer charges received by the appellant for permitting the transfer of allotted land from one person to another cannot be taxed as real estate agent service because they were custodians of land and were dealing with the allottee on principal to principal basis, not as an agent of either party. We note that the reliance placed by Revenue on Ajay Enterprises Pvt. Ltd. v. CST, Delhi - 2016 (42) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and objects of the Act and the functions and powers of the Corporation are like the wharf and weft of the fabric of development of industries by the State. 19 . There are two provisions of the Act which are not to be found in any trading Corporation. In the first place, the sums payable by any person to the Corporation are recoverable by it under this Act as an arrear of land revenue on the application of the Corporation. Secondly, on dissolution of the Corporation the assets vest in and the liabilities become enforceable against the State Government. 20 . The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in the State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estates or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall exercise superintendence and control over the Board and its officers. The aforesaid provisions of the Act clearly show that the Board is a governmental authority, as it is fully under the control of the State Government. 15 . The issue sought to be raised by the petitioners is that they are contractors engaged by the Board for construction of BPL houses from time to time. In all the cases, except two, the contract was entered into after 1-7-2012. There is no dispute about the period prior thereto as the petitioners in most of the petitions have categorically stated that service tax for that period was paid by them. The period in dispute is from 1-7-2012 onwards. 16 . The petitioners approached this court for the reason that the Board deducted the amount of service tax from the running bills of the petitioners from the very beginning opining that service tax was payable. The action was taken, as claimed, on an opinion sought by the Board. The tax deducted from the bills of the petitioners, if leviable, would be liability of the Board in law. 17 . The service tax has been levied on various services with amendments made in Finance Act, 1994. The services on which the tax was levi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the in the above cited case, the department which was also a party before the Hon ble High Court of Punjab Haryana, has accepted the said decision and refunds have been granted to the contractors by the department. 9.5 In view of our discussion on this issue, we hold that the demand of service tax under Reverse Charge Mechanism is not sustainable. 10.1 As regards extended period of limitation, we find that the appellant, which is a governmental authority constituted under the Housing Board Act, 1971, has provided all the information as required by the department. Moreover, being a statutory authority, the appellant is required to maintain proper accounts, which are duly audited by the office of the Accountant General and the audited accounts accompanied by audit report have been forwarded to the State Government as required by the Act. Further, all the figures have been taken from balance sheets. Therefore, in view of this, there is no suppression or fraud with intent to evade the payment of tax. 10.2 This issue has been considered by the Hon ble Supreme Court in various cases and it has been consistently held that no suppression or fraud with intent to evade the service tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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