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TMI Blog2023 (9) TMI 1563X X X X Extracts X X X X X X X X Extracts X X X X ..... ax paid. Appellant had been filing the ST-3 returns with adequate disclosures and nothing was suppressed from department as alleged. As nothing has been suppressed from Department, and the issue is only in respect of interpretation of the provisions as contained in the statue. The issue with regards to the Constitutional Validity of the provisions was also taken up before various High Courts in the writs filed by various builder associations. In such situation where the issue was under consideration of various courts and tribunal invoking extended period for making this demand as per Section 73 (4) of the Finance Act, 1994 cannot be upheld. Demand with interest and penalty set aside - there are no merits in the impugned order to the extent it demands service tax classifying the services under the taxable category of 65 (105) (zzzzu) - appeal allowed. - Hon ble Mr. P.K. Choudhary, Member (Judicial) And Hon ble Mr. Sanjiv Srivastava, Member (Technical) For the Appellant : Shri Atul Gupta, Advocate Shri Prakhar Shukla, Advocate. For the Respondent : Shri Manish Raj, Authorised Representative. ORDER SANJIV SRIVASTAVA: This appeal is directed against Order-In-Original No. 03/ST/ Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower Recruitment agency, Banking Financial, Construction services in respect of commercial or industrial buildings and civil structures, transport of goods by road, membership of clubs, Construction of Residential Complex and preferential location of External/Internal development of complexes. 2.2 Intelligence was gathered that they also provided other services namely 'Internal Development Construction (IDC), 'External Development Construction'(EDC) and 'Electric Sub-Station Charges'(ESSC) and they are also collecting from the buyers of flats in their different projects under the head Car Parking Space Charges. But they are also not discharging their service tax liability on the said amount. Accordingly a team of Anti Evasion Officers' of Central Excise Noida visited the office premises appellant. During the course of investigation appellant deposited the entire service tax due amounting to Rs.28,99,67,059/- before the issuance of show cause notice. 2.3 A show cause notice dated 26.7.2013 was issued to the appellant asking them to show cause to as to why- (i) Service tax (including Education Cess and SHE Cess) amounting to Rs 7,47,24,282/- (Rupees Seven Cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Atul Gupta and Shri Prakhar Shukla Advocates for the appellant and Shri Manish Raj, Authorized Representative for the revenue. 3.2 Arguing for the appellants learned counsels submit that:- IDC and ESSC are taxable under construction of residential complex service. No service tax is payable on EDC, as the appellant do not provide any services against these charges. These services were provided by the NOIDA authority and the appellant undertook construction activities on the developed land provided by the authority to them. Amount collected under IDC, EDC and ESSC are integral part of sale price of residential unit sold and therefore they should be subject to service tax under section 65(105)(zzzh). IDC, EDC AND ESSC charges are taxable under residential complex services as defined under section 65(105)(zzzh), and in respect of the charges collected by them under these heads they had paid the service tax after claiming the benefit of abatement under Notification 1/2006-ST dated 1.3.2006 (Notification dated 1.3.2006) applicable to Section 65(105)(zzzh) has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after introduction of the amendments made by Finance Act, 2010 in the Finance Act, 1994. Thus we are throughout referring to the amended provisions as they existed during the period of dispute. In the present case while the appellant has claimed the classification of charges such as EDC, IDC, ESSC and Car Parking Space Charges under the taxable category as defined by Section 65 (105) (zzzh) of Finance Act, 1994 revenue has sought to classify them under taxable category as defined by Section 65 (105) (zzzzu) ibid. For ease of reference we reproduce the relevant provisions of Finance Act, 1994 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 su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these charges do not form part of the taxable value for charging tax on construction. These facilities include,- (a) prime/preferential location charges for allotting a flat/commercial space according to the choice of the buyer (i.e. Direction- sea facing, park facing, corner flat; Floor- first floor, top floor, Vastu- having the bed room in a particular direction; Number- lucky numbers); (b) internal or external development charges which are collected for developing/maintaining parks, laying of sewerage and water pipelines, providing access roads and common lighting etc; (c) fire-fighting installation charges; and (d) power back up charges etc. 8.2 Since these charges are in the nature of service provided by the builder to the buyer of the property over and above the construction service, such charges are being brought under the new service. Charges for providing parking space have been specifically excluded from the scope of this service. Development charges, to the extent they are paid to State Government or local bodies, will be would be excluded from the taxable value levy. Further, any service provided by Resident Welfare Associations or Cooperative Group Housing Societies co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a location. Secondly, it has been submitted that there is no voluntary act of rendering a service. Thirdly, it has been urged that the tax is a tax on land per se, since it is a tax on location. Fourthly, it has been submitted that the provision is vague and therefore arbitrary since what constitutes a preferential location, an extra advantage or the basic sale price has not been defined. 33. Now what clause (zzzzu) of Section 65(105) brings in are services provided to a buyer by a builder of a residential complex or a commercial complex for providing a preferential location or development of such complex, but to the exclusion of services covered under sub clauses (zzg), (zzq) and (zzzh) and those in relation to parking places. A preferential location is defined to mean any location having extra advantages which attracts extra payment over and above the basic sale price. The circular which was issued by the Central Board of Excise and Customs on 26 February 2010 takes note of the fact that in addition to activities involving construction, completion and furnishing repair, alteration, renovation or restoration builders of residential or commercial complexes provide other facilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative prescription is clear. Hence, there is no excessive delegation. 4.9 The service of construction of complex provided by the builder to homebuyers includes not only the residential units but also the common areas and facilities such as park, life, common effluent treatment systems etc. which form a part of such residential complex. From the definition of residential complex as per Section 65 (91a) it is evident that residential complex has been defined to include not only the residential units but also the common area, facilities such as park, parking space, lift, common effluent treatment system etc. which form a part of residential complex. Thus these services provided by the Appellant should be covered under the category of such as which illustrates the kind of facilities which would be covered within the scope of residential complex. The services against EDC are not performed within the residential complex. The definition of residential complex' under Section 65(91a) includes only facilities which are a part of the residential complex and located within the premises of residential complex. Undisputedly these charges are integrally connected with the development of resid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Saurabh Mittal having Customer I D JGN KCA0100101, wherein following has been stated we have pleasure in provisionally allotting one apartment bearing Reference Number KCA0100101 in WISHTOWN KLASSIC at Jaypee Greens, Noida located as per Location Plan enclosed herewith as Annexure I and having tentative Floor Plans as enclosed herewith at Annexure II with approx Super Area of 193.23 Sq mtrs. (2080.00 Sq Ft) to be constructed with tentative specifications as per the Specification Sheet enclosed herewith as Annexure III, for a consideration of Rs 8,137,280.00 (Rupees Eighty One Lakh Thirty Seven thousand Two Hundred and Eighty only). The details of Consideration‟ are enclosed herewith as Annexure IV. The Annexure IV is reproduced below: Annexure IV WISHTOWN KLASSIC, JAYPEE GREENS NOIDA Unit Reference No KCA0100101 Estimated Super Area: 995 Sq Ft. Charge Types Description Total Amount (Rs.) Basic Price @Rs 3701.00 Per Sq Ft 7698080 Car Parking Slot(s) 1.No. @ Rs 200000 200000 Electric Sub Station Charges @ Rs 40.00 Per Sq Ft 83200 Internal Development Charges @ Rs 75.00 Per Sq Ft 156000 Total 8137280 From the perusal of the above allotment letters it is evident that the charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich provides the most specific description shall be preferred to sub-clauses providing a more general description. (b) composite services consisting of a combination of different services which cannot be classified in the manner specified in clause (a), shall be classified as if they consisted of a service which gives them their essential character, insofar as this criterion is applicable. (c) when a service cannot be classified in the manner specified in clause (a) or clause (b), it shall be classified under the sub-clause which occurs first among the subclauses which equally merit consideration. Thus in terms of (b) also these services will be classifiable under the under the category defined by 65 (105) (zzzh) 4.11 Ahmedabad bench has in the case of Shreno Ltd. [2021 (54) GSTL 187 (T-Ahmd)] held as follows: 5. We have carefully considered the submissions made by both the sides and perused records. As regards the first issue, on Preferential Location Charges and natural bundling thereof with main service under Section 65(3) of the Finance Act, 1994, we find that the issue on hand is no more Res Integra, and stands concluded in favour of the Appellant vide the following decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that the final sale deeds is executed in favour of the customers for the entire amount and there is no separate contract for providing above stated activities and that they are the part of the single contract. 4. Heard the Learned AR, who has supported the impugned Order-in-Original. 5. Having considered the rival contention and on perusal of record, we find that it is undisputed fact that the sale deed does not separately mention above stated charges and the sale deeds are for the amount of entire consideration including above stated charges. We, further, note that provisions under sub-section (3) of Section 66F has provided that whenever in ordinary course of business some service is naturally associated with a single service which gives essential character to the entire package of service then such naturally associated service is treated as bundled service and the said bundled service is to be treated as single service which gives the entire package its essential character. In the present case construction of residential complex service is the service which gives essential character to the package of the service and, therefore, the charges as stated above are essentiall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment charges etc. are part and parcel and for various elements of the main service which is Residential Complex Service and therefore the entire consideration received by the appellants are eligible for abatement under said Notification No. 26/2012-S.T. We, therefore, do not find any merit in the impugned orders. (c) Friends Land Developers - 2019 (22) G.S.T.L. 435 (Tri. - All.) 6. After considering the submission made by both sides, we find that Service Tax on construction of Residential Complex Service was introduced with effect from 16-6- 2005 vide Notification No. 15/2005-S.T., dated 7-6-2005. As per Section 59(91a) of the Finance Act, 1994 Residential Complex means any complex compromising 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 .. 7. As seen from the above definition of Residential Complex Service , parking space specifically stands included in Serial No. (iii) of the definition. If that be so, it has to be held that parking space is a part and parcel of the services falling under the category of Residential Complex Services . As re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a separate area from flats sold by the appellant, there can be bona fide belief on the part of the assessee that such parking charges are not includible in the value of the services falling under Residential Complex Construction Services . There is also no positive evidence indicating any mala fide on part of the appellant. Accordingly, we set aside the order on limitation and allow the appeal on the said ground. The Appellants have also rightly relied upon the judgment of the Hon‟ble Gujarat High Court in the case of Torrent Power (supra), wherein the principles to consider a service naturally bundled with the main service and to be taxed at same rates as main service are discussed. The relevant portion of the judgment is reproduced below : 24. It has been contended on behalf of the respondents that sub-section (3) of Section 66F of the Finance Act would not apply where the single service which gives the bundle of services its essential character is exempt from the levy of service tax. In the opinion of this Court, there is nothing in the language employed in sub-section (3) to Section 66F to read into it a requirement that such service should not be exempt from tax. All tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reements (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, 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/- 5 Security Char ..... X X X X Extracts X X X X X X X X Extracts X X X X
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