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TMI Blog2024 (11) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... olved. We find that the appellant vehemently argued that the relationship between the appellant and its members to whom the residential flats have been allotted are of association and its members. Therefore, there is no service as the service provider and service recipient are not existing. As per the facts of the present case we find that there is no dispute that the appellant is a co-operative housing society constituted by its members for the objective of construction of residential complex exclusively for the members of the society. Therefore, it is not a case that of the independent builder has constructed the residential complex and sold to the unrelated buyers. Since, the concept of doctrine of mutuality is involved in the present case between the appellant and its members, it cannot be said that the society has provided any service to its members. Between the association and its members in such service no service provider and service recipient are involved. In this arrangement of society and its members, we are of the view that at most the activities are covered under club or association service. The principal of doctrine of mutuality has been considered in various judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show cause notice dated 21.04.2016 was issued demanding service tax under the category of construction of residential complex service for the period 2011 (October, 2010 to March, 2011) to 2013-2014 along with proposal for interest and penalty. In the notice an amount of Rs. 40 Lacs already paid by the appellant was proposed to be adjusted against total tax liability. The said show cause notice has been adjudicated by the adjudicating authority whereby the demand of service tax along with interest and penalties were confirmed and amount of Rs. 40Lacs paid by the appellant during investigation was appropriated. Against the said adjudication order dated 30.03.2017 passed by the Additional Commissioner, Central Excise , Customs and Service Tax- Vadodara, the appellant filed an appeal before the Commissioner (Appeals) who vide order-in-appeal No. CCESA-SRT (APP) AT-172-2018-19 upheld the order-in-original and rejected the appeal filed by the appellant. Therefore, the present appeal is before us. 2. Shri Vipul Khandhar, Learned Chartered Accountant appearing on behalf of the Appellant submits that the appellant was constituted by the members for creation of the residential unit facil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STL 545 (SC) Sujal Developers 2013 (31) STR 523 (Guj.) Rajasthan Co-Op Dairy Federation Ltd - 2022 (65) GSTL 350 (Tri.-Del) Rajasthan Co-Op Dairy Federation Ltd 2022 (65) GSTL 257 (SC) 2.3 He further submits that the entire demand is time bar as the same is under extended period. The show cause notice covering the period 01.10.2010 to 31.03.2014 was issued on 21.042016. Therefore, the show cause notice has invoked the extended period of limitation which in the facts of the present case is not sustainable as there is no suppression, wilful mis-statement on the part of the appellant, for the same reason penalties are also liable to be set aside. He submits that the entire demand of service tax, interest and penalty be set aside and amount of Rs.40 Lacs paid by the appellant during investigation may be ordered to be refunded. 3. Shri Mohit Agarwal, Learned Commissioner (AR) appearing on behalf of the Revenue reiterates the finding of the impugned order. Post-hearing he also submitted a written submission dated 23.10.2024 which is taken on record. 3.1 He submits that the appellant has taken recourse to the Principle of Mutuality in respect of the stated incorporated society and buyers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved is 01.10.2010 to 31.03.2014, therefore, both the periods i.e. prior to negative list regime and post negative list regime is involved. We find that the appellant vehemently argued that the relationship between the appellant and its members to whom the residential flats have been allotted are of association and its members. Therefore, there is no service as the service provider and service recipient are not existing. As per the facts of the present case we find that there is no dispute that the appellant is a co-operative housing society constituted by its members for the objective of construction of residential complex exclusively for the members of the society. Therefore, it is not a case that of the independent builder has constructed the residential complex and sold to the unrelated buyers. Since, the concept of doctrine of mutuality is involved in the present case between the appellant and its members, it cannot be said that the society has provided any service to its members. Between the association and its members in such service no service provider and service recipient are involved. In this arrangement of society and its members, we are of the view that at most the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 108/2/009-S.T., dated 29-1-2009 by not distinguishing a co-operative housing society, which is providing service to its members from a developer/promoter? 3. We have heard learned counsel for the appellant and the respondent. Brief facts are that respondent Co.-Op. Housing Society had availed of the services of Contractor for constructing the residential units for use of the members of the Housing Society. Initially, the Society had paid service tax. Subsequently, however, the society carried a belief that it was not liable to pay service tax. Society filed refund claims which were dismissed. The issue, ultimately, reached the Tribunal. Tribunal by the impugned judgment relying on the Board s Circulars and Clarifications, formed an opinion that if the activity is undertaken by the Society for and on behalf of the members, it cannot be stated that the Society provided the services to its members. 4. Counsel for the respondent drew our attention to the judgment of Division Bench of this Court rendered in Tax Appeal No. 1550 of 2010 dated 22nd April, 2011 in case of Commissioner of Service Tax v. M/s. Sujal Developers in which, judgment of the Tribunal impugned in the present app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eveloper is using its own finances and developing the land in question and selling the property constructed thereon to the members of the society. Thus, in the light of the clarification issued by the Board, viz., when it is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then, the ownership of the property gets transferred to the ultimate owner, in such a case, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed, would be in the nature of self-service and consequently, would not attract service tax. 14. In the facts of the present case, there is nothing to indicate that the respondent has been hired as a contractor by the society so as to bring the activities of the respondent within the ambit of taxable services as contemplated under section 65(105)(zzzh) of the Act. In the absence of there being any service provider and service recipient in relation to the transaction in question, the Tribunal was justified in holding that the transaction in this case cannot be considered as taxable . 5. Counsel for the respondent further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation legal situation in factual background arising in present appeal, would or would not be any different. Suffice it to note that the explanation was brought in the statute book long after the taxing event in the present case had arisen. 9. In absence of any indication in the amendment to make it either retrospective or explanation being merely declaratory or clarifiacatory in nature, such statutory change cannot be made applicable to the long past events. 10. In the result, we do not find that any question of law arises. Tax Appeal, is therefore, dismissed. 4.2 In an another case of Sujal Developers (Supra) Hon ble Gujarat High Court held that service of construction of complex can be taxable only when there is service from one person to another person. In the said case the developer using its own finances and developing the land in question and selling the property constructed there on to the members of the society. The relevant part of the judgment is reproduced below:- 9. Sub-section (105) of Section 65 of the Finance Act, 1994 defines taxable service to mean any service enumerated thereunder. The taxable service as provided under clause (zzzh) thereof is to any person, by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to any person by any other person does not arise. The Board, in the clarification dated 29-1-2001, which has also been reproduced by the Tribunal in the impugned order, has clarified that generally, the initial agreement between the promoters/builders/ developers and the ultimate owner is in the nature of agreement to sell . Such a case, as per the provisions of the Transfer of Property Act, does not itself create an interest in or charge on such property. The property remains under the ownership of the seller (in the instant case, the promoters/builders/developers). It is only after the completion of the construction and full payment of the agreed sum that a sale deed is executed and only then the ownership of the property gets transferred to the ultimate owner. Therefore, any service provided by such seller in connection with the construction of residential complex till the execution of such sale deed would be in the nature of self-service and consequently would not attract service tax. Further, if the ultimate owner enters into a contract for construction of a residential complex with a promoter/builder/developer, who himself provides service of design, planning and constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society. The society has entered into a development agreement with the respondent. Under the agreement between the society and the respondent-developer, the work of construction and development of the housing project has been entrusted to the respondent. The respondent-developer has agreed to develop the said land by attending to construction and development work and to complete the scheme duly and diligently on the terms and conditions contained in the agreement. Under the agreement, the developer is required to carry out every act necessary to complete construction and development of the project directly or indirectly, which includes preparation and approval of plans, getting the buildings constructed directly or by sub-contracting and/or purchase of material, hiring labour, arrangement of finance, marketing and advertising the project, enroll members, collect money, etc. The respondent is permitted to use the property in question for the purposes mentioned in the agreement. The respondent is entitled to construct and/or arrange to construct the building as per the plan and specifications prepared by the Architects. Thus, as per the agreement, the respondent-developer is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d selling milk and milk products. The appellant is providing various services to support the milk unions in this endeavour and is charging a fee which is called RCDF cess at the rate of 1.25% on the turnover of the milk unions. The question which falls consideration is whether in this factual matrix the services provided by the appellant to its own members (who are also separate legal entities) can be considered as service provided by one entity to another. 9. We find that the Constitution Bench of the Supreme Court has in State of West Bengal v. Calcutta Club Ltd. discussed at length the doctrine of mutuality under Article 366(29A)(e) of the Constitution and held that doctrine of mutuality continues to be applicable to incorporated and unincorporated members clubs after the 46th Amendment to the Constitution and, therefore, no sales tax is payable to the State by the Calcutta Club. It was further held that the same logic applies to service tax levied on members clubs. Paragraphs 49, 50, 54, 55, 72, 73, 76, 77, 78, 79, 80 and 85 of this judgment are reproduced below : 49. In light of the view that we have taken, it is unnecessary to advert to Shri Dwivedi s arguments that the expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cription or any other amount to its members would be within the tax net. However, what is of importance is that anybody established or constituted by or under any law for the time being in force, is not included. Shri Dhruv Agarwal laid great emphasis on the judgments in DALCO Engineering Private Limited v. Satish Prabhakar Padhye and Ors. Etc., (2010) 4 SCC 378 (in particular paragraphs 10, 14 and 32 thereof) and CIT, Kanpur and Anr. v. Canara Bank, (2018) 9 SCC 322 (in particular paragraphs 12 and 17 therein), to the effect that a company incorporated under the Companies Act cannot be said to be established by that Act. What is missed, however, is the fact that a Company incorporated under the Companies Act or a cooperative society registered as a cooperative society under a State Act can certainly be said to be constituted under any law for the time being in force. In R.C. Mitter Sons, Calcutta v. CIT, West Bengal, Calcutta, (1959) Supp. 2 SCR 641, this Court had occasion to construe what is meant by constituted under an instrument of partnership, which words occurred in Section 26A of the Income Tax Act, 1922. The Court held : The word constituted does not necessarily mean crea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration. We have seen how in the judgment relating to Sales Tax, the fact is that in members clubs there is no sale by one person to another for consideration, as one cannot sell something to oneself. This would apply on all fours when we are to construe the definition of service under Section 65B(44) as well. 77. However, Explanation 3 has now been incorporated, under sub-clause (a) of which unincorporated associations or body of persons and their members are statutorily to be treated as distinct persons. 78. The Explanation to Section 65, which was inserted by the Finance Act of 2006, reads as follows : Explanation. - For the purposes of this section, taxable service includes any taxable service provided or to be provided by any unincorporated association or body of persons to a member thereof, for cash, deferred payment or any other valuable consideration. 79. It will be noticed that the aforesaid explanation is in substantially the same terms as Article 366(29A)(e) of the Constitution of India. Earlier in this judgment qua Sales Tax, we have already held that the expression body of persons will not include an incorporated company, nor will it include any other form of incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant for the services rendered to its members. 13. Accordingly, the demand confirmed by the impugned order cannot be sustained. The interest on the demand and the penalties imposed also need to be set aside and are set aside. The appeal is, accordingly, allowed and impugned order is set aside with consequential benefits to the appellant, if any. 4.3 The above judgment has been upheld by the Hon ble Supreme Court reported as 2022 (65) G.S.T.L. 257 (S.C.) considering the constitution bench judgment in the case of Calcutta Club Ltd 2019 (29) GSTL 545 (S.C.) 4.4 In view of the above judgments, on the very same issue, we are of the view that in a case the appellant being a society consisting of members provided the residential complex to its members does not amount to service in the light of settled legal position in Calcutta Club (Supra). Therefore, the demand is not sustainable. 4.5 The objection raised by the Ld. AR that whether society is incorporated registered with competent authority with details or not and whether member list has been approved with competent authority where society has been registered. In this context we have perused the registration certificate produced b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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