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TMI Blog2025 (3) TMI 268X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions. These are not to be treated as services provided for a consideration. Therefore, such activities assigned to be performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purposes of levy of Service Tax.' The decision of the Tribunal in case Greater Noida Industrial Development Authority [2014 (9) TMI 306 - CESTAT NEW DELHI] has not been agreed to by the larger bench of Tribunal in case of Rajasthan State Industrial Development and Investment Corporation Ltd. [2025 (2) TMI 211 - CESTAT NEW DELHI - LB] and Larger Bench has observed settled the issue stating 'The value of "premium" or "salami" is exigible to service tax under "renting of immovable property" for the period prior to 01.07.2012 under section 65(105)(zzzz) of the Finance Act and from 01.07.2012 under section 66B of the Finance Act.' The submission made by the appellant that they are not liable to pay service tax being government authority in respect of the services in dispute, is thus devoid of merits. Denial of abatement - HELD THAT:- The appellant have claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ND MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) Shri Sanjay Khanduja, Chartered Accountant for the Appellant Smt Chitra Srivastava, Authorised Representative for the Respondent ORDER This appeal is directed against Order-in-Original No.(ST-143/2014)10 of 2015 dated 24/03/2015 passed by Commissioner of Customs, Central Excise & Service Tax, Allahabad. By the impugned order following has been held:- "ORDER (i) I confirm the demand of Rs. 3,51,34,251/- (Rupees Three Crores Fifty One Lakhs Thirty Four Thousand Two Hundred and Fifty One Only) including Education Cess and Secondary & Higher Education Cess for the period 2009-10 to 2013-14, upon M/s Allahabad Development Authority, Allahabad, and order for recovery of the same under the provisions of proviso to Sub-Section (1) of Section 73 read with Section 73 (2) of Chapter V of the Finance Act, 1994. (ii) I order for charging Interest at the appropriate rate under the provisions of Section 75 of the Finance Act, 1994 on the amount of Service Tax confirmed at (i) above. (iii) I impose a further penalty of Rs. 5000/- (Five Thousand Only) under Section 77 (2) of the Finance Act, 1994 on the party for their failure to file ST-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for violation of Section 68 read with Rule 6 of the Rules and e) Penalty should not be imposed upon then under the provisions of Section 78 of the Act. for having committed suppression of facts with intent to evade payment of service tax." 2.3 The said show cause notice was adjudicated as per the Order-in-Original dated 24.03.2015 referred in para 1 above. 2.4 Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Sanjay Khanduja, learned Chartered Accountant appearing for the appellant and Smt Chitra Srivastava learned Authorised Representative appearing for the revenue. 3.2 Arguing for the appellant learned Counsel submits that appellant is a Government or a local authority and hence would be exempt from payment of service tax. Reliance is placed on clarifications regarding services provided by government or a local authority, any service provided by the Government or a local authority to a business entity, issued by the Press Information Bureau, Government of India, New Delhi dated 14 April, 2016. 3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities. 4.1 We have considered the impugned orders along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the party are eligible for exemption under various notifications, as claimed by them? (iii) whether the show cause notice has been rightly issued to the party under extended period provision? (iv) whether the demand of service tax is maintainable, interest is leviable and proposal for imposition of penalties justified? 6.0 First, I take up the issue of taxability of service rendered by the party and its classification. For proper appreciation of the case and to arrive at the correct conclusion, it is imperative to visit the relevant provisions contained in the statute and the facts of the instant case. It has not been disputed that Allahabad Development Authority (ADA), are interalia, engaged in construction of residential complexes and sale thereof. I have gone through the allegations contained in the impugned SCN, which intend to classify the services rendered by the party under the "construction of complex service and thus it becomes important to visit the statutory provisions related to the said service. 6.1 Section 65 (30a) of the Finance Act, 1994 defines "construction of complex "as follows:- "construction of complex" means- (a) construction of a new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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; 6.5 Further, the issue of taxability with regard to "construction of complex service" has been explained and clarified by the CBEC vide Circular D.O.F. No. 334/1/2010-TRU, dated 26-2-2010, the relevant extract of which is reproduced as under: Government of India Ministry of Finance (Department of Revenue) Central Board of Excise & Customs, New Delhi Tax Research Unit Subject: Changes proposed in Service tax law and procedure in Union Budget 2010-11-Regarding. ........................................ ............................................... 8. Service tax on construction services 8.1 The service tax on construction of commercial or industrial construction services was introduced in 2004 and that on construction of complex was introduced in 2005. 8.2 As regards payment made by the prospective buyers/flat owners, in few cases the entire consideration is paid after the residential complex has been fully developed. This is in the nature of outright sale of the immovable property and admittedly no Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spective buyer and the Service tax would be charged accordingly. This would only expand the scope of the existing service, which otherwise remain unchanged. [Emphasis added] 6.6 The party have also raised the issue of abatement under notification no. 1/2006-ST dated 1.3.2006. The aforesaid notification grants exemption in the form of abatement of taxable value equal to 67 per cent of the total taxable value, on which service tax under construction of complex service is otherwise payable. In effect, only 33 per cent of the taxable value is subjected to service tax at the prescribed rate. This exemption however does not apply to cases where the taxable services provided are only completion and finishing services in relation to residential complex, referred to in sub-clause (b) of clause (30a) of section 65 of the Finance Act. The exemption is also not available if the service provider has (i) taken Cenvat Credit of duty on inputs or capital goods used for providing taxable service; or (ii) taken Cenvat credit of service tax on input services used for providing taxable service; or (iii) availed exemption on cost of goods and materials sold to the recipient of the service, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny existing civil structure; [Emphasis supplied] 6.9 Consequent upon amendment to the Finance Act, 1994, as enumerated above, exemption Notification No. 25/2012-ST dated 20.06.2012, also called the Mega Notification, effective from 01.07.2012, was issued, which exempts the specified taxable services from the whole of the service tax leviable thereon under section 66B of the said Act. The extract relevant to the present case reads as under: "12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation , or alteration of - (a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession; (b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958); (c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; (d) ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where entire consideration is received after issuance of completion certificate by the competent authority. This exemption is available subject to the condition (i) CENVAT credit on inputs used for providing the taxable service has not been taken under the provisions of the CENVAT Credit Rules, 2004. (ii) the value of land is included in the amount charged from the service receiver. Furthermore, it has also been provided that the amount charged shall be the sum total of the amount charged for the service including the fair market value of all goods and services supplied by the recipient(s) in or in relation to the service, whether or not supplied under the same contract or any other contract, after deducting- (a) the amount charged for such goods or services supplied to the service provider, if any; and (b) the value added tax or sales tax, if any, levied thereon. 6.11 Having elaborately discussed all the provisions of law and CBEC Circular relevant to the "construction of complex service", I now return to the issue of classification of service rendered by the party to its clients, wherein it builds flats and houses. The party has itself stated that it constructs residential pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functions performed in public interest. Clearly the activity of building/ selling flats and houses by ADA cannot be treated as discharge of statutory / sovereign function by the government. For the period after 01.07.2012, "Construction of Complex Service" has been explicitly included in Section 66E of the Act as a "declared service". Furthermore, with regard to the exemption granted under the Mega Notification [25/2012-ST dated 20.06.2012), it is explicit therein that "services provided to the Government, a local authority or a governmental authority by way of, interalia, construction, installation, completion, fitting out, repair, maintenance, renovation etc. are exempt". The Mega Exemption notification does not exempt service in respect of construction provided by the Government, a local authority or a governmental authority. Thus clearly the construction of complex service rendered by ADA is not entitled for any exemption for the entire period of demand. 7.2 In fact, in the entire scheme of taxability of "construction service" envisaged in the Finance Act, 1994, for the period prior to as well as after 01.07.2012, only one exception from taxability has been created in the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the argument made by ADA, that they sell flats to their clients uprightly, is factually incorrect. The truth is, that they sell flats to their clients under EMI scheme, and such instances, as discussed earlier fall in the ambit of "construction of complex service" and are accordingly taxable. Moreover, other than the assertion, I find that the party have not given any documents or evidence to substantiate their contention that they receive the entire consideration after completion of flats. Hence, the party's contention is erroneous and not sustainable and thus I reject the same, 8.0 Notwithstanding the above, the party have raised a contention that they are eligible for abatement from the gross value for the purpose of computation of demand, as envisaged under Notification No. 1/2006-ST, as amended. Contrary to the party's assertion, I find that the abatement provided under Notification No. 1/2006-ST dated 1.3.2006, as amended vide Notification No. 29/2010-ST dated 22.06.2010, effective from 01.07.2010 and Notification No. 26/2012-ST dated 20.06.2012, effective from 01.07.2012, provide for certain specific conditions, subject to which alone, the abatement can be all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the tax or any. part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below ten per cent and not exceeding thirty-six per cent per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette, for the period by which such crediting of tax or any part thereof is delayed. I find that the Hon'ble Bombay High Court (DB) in the case of CCE vs. Padmashri VV Patil SSK Ltd. reported in 2007 (215) ELT 23 (Bom.-HC-DB) held that- Interest is civil liability of assessee who has retained amount of public money. Interest is mandatory, even if evasion of duty is not mala fide or intentional.. The CESTAT in the case of Sree Vadivambigai Textile Mills Ltd vs. CCE [2005] 1 STT 72 (Chen.-CESTAT) held that levy of interest under section 75 is mandatory and no leniency can be shown merely because appellant has been declared as sick company. I also find that CESTAT in the case of Ballarpur Industries Ltd vs. Commissioner of C.Ex. Nagpur 2007 (5) STR-197 (Tri.-Mumbai) held that the provisions of section 75 prescribing interest on service tax paid belatedly are mandatory and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, such activities assigned to be performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration for the purposes of levy of Service Tax. 33. However, if a sovereign/public authority provides a services, which is not in the nature of an statutory activity and the same is undertaken for a consideration (not a statutory fee), then in such cases, Service Tax would be leviable as long as the activity undertaken falls within the scope of a taxable service as defined." 4.5 In view of the above referred decision of Hon'ble Jurisdictional High Court in our view, the order of Commissioner (Appeals) cannot be faulted to this extent. Similar order has been passed by Mumbai Bench of this Tribunal in the case of M/s CIDCO Ltd. 2015 (37) STR 122 (Tribunal-Mumbai). Similar view has been expressed by Delhi Bench of this Tribunal in the cases of M/s NEW OKHLA INDUSTRIAL DEVELOPMENT AUTH. 2015 (39) STR 443 (Tri.-Delhi) & M/s Bhilai Steel Plant 2022 (61) GSTL 56 (Tri.-Delhi). 4.6 The decision of the Tribunal in case Greater Noida Industrial Development Authority [2015 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zzzz) of the Finance Act and from 01.07.2012 under section 66B of the Finance Act." 4.7 Hon'ble Supreme Court has in case of Krishi Upaj Mandi Samiti [2022 (58) G.S.T.L. 129 (S.C.)] observed as follows: "6. At the outset, it is required to be noted that the respective Market Committees are claiming exemption under the 2006 circular. The exemption circular issued by the Board reads as under :- Circular No. 89/7/2006, dated 18-12-2006 :- "A number of sovereign/public authorities (i.e., an agency constituted/set up by Government) perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant lows. Fee as prescribed is charged and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the conditions thereof. In case such conditions are not fulfilled, the issue of application of the notification does not arise at all by implication. 8.1 It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the Court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard. 8.2 The exemption notification should be strictly construed and given a meaning according to legislative intendment. The Statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions. 8.3 As per the law laid down by this Court in a catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining a defined meaning. Strict interpretation of the provision is to be accorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statutory levy/statutory fee. Thus, under the Act, 1961, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function under the statute. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed." This decision has been followed by the Hon'ble Apex Court subsequently in following cases: * Agriculture Produce Marketing Committee Gazipur [(2023) 2 Centax 293 (S.C.)] * Gujarat Industrial Development Corporation [(2023) 5 Centax 171 (S.C.)] 4.8 Thus the submission made by the appellant that they are not liable to pay service tax being government authority in respect of the services in dispute, is thus devoid of merits, in view of the above referred decisions. 4.9 However, we find that appellant have claimed benefit of abatement for determination of the value of taxable services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 27. In fact, the speech made by the Hon'ble Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section-4 of the Uttar Pradesh Town Planning and Development Act on 20 August 1974 by the Government's release dated 09-08-1974 to solve the complex housing problem arising out of the pressure of this growing population, cannot be imputed with intention to evade payment off service tax. Hence, we do not find any merits in invocation of extended period of limitation for making this demand. In case of Hindustan Insecticides Ltd [2017 (6) G.S.T.L. 218 (Tri. - Del.)] following has been held: "12 The time period involved in the present case is from 2005-2006 to 2009-2010. The department has issued various show cause notices on different dates though the total demand confirmed is 3,13,56,315/-. The assessee appellant has given the submission that demand beyond the period of one year is time- barred as the department had the knowledge of the relevant facts. The assessee submits that the fact of receipt of subsidy was reflected in their profit and loss account and balance sheet and they are public sector undertaking therefore there is no question of they having any 'intent to evade payment of duty'; more so, when they have sold entire quantity of DDT manufactured to the Ministry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the appellant, was in respect of excess sales tax collected. The said details were worked out from the invoices which were raised by the appellant during the relevant period. On perusal of the said invoices, I find that the appellants were showing the amount which has been collected by them in form of sales tax. These will indicate that there was some kind of information given on the invoices to the authorities. Be that it may be, I find strong force in the contention of the ld. Counsel that the appellant being a Public Sector Undertaking, there cannot be mala fide for non-discharge of excise duty, if any and there cannot be allegation of intention to evade duty. I find fortified in my view, by decision of this Tribunal in the case of Markfed Refined Oil & Allied Indus, (supra), wherein the Tribunal held that "We are of the view that in the absence of any material showing any positive intention on the part of the appellant, which is a Government undertaking, to evade duty or fraud, collusion, etc., imposition of penalty was not justified." I find that the Revenue took up the matter in the case of Markfed Refined Oil & Allied Indus. in appeal to Hon'ble High Court of Punjab & Har ..... X X X X Extracts X X X X X X X X Extracts X X X X
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