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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 ..... 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 Returns for the relevant period. (iv) For their failure to obtain service tax registration under 'Construction of Complex Service', I impose a penalty of Rs.10000/- (Ten Thousand Only) under the provisions of Section 77 (1) (a) of the Act, on M/s Allahabad. (v) Development Authority, Allahabad. I also impose a penalty of Rs. 3,51,34,251/- (Rupees Three Crores Fifty One Lakhs Thirty Four Thousand Two Hundred and Fifty One Only), upon M/s Allahabad Development Authority, Allahabad under the provisions of Section 78 of the Finance Act, 1994." 2.1 Appellant is engaged in providing services of construction of complex and as they had not discharged their service tax as detailed in table bellow:- Year Amount received from Constructio n of new residential complex Amount received from completion and finishing services in relation to a residential complex, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with the submissions made in appeal and during the course of argument. 4.2 For holding against the appellant, impugned order records as follows:- "5.2 I find that the case of the department is that the party are providing services of "construction of complex". On discreet investigation conducted by the department, it was observed that the services provided by the party, were liable to service tax and appropriately classifiable under "construction of complex service", defined under Section 65(30a) of the Finance Act, 1994 and therefore the gross amount of Rs.33,29,60,186/-received by the party, during the period from 2009-10 to 2013-14 was taxable, on which the party were liable to pay service tax amounting to Rs.3,51,34,251/- (including cess). 5.3 The party has contested the impugned demand on the ground that the services provided by it are not covered under the "con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered 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 residential complex or a part therecf; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex; 6.2 The term "residential complex" is defined in Section 65(91a) of the Act as follows: "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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 Service tax is chargeable on such transfer. However, in most cases, the prospective buyer books a flat before its construction commencement/completion, pays the consideration in installments and takes possession of the property when the entire consideration is paid and the construction is over. 8.3 In some cases the initial transaction between the buyer and the builder is done through an instrument called 'Agreement to Sell'. At that stage neither the full consideration is paid nor is there any transfer in ownership of the property although an agreement to ultimately sell the property under settled terms is signed. In other words, the builder continues to remain the legal owner of the property. At the conclusion of the contract and completion of the payments relating thereto, another instrument called 'Sale Deed' is executed on payment of appropriate stamp duty. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 terms of Notification No.12/2003-ST dated 20.6.2003. 6.7 This notification No. 1/2006-ST dated 1.3.2006 was amended vide Notification No. 29/2010-ST dated 22.06.2010, effective from 01.07.2010, wherein the abatement was increased to 75% of the gross taxable value, subject to a further condition that this exemption shall not apply in 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. 6.8 The provisions contained in the Finance Act, 1994, underwent a sea change vide the Finance Act, 2012, with the enactment of new provisions with regard to the "declared services and the "negative list and the Introduction of Mega Exemption vide Notification No. 25/2012-ST dated 20.06.2012, effective from 01.07.2012. Of the new provisions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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) canal, dam or other irrigation works; (e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or (1) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 658 of the said Act; 13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,- (a) a road, bridge, tunnel, or terminal for road transportation for use by general public; (b) a civil structure or any other original works pertaining to a scheme under Jawaharlal Nehru National Urban Renewal Mission or Rajiv Awaas Yojana; (c) a building owned by an entity registered under section 12AA of the Income tax Act, 1961(43 of 1961) and meant predon ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 properties after purchasing land and preparation of a site plan. The party goes on to state that it constructs houses/ flats out of its own resources and then sells it to its buyers against execution of a registered deed in favour of the buyer. Going by the provisions of law discussed very elaborately earlier and the self acknowledged construction activity carried out by the party, I conclude that that the activity carried out by the party in relation to houses/ flats it builds and sells, is rightly classifiable under "construction of complex service". In my view, there is no ambiguity or confusion as to the classification of service rendered by the party when it builds flats/ houses for its buyers. 7.0 A question has been raised that service provided by the Government, in this case ADA, are exempt from service tax. It is pertinent to mention herein that prior to 01.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice 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 statute, and that is in the case when the builder collects the entire sum against the residential complex from the buyers after the grant of completion certificate from the authority competent to issue such certificate. In such cases the construction service shall not be taxable. The intent of the said provision is that in case a builder receives the entire consideration against the sale of residential units from the buyers after the grant of completion certificate by the competent authority, the service shall not be taxable as it shall be deemed to be an outright sale. In any other case, in which the buyer and the builder enter into contracts/ agreement known under whatever nomenclature, the service shall be taxable. In the instant case, the party have consistently pleaded that they sell the flats after completion of construction and only when the completion certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 allowed. The notifications and the conditions specified therein have been discussed in detail in the preceding paras. I find that during the entire period of demand ie. 2009-10 to 2013-14, the party has not submitted any proof of having fulfilled the said conditions. Thus I hold that the party are not entitled to the benefit of notification as they have not submitted any proof of having fulfilled the specified conditions. 9.0 It is amply clear from the facts of the case and above cited statutory provisions contained in the Finance Act, 1994 as well as elaborate discussions that the services provided by the party by way of construction of complexes is chargeable to service tax during the material time and appropriately classifiable under "Construction of Complex Service". Therefore, I hold that the party is liable to pay service tax amounting to Rs.3,51,34,251/-(includi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 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 therefore the appellants are liable to pay interest. I also find that CESTAT in the case INMA International Security Academy (P) Ltd. vs. CCE [2005] 1 STT 31 (Chennai-CESTAT) held that the liability to pay interest at prescribed rate, for delayed payment of dues, was inescapable as the law did not confer any discretion in the matter of levying interest. 11.1 From the above it is clear that interest is liable to be paid by the party at appropriate rates under the provisions of Section 75 of the Finance Act, 1994, on the amount of service tax being confirmed." 4.3 The issue involved in the present case is squarely covered by the decision of Hon'ble jurisdictional Allahabad High Court in the case of Greater Noida Industrial Development Authority 2015 (40) STR 95 (All.) by holding as follows:- "1-29 ..................................... 30. It is left open to the appellant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (38) STR 1062 (Tri.-Del.)] has not been agreed to by the larger bench of Tribunal in case of Rajasthan State Industrial Development and Investment Corporation Ltd. [INTERIM ORDER NO's. 1/2025 & 1/2025 dated 27.01.2025 in Service Tax Appeal No 50553 of 2017 and Service Tax Appeal No. 89766 of 2013 (Mumbai Bench)] and Larger Bench has observed settled the issue stating as follows: "31. In Greater Noida Industrial Development Authority, this issue was examined in paragraph 10.1 of the judgment, which paragraph has been reproduced above. In paragraph 16 of the judgment, the Division Bench noticed that in Panbari Tea the Supreme Court drew a distinction between premium and rent, but then proceeded to hold that since the taxing event under section 65(105)(zzzz) of the Finance Act is "renting of immovable property", service tax would be leviable only on the element of rent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransport 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 the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as 'provision of service' for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in accordance with law. The fee collected by them for performing such activities is in the nature of compulsory levy as per the provision of the relevant statute, and it is deposited into the Government treasury. Such activity is purely in public interest and it is undertaken as mandatory and statutory function. These are not in the nature of service to any particular individual for any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to each case on hand. Purposive interpretation can be given only when there is an ambiguity in the statutory provision or it results in absurdity, which is so not found in the present case. 8.4 Now, so far as the submission on behalf of the respondent that in the event of ambiguity in a provision in a fiscal statute, a construction favourable to the assessee should be adopted is concerned, the said principle shall not be applicable to construction of an exemption notification, when it is clear and not ambiguous. Thus, it will be for the assessee to show that he comes within the purview of the notification. Eligibility clause, it is well settled, in relation to exemption notification must be given effect to as per the language and not to expand its scope deviating from its language. Thus, there is a vast difference and distinction between a charging provision in a fisca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provided by them which has been denied for production of sufficient documents admissibility. Denial of such abatement cannot be justified and the value of taxable services needs to be determined after allowing for abatement either under the composition scheme or on the basis of actual documents, if documents produced. The said view is in line with the decision of Hon'ble Supreme Court in the case of M/s Larsen and Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)] wherein following has been held:- "24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 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 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." 28. Pursuant to the aforesaid speech, not only was the statute amended and rules framed, but a Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was also notified in which service providers could opt to pay service tax at percentages ranging from 2 to 4 of the gross value of the works contract. 29. It is interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmits 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 Health & Family Welfare, Government of India. 12.1 CESTAT in the case of CCE, Indore v. Nepa Ltd. - 2013 (298) E.L.T. 225 (Tri.-Del.) . has held that in case of Public Sector Undertaking, it would be absurd to accuse that there was 'intention to evade tax'. CESTAT in the said decision observes as under : In any case it "8. is seen that the show cause notice has been issued after expiry of normal limitation period of one year from the relevant date and same would not survive unless the Department proves that the respondents had deliberately suppressed the relevant facts from the Department with intent to evade the duty. In this regard we find that the respondent is a Public Sector Undertaking wholly owned by the Government of India and in our view it would be absurd to accuse a wholly Government owned company of non-payment of excise duty with intent to evade the tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 & Haryana and their Lordships, while dismissing the appeal, passed the following order : "The revenue has filed the instant appeal under Section 35G of the Central Excise Act, 1944 challenging order dated 28-3-2008 passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (for brevity 'the Tribunal'). The Tribunal has recorded a categorical finding that there is no material brought on record which may lead to an inference that there was any intention to evade duty by playing fraud or collusion. The dealer-respondent is a government undertaking namely Markfed. After recording the aforesaid finding, the order of penalty has been set aside by the Tribunal. Having heard learned counsel, we find that no exception is provided to interfere in the impugned order in which pure findings of fact have been recorded. Once the dealer-respondent is a Government organi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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