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TMI Blog2025 (3) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... D ANOTHER VERSUS ASSISTANT COMMISSIONER OF SERVICE TAX, HYD -3- OT [2020 (2) TMI 632 - TELANGANA HIGH COURT]] held as '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 and since neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service components from ascertaining the measure of service tax, the same cannot be levied.' Thus, the Appellant was not liable for payment of service tax on construction of residential complex service during April, 2017 to June, 2017 and the appeal is liable to be allowed on merits. Extended period of limitation - HELD THAT:- For demanding service tax for the period April, 2017 to June, 2017, SCN had been issued on 05.08.2020, by invoking extended period of limitation. The Commissioner (Appeals) has upheld the invocation of extended period by holding that the decision in the case of Suresh Kumar Bansal was for the period prior to 01.07.2012 and that the Appellant has been holding service tax registration for a lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Adjudicating Authority as well as Appellate Authority has been that the Hon'ble Delhi High Court in the case of Suresh Kumar Bansal 2016 (43) S.T.R. 3 (DEL) has held that there was no mechanism for ascertaining the service component and therefore the levy itself would fail. He drew my attention to the said decision, wherein it has been held that service tax could not be levied on value of undivided share of land and that neither Service Tax (Valuation Rules, 2006) nor Finance Act, 1994 have provisions to determine value of services covered under Section 65 (105) (zzzh). He further submits that the aforesaid decision has been followed in the following cases :- (a) Vasudha Bommireddy Vs. AC of Hyderabad reported in 2020 (35) GST 52 (Telangana). (b) Ruchi Goyal Vs NBCC (India) Ltd. reported in 2019 (29) G.S.T.L. 392(Del). (c) Vaani Kapoor Vs. CCE reported in 2019 (25) G.S.T.L. 534 (Del). 4. The learned Chartered Accountant further submitted that the Adjudicating Authority has not followed the decision of Suresh Kumar Bansal (Supra) on the ground that Department has filed appeal against the same and that the Appellate Authority has not followed the same on the ground that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05)(zzzh) of the Act (hereafter 'the impugned explanation') introduced by virtue of Finance Act, 2010 as being ultra vires of the Constitution of India. XXXXXXXX XXXXXX XXXXXXX XXXXX 9. Next, Mr. Agrawal contended 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. He submitted that services covered under Section 65(105)(zzzh) and 65(105)(zzzzu) are now sought to be taxed by virtue of Section 66E(b) read with Section 65B(22) and Section 65B(44) of the Act. He submitted that the challenge laid by the petitioners to the provisions of Section 65(105)(zzzh) and 65(105)(zzzzu) of the Act would also be equally valid for the taxing provisions introduced with effect from 1st July, 2012. Xxxxxx xxxxx xxxxxxx xxxxxxx 20. By virtue of Finance Act, 2010, an explanation was added to Section 65(105)(zzzh) which is impugned in these petitions. After the insertion of the impugned explanation, the said clause read as under : "S.65(105) "Taxable Service" means any service provided or to be provided :- xxxx xxxx xxxx xxxx xxxx "(zzzh) to any person, by any other person, in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be impermissible to expand the measure of service tax to include elements such as the value of goods because that would result in extending the levy of service tax beyond its object and would impinge on the legislative fields reserved for the State Legislatures. Xxxxxxxxxxx xxxxxxxxxx xxxxxxxxxx xxxxxxxxx 37. Undisputedly, the contract between a buyer and a builder/promoter/developer in development and sale of a complex is a composite one. The arrangement between the buyer and the developer is not for procurement of services simplicitor. As noticed hereinbefore, an agreement between a flat buyer and a builder/developer of a complex - who is developing the complex for sale is, essentially, one of purchase and sale of developed property. But, by a legislative fiction, such agreements, which have been entered into prior to completion of the project and/or construction of a unit, are imputed with a character of a service contract; the works involved in construction of a complex are treated as being carried by the builder on behalf of the buyer. However, indisputably the arrangement between the buyer and the builder is a composite one which involves not only the element of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he works would stood excluded. In our view, this issue also stands concluded against the Revenue by the judgment in the case of Commissioner of Central Excise v. Larsen and Toubro Limited (supra). In that case, the Supreme Court had affirmed the decision of the Orissa High Court in Larsen and Toubro Limited v. 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. The relevant extract from the decision of the Orissa High Court is reproduced below :- "This Court is of the opinion that if the Act is unworkable in the absence of necessary Rules, as has been held by several judgments referred to above, any assessment under the said Act cannot be enforced even if such an assessment order is made by an authority under the Act purportedly in accordance with the provisions of the Act. The inherent infirmity of an assessment order passed on the basis of circulars which have no statutory sanction cannot be cured by an appellate order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof, including a complex or building intended for sale by a buyer fully or partly, except where the entire consideration is received after issuance of completion certificate by the competent authority. 27. Clause (h) of Section 66E mentions that the "service portion in the execution of a works contract" is also a declared service. Xxxxxxx xxxxxxxxx xxxxxxxxx. 29. Rule 2A of the Service Tax (Determination of Value) Rules, 2006 deals with determination of value of service portion in the execution of a works contract mentioned only in clause (h) of Section 66E of the Act. Xxxxxxxxx xxxxxxxxxxx xxxxxxxxxxxx 31. We are of the opinion that Rule 2A of 2006 Rules deals only with determination of the value of the service portion in execution of a works contract referred to clause (h) of Section 66E of the Act; and even as of date, no rule has been enacted by the Central Government dealing with determination of value of service portion in a composite contract of sale involving not only a service component but also sale of built up area along with undivided share of land involving also sale of goods included in the total consideration paid for their purchase falling in clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 and since neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service components from ascertaining the measure of service tax, the same cannot be levied. 33. We are in complete agreement with the above view. 34. Though Sri Swaroop, Counsel for respondents sought to contend that construction of the complex is also a 'works contract' and falls under Section 66E(h), we do not accept the said interpretation because if such an interpretation was to be correct, the Legislature would not have created a separate category of services relating to construction of a complex in clause (b) of Section 66E, and the same cannot be rendered otiose by the Court." 10. In view of aforesaid decisions of Hon'ble Delhi High Court and Hon'ble Telangana High Court, I hold that the Appellant was not liable for payment of service tax on construction of residential complex service during April, 2017 to June, 2017 and the appeal is liable to be allowed on merits. 11. On the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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