M/s. Aswini Apartments Versus Commissioner of GST & Central Excise Chennai South
Service Tax
2018 (10) TMI 404 – CESTAT CHENNAI – 2019 (31) G. S. T. L. 476 (Tri. – Chennai)
CESTAT CHENNAI – AT
Dated:- 26-9-2018
ST/42463/2015 – 42515/2018
Service Tax
Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical)
For the Appellant : Shri G. Natarajan, Advocate
For the Respondent : Shri K. Veerabhadra Reddy, ADC (AR)
ORDER
PER BENCH
Brief facts are that during verification of accounts of the appellants by the Service Tax Commissionerate, Chennai it was noticed that the appellant did not pay service tax on the entire construction activities and also that they have paid service tax under the works contract service on the taxable value realized from customers towards builders' share of constructed area. Show cause notice was issued proposing to demand short-paid service tax along with interest and also for imposing penalties. After due p
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rs. A.M.P.A. Valliammai Achi and Mrs. A.Pl. Nachammai, who are co owners of the adjacent land, so as to develop the said land also into a common commercial complex. The landowners under this agreement would also be entitled to 50 % of the constructed area and the remaining 50 % for the appellant. Finally, the area entitled for the landowners and the appellant has been arrived at as, out of the total constructed area of 1,22,428 Sq. Feet, 63888 Sq. Feet would be for the land owners and the remaining 58,540 Sq. Feet would be for the appellant. The differences have been settled between the landowners and appellant by making suitable payments, subsequently.
2.2 As and when the appellant's portion of constructed area was sold by the appellant, appropriate service tax has been paid on the same by the appellant, by opting for composition scheme under works contract service, on the total amount received from the buyers, including the UDS land value. In this connection, a show cause notice No.
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sale of constructed area pertaining to the appellant, under the composition scheme of works contract service is not correct in as much the project commenced prior to the introduction of levy of service tax on works contract (01.06.2007) and hence service tax has to be paid under commercial or industrial construction service. Hence, differential service tax demand has been made in respect of the services provided by the appellant to the buyers of the appellant's share of constructed area, where the appellant has paid service tax under composition scheme of works contract service. The break-up of the demands is given below.
S. No.
Details of Demand
Period of demand
Amount of demand
I
Demand of service tax on services rendered to land owner, in respect of the commercial project – Navin's Presidium, commercial or industrial construction service (CICS)
June 2005 to September 2009
Rs.3,97,29,247
II
Demand of service tax on services rendered to buyers from the appellant's portion,
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s placed on the decision of the Hon'ble Supreme Court in CCE, Kerala v. Larsen & Toubro Ltd reported in 2015 (39) STR 913 (SC), wherein it was held that the provisions of Section 65(105)(g), 65(105)(zzd), 65(105)(zzh), 65(105)(zzq) and 65(105)(zzzh) were not sufficient for levying service tax on indivisible composite works contract prior to 01.06.2007. Hence, the demand upto 31.05.2007 under CICS is not at all sustainable and liable to be set aside.
2.5 As only pure service contracts are covered under the definition of CICS as held by the Hon'ble Supreme Court, confirmation of the demand under the said service, post 01.06.2017, in respect of the composite contracts undertaken by the appellant is not at all sustainable. In this connection, he relied on the decision of the Tribunal in the case of Real Value Promoters Ltd. Vs. CCE – 2018-TIOL-2867-CESTAT, Chennai.
2.6 Further, the appellant also relied on the decision of the Hon'ble Tribunal in Vasantha Green Projects VS CCE – 2018-TIOL
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occasion to analyse the issue regarding demand of service tax under construction of residential complex services, commercial or industrial construction service and construction of complex service. The Tribunal has held that prior to 1.6.2007, levy of service tax can be under the above categories only for contracts which are purely for services. That after 1.6.2007, the above categories would be applicable only if the contracts are purely services and which are not composite contracts. Further, it was held that after 1.6.2007, demand in respect of composite contracts would fall under works contract service only. The relevant portion of the said decision is reproduced as under:-
“7.8 On the contrary, being composite works contracts, they will necessarily fall within the ambit of works contract service as defined under section 65(105)(zzzza) ibid. It is possibly with this intent in mind that the lawmakers have included in the definition of works contract, erection and commissioning serv
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thin the ambit of levy of service tax only with effect from 1.6.2007 by introduction of Section 65(105)(zzzza) i.e. Works Contract Services. As pointed out by the ld. counsels for appellants, there is no change in the definition of CICS/CCS/RCS after 1.6.2007. Therefore only those contracts which were service simpliciter (not involving supply of goods) would be subject to levy of service tax under CICS / CCS / RCS prior to 1.6.2007 and after. Our view is supported by the fact that the method / scheme for discharging service tax on the service portion of composite contract was introduced only in 2007.
7.11 The ld. AR Shri A. Cletus has tried to counter this contention by stating that works contract service is service / activity which would be of a general nature whereas the construction activities defined in Commercial or Industrial Construction Services, Construction of Complex Service and Construction of Residential Complex etc. are of special nature. He took support of the maxim 'g
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after that date.”
7.12 Thus, for example, while construction of a new residential complex as a service simpliciter would find a place under section 65(105)(30b) of the Act, the same activity as a composite works contract will require to be brought under section 65(105)(zzzza) Explanation (c). For both these categories for the definition of residential complex, the definition given in section 65(105)(91a) will have to be adopted as discussed above will have to be taken into account.
7.13 We find sustenance in arriving at this conclusion by a number of decisions of the Tribunal in which it has held as under:-
a. In the case of Commissioner, Service Tax, New Delhi Vs. Swadeshi Construction Company – 2018-TIOL-1096-CESTAT-DEL, the Tribunal in para 7 has held as under:-
“7. We note that in the present case, the SCN was issued on 27.05.2011. On that date, both the tax entries, namely, Commercial or Industrial Construction Service and Works Contract Service, were available in the Fina
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UM, in respect of identical issue for the period from 2005 to 2012, the Tribunal in para 7 has held as under:-
“7. On careful consideration of the submissions made by both the sides, we find that the issue falls for consideration is whether the services rendered by the appellant in respect of 52 contracts entered with various Govt. authorities need to be taxed under MMRC/CICS/ECIS or otherwise. It is on record and undisputed that the adjudicating authority has specifically held that all the 52 contracts which has been executed by the appellants are with material. Learned Counsel was correct in bringing to our notice that the said findings of the adjudicating authority that the appellant is eligible for abatement of 67% of the value of the goods is in itself the acceptance of the fact that the contracts were executed with material. It is also on record that the Revenue has not contested these findings of the adjudicating authority before the Tribunal.
If that be so, even when the Re
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acts 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 are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from
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industrial construction service'. It is already established in the aforesaid judgment of the Hon'ble Supreme Court that the entry under Section 65(105)(zzd) is liable to be invoked only for construction simpliciter. Therefore, there is no scope for vivisection to isolate the service component of the contract.”
d. In the case of Logos Construction Pvt. Ltd. Vs. Commissioner of Central Excise as reported in 2018 (6) TMI 1361, the Tribunal has held as under:-
“5.1 The payment upto 01.06.2007 will get extinguished on account of the law that has been laid down by the Apex Court in the case of Larsen & Toubro Ltd., (supra), relied upon by the Ld. Counsel. So ordered.
5.2 The Ld. Counsel has been at pains to point out that on-going projects which were only in the nature of works contract prior to 01.04.2007 cannot be brought under different category of Construction Services and CICS subsequently. We find merit in his arguments. The SCN has proposed demand of service tax liability only
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sequent to the visit of the officers. However, the interest liability if any that arise on this amount if not paid already will have to be discharged by the appellants. So ordered.”
8. In the light of the discussions, findings and conclusions above and in particular, relying on the ratios of the case laws cited supra, we hold as under:-
a. The services provided by the appellant in respect of the projects executed by them for the period prior to 1.6.2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial construction service or construction of complex service in the light of the Hon'ble Supreme Court judgment in Larsen & Toubro (supra) upto 1.6.2007
b. For the period after 1.6.2007, service tax liability under category of 'commercial or industrial construction service' under Section 65(105)(zzzh) ibid, 'Construction of Complex Service' under Section 65(105)(zzzq) will continue to be attracted only if the activities are in
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