2018 (5) TMI 889 – CESTAT HYDERABAD – TMI – Construction of houses and residential premises with different land owners, in respect of one joint development agreement – Revenue has demanded service tax from appellant on the ground that it was not paid correctly on the villas which were constructed by appellant for land owner, as a part of compliance of the agreement entered with the land owners – extended period of limitation – Held that: – It is undisputed that appellant has provided construction services to the land owner and as a consideration, received legal rights on his share of land, constructed Villas on that land and sold them, which would mean that appellant is investing the consideration received from first transaction of land owners right to construct in second transaction – merely because the consideration received from land owners is invested in construction of villas to other buyers on which service tax is paid, it cannot be concluded that service tax paid on considerati
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d the service tax liability on the construction undertaken on joint development basis on the value of construction which is mandated in Section 67 of Finance Act, 1994, read with rules made thereunder. In our view, if once the service tax liability has been discharged on the gross amount, demand of service tax on the same amount again would amount to double taxation.
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Extended period of limitation – Held that: – it cannot be held that there was a malafide intention on the part of the appellant to suppress any facts or make mis-statements, with an intention to evade service tax liability – demands are also hit by limitation and extended period cannot be invoked for the demands received.
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Demand is not sustainable on merits as well as on limitation – appeal allowed – decided in – Appeal No. ST/31095/2017 – Final Order No. A/30559/2018 – Dated:- 11-5-2018 – Hon ble Mr. M. V. Ravindran, Member (Judicial) And Hon ble Mr. Madhu Mohan Damodhar, Member (Technical) Shri Alok Barthwal
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of differential service tax for the period April 2012 to March 2015 with an allegation that they had not discharged the service tax liability towards the amount received from land owners towards allotted share of developed property. The allegations in the show cause notice also invoked the extended period of limitation and the said show cause notice relied upon the clarification given by the Board dated 10.02.2012 wherein the service tax liability has been vested on the builders/developers on the construction service involved in flats/houses given to land owners as per the agreement. The demand was issued on the basis of nearest sale value of the villas to the new prospective customers of the property which lies with the appellant. The appellant contested the show cause notice on limitation as well as on merits, taking the stand that the value of ₹ 5,495/- per sq. Ft in respect of the land owner share is incorrect as the entire value of the land was considered by them while disch
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evidencing that service tax has been paid by them on whatever considerations that have been received and the adjudicating authority has sought to bifurcate the joint development agreement into two transactions, which is incorrect; that CBEC has issued instructions on construction services/commercial or industrial construction services under letter No. V/DGST/22/Audit/Misc/1/2004, dated 16.02.2006 wherein it has been directed that different practices and financial arrangements exists which influence the taxable value under these services; that in all such situations, the taxable value under section 67 of the Finance Act, 1994 shall be gross amount charged by service provider (builder in this case) for such services provided or to be provided and these instructions are applicable on Revenue and has not been withdrawn. 4. Ld. DR after reiterating the findings of the lower authorities, submits that to arrive at gross value for discharge of service tax, the value of construction of villas w
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dered the submissions made at length and perused the records as also the Board circulars and instructions in this regard. We find that in the present case, Revenue has demanded service tax from appellant on the ground that it was not paid correctly on the villas which were constructed by appellant for land owner, as a part of compliance of the agreement entered with the land owners. We find that adjudicating authority has confirmed the demands holding that transactions between builder and land owner and builder and buyers have to be understood as two separate transactions. It is undisputed that appellant has provided construction services to the land owner and as a consideration, received legal rights on his share of land, constructed Villas on that land and sold them, which would mean that appellant is investing the consideration received from first transaction of land owners right to construct in second transaction. In our view, merely because the consideration received from land own
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ration in cash for the sale of said villas. e) It is undisputed that for the sale of villas to the prospective customers, the cost of land is included in the value so arrived i.e. ₹ 5,495/- per sq.ft. f) In case of villas, which were constructed for land owner, the same were not for sale in the market but for their own use (as residences). 7. It has to be construed, in the above factual matrix, that construction of villas for the land owners is a consideration towards the land on which villas were constructed and offered for sale to prospective customers. It would not be a rocket science to understand that the value which has been arrived at for sale of villas to prospective customers, would include the consideration paid or payable for acquisition of land. It is not a case that appellant has not discharged the service tax liability on the value received for the villas from prospective customers. In our view, if the consideration towards the acquisition of the land has been inclu
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provided or to be provided by him; (ii) In a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) In a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed under Rule 3 of Service Tax
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on received from prospective customers i.e. total gross amount. In the case in hand, the amount attributable to the consideration received by appellant in the form of land rights from the land owner stands included in the value of villas sold to prospective customer which would mean that whatever consideration was received by the appellant in form of developmental right was considered in assessable value. The Chartered Accountant s certificate placed on record by appellant goes into detail and certifies that appellant has discharged the service tax on consideration received by them and in such a case there is no reason to again demand service tax on the villas constructed and handed over to the land owners. 9. The Chartered Accountant certificate has clearly stated that to arrive at the value of construction, areas of villas to be shared to land owners, the Developer (the appellant herein) had undertaken an exercise to determine the value of construction per sq.ft for the villas and th
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Makers Pvt. Ltd. [2013(30) STR 33 (Tri.-Chennai)]. 11. We find that CBEC vide circular dated 16.02.2006 in respect of collection of service tax under construction of complex services had issued instructions under section 57 (B) of Central Excise Act, 1944 which are made applicable to service tax under section 83 of Finance Act, 1994, in para No. 8 of the said instructions stated as under: 8. It is noticed that in the construction business different practices and financial arrangements concerning (a) promoters, developers & builders, (b) land owners (c) contractors and (d) buyers exist. These practices influence the taxable value under the construction of complex services. In all such situations, the taxable value under section 67 shall be the gross amount charged by the service provider (builder in this case) for such services provided or to be provided by him. This read with notification No. 18/2005-ST, dated 07.06.2005 entitles a builder/contractor an abetment of 67% on the gross
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ted that service tax compliance is towards the payment of gross amount of the construction undertaken on joint development basis and received from the customers has been made. This leads to conclusion that it is evident that appellant has complied the service tax liability on the construction undertaken on joint development basis on the value of construction which is mandated in Section 67 of Finance Act, 1994, read with rules made thereunder. In our view, if once the service tax liability has been discharged on the gross amount, demand of service tax on the same amount again would amount to double taxation. 13. The reliance placed by Ld. DR on the case of LCS City Makers Pvt. Ltd. will also not carry the case of Revenue any further, as in that Bench upheld the contention of the Revenue that recording that the facts and circumstances of the case do not warrant assessment of a different value for services in respect of flats sold to individual buyers as compared to flat handedover to th
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