2018 (9) TMI 1149 – CESTAT CHENNAI – TMI – Construction Services – composite Works Contracts – pure services – Department was of the view that such payment is not proper for the reason that the services cannot be classified as Works Contract Service and also because appellants have not exercised their option for payment of service tax under Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
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Held that:- 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 – 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 activitie
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under composition scheme under Works Contract Service – Held that:- The Tribunal in the case of Vaishno Associates Vs. Commissioner of Central Excise [2018 (3) TMI 417 – CESTAT NEW DELHI] had occasion to consider this issue and held for sole reason of not filing the intimation opting to pay service under Works Contract Service, the demand cannot sustain.
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Appeal allowed – decided in favor of appellant. – ST/723/2010, ST/350/2010, ST/528/2010 – 42436-42438/2018 – Dated:- 18-9-2018 – Ms. Sulekha Beevi C.S., Member (Judicial) And Shri Madhu Mohan Damodhar, Member (Technical) For the Appellant : Shri G. Natarajan, Advocate, Shri Raghavan Ramabhadran for Appellant And Shri Ramachandra Rao, Consultant For the Respondent : Shri A. Cletus, Addl. Commissioner (AR) ORDER PER BENCH The issue involved in all these appeals being similar, they were heard together and are disposed by this common order. 2. The appellant M/s. Real Value Promoters (P) Ltd. are involved in activity of constructing
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2007 to 31.3.2008 along with interest thereon as under. The show cause notice also proposed penalties under sections 76 and 78 of the Finance Act, 1994. Name of the Project Allegation Tax liability Commercial PRGT Non-payment of service tax on the services provided to buyers Rs.34,38,337/- Residential The Lords Sananda Brindavan Sujeet Surya Skanda Non-payment of service tax on the services provided to buyers Rs.1,07,33,392/- Commercial PRGT Amarasri Non-payment of service tax on the services provided to land owners 48,98,579/- Residential Sai Brindavan Non-payment of service tax on the services provided to land owners Rs.15,49,944/- Total Rs.2,06,20,252/- 2.1 Another Show Cause Notice No. 570/2009 dated 20.10.2009 was also issued in respect of amount received towards construction of residential apartments and commercial complexes for the period from 1.4.2008 to 31.3.2008. It appeared to department from the nature of the services provided, that appellants are liable to pay service tax
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who are the owners of the land for the development of residential complex comprising 432 apartments. The units in the complex are sold by appellant to ultimate buyers under separate agreements. Show cause notice dated 10.8.2009 was issued for the period January 2005 to August 2008 proposing to demand service tax under the category of Construction of Complex Service (CICS). After adjudication, the original authority confirmed an amount of ₹ 1,16,42,448/- holding that for the period prior to 1.6.2007, the appellant has to pay service tax under CICS and not under Works Contract Service (WCS) as the project was launched prior to 1.6.2007 and consideration was also received prior to 1.6.2007. For the period after 1.6.2007, the adjudicating authority held that Commercial or Industrial Construction Services / Construction of Residential Complex Services (RCS) were taxable even after 1.6.2007 and that appellant would have to pay under either RCS or WCS. 2.4 M/s. Ceebros Property Developm
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atter came up for hearing, ld. counsel Shri G. Natarajan, appeared for Real Value Promoters Pvt. Ltd. and took us to the history of introduction of service tax on various construction services and also made various contentions, submissions in respect of the matter under appeal. The submissions and contentions of the ld. counsel can be broadly summarized as under:- 3.1 Service Tax was introduced on the following taxable services from the dates mentioned against each: S.No Name of the service Section of the Finance Act, 1994 Introduced with effect from 1 Commercial or industrial construction service (CICS) 65 (105) (zzq) 01.07.2003 2 Construction of Complex Service (CCS) 65 (105) (zzzh) 16.06.2005 3 Works Contract Service (WCS) 65 (105) (zzzza) 01.06.2007 3.2 Section 65A of the Act deals with the principles of classification of services. As each of the taxable services are made taxable from different dates and the scope of abatement from value, exemption entitlements, valuation, rate of
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rtion has been prescribed vide Rule 2A of the Service Tax (Determination of Value) Rules, 2006, framed under Section 94 (2) of the Act. An alternative in the form of Works Contract (Composition scheme for payment of Service Tax) Rules, 2007 has also been introduced to pay service tax at a lesser rate on the gross amount (including the value of transfer of property in goods). 3.5 The issue as to whether a composite contract involving provision of service as well as transfer of property in goods could be covered under CICS and CCS from the date of introduction of service tax levy on such services was, being litigated upon which was finally settled by the Hon‟ble Supreme Court in the case of CCE Vs. Larsen & Toubro Ltd. 2015 (39) STR 913 SC. The Apex Court has observed that in as much as section 67 of the Act, dealing with valuation of taxable services, refers to the gross amount charged for service, the services of CICS and CCS would cover only pure service activities, as any c
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ate authorities cannot travel beyond the scope of allegations in the show cause notice and confirm the demand under a different category of taxable service as the assesse was not at all put on notice on the new category of taxable service. These decisions were based on various decisions of higher appellate forums, where it has been held that the show cause notice is the foundation of allegations and the adjudication should be limited to the allegations. Further, as per Section 65 A of the Act, classification of service shall be based on the specific entries and the more specific description has to be preferred. In this connection, he invited attention to CBEC‟s Circular 128/10/2010 Dt. 24.08.2010. 3.8 If show cause notices are issued demanding service tax under CICS / CCS, on composite contracts, involving transfer of property in goods, for the period post 01.06.2007, the said demands of service tax cannot be sustained, as these services would cover only pure service activities,
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stainable and liable to be set aside. Reliance is placed on the following decisions, wherein the demands under CICS/CCS for the period post 01.06.2007 have been set aside. a) URC Constructions Vs CCE – 2017 (50) STR 147 Tri-Chennai b) Mantri Developers VS CCE – 2014 (36) STR 944 Tri-Bang. c) Skyway Infra Projects VS CST – 2018-TIOL-360-CESTAT-MUM d) Srishti Constructions VS CCE – 2018-TIOL-337-CESTAT-CHD e) CST VS Swadeshi Construction Company – 2018-TIOL-1096-CESTAT-DEL f) Logos Construction Pvt. Ltd. VS CST 2018 (6) TMI 1361 – CESTAT CHENNAI 3.11 In the subject appeal, all the demands confirmed are in respect of composite contracts (commercial buildings, residential buildings, service provided to buyers and service provided to landowners). If the plea that such demands under CICS and CCS for the period both prior to and post 01.06.2007 is not sustainable is upheld, there is no need to advance any further arguments specific to the projects in question. 4. The above arguments advanced
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ut forward by appellants is that Union Government has for the first time decided to tax the service component of composite contracts such as Works Contract only with effect from 1.6.2007. The definition of Commercial Constructions Service (CICS / CCS) have not undergone any change after introduction of service tax on works contracts. While pure construction services (not composite involving supply of goods) which are not in the nature of works contract would be liable to service tax, prior to 1.6.2007, those in the nature of works contract (composite involving supply of goods) would be subject to levy only with effect from 1.6.2007. Let us proceed to examine the same. 7.1 Commercial or industrial construction was made exigible to service tax by insertion of Section 65(25b) of the Finance Act with effect from 1.7.2003. The definition when introduced read as under:- The said definition was amended with effect from 1.7.2010 vide Notification No. 24/2010-ST dated 22.6.2010 as under:- 25(b)
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onstruction of Complex Service (CCS), defined under section 65(30a) ibid during the period of dispute as under:- construction of complex means – (a) construction of a new residential complex or a part thereof; 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; 7.3 Residential Complex‟ was defined in section 65(91a) ibid during the disputed period as under:- 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
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any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation. – For the purposes of this sub-clause, works contract means a contract wherein, – (i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out, – (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) construction of a new building or a civil struc
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analysis‟ under section 65(105)(zzh) ibid; construction services‟ under section 65(105)(zzq); construction of complex services under section 65(105)(zzzh) would refer only to service contracts simpliciter and not to composite works contracts; that these five taxable services only would qualify without any other element. The Hon‟ble Supreme Court also observed that with introduction of works contract service as a separate taxable service, statutory mechanism to exclude the value of transfer of property of goods has been prescribed. The Apex Court held that since the Finance Act had not laid down any charge or machinery to levy and assess service tax on indivisible works contract prior to 1.6.2007, the levy on such composite works contract prior to that date has no constitutional validity. 7.6 The Larsen & Toubro (supra) judgment has been followed by this Tribunal in many numbers of cases to set aside the demand of service tax on services like commercial or industr
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Based on the Hon‟ble Apex Court judgment in Larsen & Toubro, such composite works contract then will not be liable to service tax levy prior to 1.6.2007. On the same ratio, such composite contracts even for the period after 1.6.2007 disputed in these appeals will still have to be held as composite works contract only and not pure service simpliciter contracts that could be classified under commercial or industrial construction service, or construction of complex service. To put in another way, to merit being classified as CICS or CCS, the service provider concerned will be rendering only service simpliciter without any other element in them namely without any material or goods supply involved. That is definitely not the case in the facts of these appeals. The activities of the appellants will therefore continue to be in the nature of composite works contract services and hence even after 1.6.2007 for the periods disputed in these appeals they cannot be brought within the fold
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composition scheme under which service tax will be levied at only 2 per cent of the total value of the words contract . 7.10 The issue was analyzed by the Hon‟ble Apex Court in Larsen & Toubro case (supra) and held that there can be no levy of service tax on composite contracts (involving both service and supply of goods) prior to 1.6.2007. This read together with the budget speech as above would lead to the strong conclusion that composite contracts were brought within 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 dischargi
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rvice Works Contract service‟ was made effective, classification of aforesaid services would undergo a change in case of long term contracts even though part of the service was classified under the respective taxable service prior to 1-6-2007. This is because works contract‟ describes the nature of the activity more specifically and, therefore, as per the provisions of Section 65A of the Finance Act, 1994, it would be the appropriate classification for the part of the service provided 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
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e Hon'ble Apex Court in M/s L&T Limited. Even in the appeal, the Revenue submitted that the respondent were engaged in construction services liable to tax under tax entry Section 65(105) (xxq). The grievance of the Revenue is with reference to commercial nature of the construction undertaken by the respondent and not on the correct classification of taxable activity. b. In the case of Skyway Infra Projects Pvt. Ltd. Vs. Commissioner of Service Tax, Mumbai – 2018-TIOL-360-CESTAT-MUM, 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
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nfirmed by the adjudicating authority is liable to be set aside and we do so. c. In the case of URC Construction (P) Ltd. Vs. Commissioner of Central Excise, Salem – 2017 (50) STR 147, the Tribunal in paragraphs 9, 10 and 11 has held as under:- 9. The Hon‟ble Supreme Court in re Larsen & Toubro & Ors. has decided thus 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 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 taxabl
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er of the two show cause notices adduce to leviability of tax for rendering works contract service‟. On the contrary, the submission of the appellant that they had been providing works contract service‟ had been rejected by the adjudicating authority. Therefore, even as the services rendered by them are taxable for the period from 1st June, 2007 to 30th September, 2008 the narrow confines of the show cause notices do not permit confirmation of demand of tax on any service other than commercial or 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 paymen
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ntract for this period. The only argument brought forth by the Ld. Counsel is that they have discharged an amount of around ₹ 82 lakhs under this category after the visit of the departmental officers and therefore an amount of ₹ 36,88,611/- demanded in the impugned order should be considered as having been discharged. We find merit in his argument and hence the demand of ₹ 26,88,611/- under works contract service for the period 01.04.2008 to 30.09.2008 is required to be considered as having been paid, albeit subsequent 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
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te, proposing service tax liability on the impugned services involving composite works contract, under Commercial or Industrial Construction Service‟ or Construction of Complex‟ Service, cannot therefore sustain. In respect of any contract which is a composite contract, service tax cannot be demanded under CICS / CCS for the periods also after 1.6.2007 for the periods in dispute in these appeals. For this very reason, the proceedings in all these appeals cannot sustain. 9. The next issue that arises for consideration is with regard to the demand raised for the reason that appellants did not intimate the department about their intention to opt for payment of service tax under composition scheme under Works Contract Service. The Tribunal vide Final Order No. 50871/2018 dated 6.3.2018 in the case of Vaishno Associates Vs. Commissioner of Central Excise had occasion to consider this issue and held for sole reason of not filing the intimation opting to pay service under Works Co
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