2018 (10) TMI 402 – CESTAT CHENNAI – TMI – Construction of commercial or industrial construction service – Workd Contract Service – benefit of Abatement of 67% – pure services or composite contracts – non-discharge of tax appropriately on the construction activities – period involved in the present case is from October 2004 to March 2009 – demand with Interest and penalties.
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Held that:- The contracts entered between the appellant and the service recipient is a composite contract which involves both supply of materials as well as rendering of service. The Tribunal in the case of Real Value Promoters Ltd. [2018 (9) TMI 1149 – CESTAT CHENNAI] had 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 serv
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the demand of service tax under construction of commercial or industrial construction service (residential complex service). 3. Brief facts are that during investigation, it was found that the appellant rendered construction of residential complex service in respect of M/s. Vijaisurya Apartments for the period 2006 – 08 consisting of 62 dwelling units and Vijayisurya Residency which was started in the month of April 2009 consisting of 19 dwelling units. In all these cases, the appellant had entered into construction agreement with clients for construction of flats and executed sale agreement only on UDS land and not for the total built-up constructed area of the flat and as such there is no total sale involved and the appellants have rendered service of construction of flats to the respective clients. They did not discharge appropriate service tax on the construction activities for which show cause notices were issued proposing to demand service tax under commercial or industrial const
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Sep 2011 Dept Appeal for non-imposition of penalty under Sec. 76 Sec. 76 ST/40337/2013 Jan 2010 to Dec 2010 Rs.4,66,097 Rs.200 per day / 2 % pm (Sec. 76) ₹ 4,66,097 (Sec. 78) 4. The ld. Counsel Shri G. Natarajan appeared and argued the matter for the appellants, which can be broadly summarized as under:- 4.1 The above demands of service tax stand confirmed on the appellant under construction of complex service, as defined under Section 65 (105) (zzzh) read with Section 65 (30a) and Section 65 (91a) of the Finance Act, 1994, in respect of certain residential apartment construction activities undertaken by the appellant. The demand has been made after granting abatement of 67 % from value, as the activities involve transfer of property in goods also. 4.2 At the outset, it is submitted that since transfer of property is also involved, the activities are liable to service tax only under works contract service, as per Section 65 (105)(zzzza) of the Act, from 01.06.2007 only and for th
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ents, cannot come in aid to levy service tax on composite contracts prior to 01.06.2007, as the validity of a levy cannot depend upon the existence of exemption notifications issued by the executive. The said decision of the Hon ble Supreme Court has been followed in a catena of cases, out of which reliance is placed on the following. Balaji Builders v. CCE, Jaipur reported in 2017 (6) GSTL 59 (Tri-Del) Ircon International Ltd v. CCE, Delhi reported in 2017 (5) GSTL (221) (Tri-Del) 4.3 Hence, the demand upto 31.05.2007 under construction of residential complex service is not at all sustainable and liable to be set aside. 4.4 As only pure service contracts are covered under the definition of Construction of residential complex service, 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, reliance is placed on the following decisions. Real Value Promoters Ltd. V
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ief. 5. The ld. AR Shri K. Veerabhadra Reddy supported the findings in the impugned order. 6. After hearing both sides, it is brought to light that the period involved in the present case is from October 2004 to March 2009. The demand has been raised in the show cause notice under construction of residential complex services. The contracts entered between the appellant and the service recipient is a composite contract which involves both supply of materials as well as rendering of service. The Tribunal in the case of Real Value Promoters Ltd. (supra) had 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 pure
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in a works contract should attract service tax. Hence, I propose to an optional 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
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assification, with effect from 1-6-2007 when the new service 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 ha
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s only as per legal position settled by the 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 sp
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On this ground itself, the entire demand confirmed 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 poi
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s seen that neither 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 payment upto 0
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or 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 the nat
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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. 7. Following the above decision, we are of the considered opinion that the demand of service tax under commercial or industrial construction service (residential complex) cannot sustain after the period 1.6.2007. The levy of service tax prior to 1.6.2007 cannot also sustain by application of the decision of the Hon ble Supreme Court in the case of Larsen & Toubro Ltd. – 2015 (39) STR 913 (SC). 8. From the discussions made above, we hold that the impugned order cannot sustain and is set aside. The appeal is allowed with consequential relief, if any. (Operative
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