M/s. Vijaisuriya Constructions P. Ltd. Versus Commissioner of GST & Central Excise Coimbatore
Service Tax
2018 (10) TMI 402 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 26-9-2018
ST/94/2012, ST/40335/2013, ST/40336/2013, ST/40337/2013 – 42496-42499/2018
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 R. Subramaniam, AC (AR)
ORDER
PER BENCH
The issue involved in all these appeals being same, they are heard together and are disposed by this common order.
2. The appellants are aggrieved by 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 dwelli
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er passed by the Commissioner (Appeals). Vide the adjudication order, the original authority had not imposed penalty under section 76 against which the department filed appeal before Commissioner (Appeals) and the Commissioner (Appeals) in the impugned order imposed penalty under section 76. Aggrieved, the appellants have filed appeals. The details of the demand and period involved as shown in the Table are reproduced below:-
Appeal No.
Period
ST demanded
Penalties
ST/94/2012
Aug 2006 to Dec 2009
Rs.22,20,816
Rs.200 per day / 2 % pm (Sec. 76) Rs. 22,20,816 (Sec. 78)
ST/40335/2013
Jan 2011 to Sep 2011
Rs.77,562
Sec. 77
ST/40336/2013
Jan 2011 to 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) Rs. 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 dema
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)(zzzh) were not sufficient for levying service tax on indivisible composite works contract prior to 01.06.2007. The Hon'ble Supreme Court has considered the whole scheme of taxation of services and came to the conclusion that the above taxable services would refer only to pure service contracts and a composite contract can be subjected to levy of service only from 01.06.2007 under works contract service, as the legislative mechanism to determine the value of service element in the composite contract, was introduced for the first time, only with effect from 01.06.2007 under works contract service. Further, various exemption notifications, providing for abatements, 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 followi
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to submit that construction of individual units in an apartment complex, for various individual buyers, cannot be subjected to the levy of service tax, under construction of complex service, prior to 01.07.2010, as held in the following cases.
Krishna Homes VS CCE – 2014 (34) STR 881 Tri-Del.
Vijay Shanthi Builders Vs CCE – 2018 (9) GSTL 257 Tri-Chen.
4.7 The other defence as per the grounds of appeal are also reiterated. In as much as the demand of service tax are thus not sustainable, the penalties imposed are also not sustainable.
4.8 Accordingly it is prayed that the subject appeals may kindly be allowed by setting aside the impugned orders with consequential relief.
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 s
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ssarily 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 service, commercial or industrial construction service, construction of complex service and in addition turnkey projects including EPC projects within the definition of Works Contract Service.
7.9 At this juncture, it is worthwhile to reproduce excerpts from the Union Finance Minister's budget speech in 2007:-
“State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services 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 c
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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 'generalia specialibus non derogant' – 'general things do not derogate special things'. The counsel for appellants have submitted that as per Section 65A of the Act ibid, classification of service shall be based on the specific entries and the more specific description of service has to be preferred. He invited our attention to CBEC's Circular 128/10/2010 dated 24.8.2010 which is reproduced as under:-
“The matter has been examined. As regards the classification, 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
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ra 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 Finance Act, 1994. The SCN did mention this in the first para itself. However, the proposal for tax demand was specifically made under Commercial or Industrial Construction Service under Section 65 (105) (zzq) of the Finance Act, 1994. In such situation, we note that it cannot be a case of simple mentioning of wrong provisions of law as submitted by the Revenue.
Apparently, the tax liability of composite works contract is to be considered under works contract services 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 t
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s 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 Revenue authorities are accepting the facts that the contracts executed by the appellant are nothing but works contracts, for the period in question, entire case of the Revenue in the show-cause notice stands demolished by the Apex Court in the case of Larsen & Toubro Ltd. (supra). In the said judgment, their Lordships have very categorically laid down the law that the works contract cannot be vivisected for the confirmation of demand under various other services. 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:-
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ntracts, 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 the gross value of the works contract the value of properly in goods transferred in the execution of a works contract.'
10. In view of this specific decision and the admitted claim of the appellant that they are not providers of 'commercial or industrial construction service' but of 'works contract service', no tax is liable on construction contracts executed prior to 1st June, 2007.
11. Insofar as demand for subsequent period till 30th September, 2008 is concerned, it is 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
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re 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 under these two categories and not under Works Contract service. The demand confirmed in the impugned order under these categories namely under construction service for the period 10.09.2004 to 16.06.2005 under CICS for the period 16.06.2005 to 30.09.2008 cannot also sustain and are therefore set aside. So ordered
5.3 For the period 01.04.2008 to 30.09.2008, the demand confirmed is Rs. 26,88,611/-. We note that the appellant has not contested the liability under works contract for this period. The only argument brought forth by the Ld. Counsel is that they have discharged an amount of around Rs. 82 lakhs under this category after the visit of the departmental officers and therefore an amount of Rs. 36,88,611/- demanded in the impugned order should
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vice 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 the nature of services' simpliciter.
c. For activities of construction of new building or civil structure or new residential complex etc. involving indivisible composite contract, such services will require to be exigible to service tax liabilities under 'Works Contract Service' as defined under section 65(105)(zzzza) ibid.
d. The show cause notices in all these cases prior to 1.6.2007 and subsequent to that date for the periods in dispute, 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 CIC
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