M/s. Vishranthi Homes Pvt. Ltd. Versus Commissioner of GST & Central Excise Chennai South Commissionerate
Service Tax
2018 (10) TMI 1191 – CESTAT CHENNAI – TMI
CESTAT CHENNAI – AT
Dated:- 24-9-2018
Appeal No. ST/242/2011 – Final Order No. 42468 / 2018
Service Tax
Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) and Hon'ble Shri Madhu Mohan Damodhar, Member (Technical)
Shri Raghavan Ramabhadran, Advocate for the Appellant
Shri K. Veerabhadra Reddy, ADC (AR) for the Respondent
JUDGEMENT
Per Bench
During the course of audit of account of the appellant by the internal audit unit of the department, it was noticed that the appellant did not pay service tax on the owner's share of construction in respect of the following Joint Venture Projects.
Project Name
Category of Service
Commencement of Work
Owner's Share of construction
Jayanth Tech Park
Commercial construction
May 2006
88,338 sq. ft.
Swarup Heritage
Residential complex
Sep. 2006
25,372 sq. ft.
&
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He explained that the actual construction in respect of Jayanth Tech Park commenced from August 2007 only. The appellant submits that out of 65% USD acquired by them, sale deeds and builder's agreements were executed in favour of MRR Reddy (16.49%), Kalpataru Finance (16.49%) and Vishranthi Reality Services (32.03%). In respect of the 16.49% USD transferred to MRR Reddy, appellant entered into agreement to sell dated 28.4.2006. However, the deed for sale of USD was executed and registered only on 3.9.2007. In respect of 32.03% UDS transferred to Vishranthi Reality Services, appellant entered into agreement to sell dated 28.4.2006. however, as the appellant could not pay the agreed consideration, it assigned the entire UDS in favour of various persons against payment of nomination fees. Accordingly, appellant executed and registered deed for sale of UDS and builders agreement with the new assignees after 23.8.2007. Pertinently, no separate monetary consideration was agreed upon or paid
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ner of GST and Central Excise, Chennai Vide Final Order Nos. 42436 to 42438/2018 dated 18.9.2018 to argue that the demand of service tax under construction of residential complex service cannot sustain after 1.6.2007 for the disputed period (May 2006 to March 2008).
2.1 The dispute in respect of Swarup Heritage is only on the land owner's share of UDS, while the demand for service tax in respect of Jayant on eligibility for composition scheme post 1.6.2007 on both builder's share and owner's share. The demand is captured in the following table:
Project
Service Tax Liability (INR)
Owner's Share
Builder's Share
Swarup Heritage
28,17,866
–
Jayant Tech Park
2,27,65,233
2,10,00,697
Total
2,55,83,099
2,10,00,697
4,65,83,796
2.2 In respect of Swarup Heritage also, the very same argument was put forward by the ld. counsel for the appellant who submitted that the demand cannot sustain for the reason that the departm
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only be under works contract service for the period disputed in this appeal. It is not disputed that the works contract executed in these projects are of composite in nature for the reason that the appellants have availed the benefit of Notification No. 1/2006-ST which is not disputed by the department. The relevant portion of the decision in Real Value Promoters (supra) is extracted hereunder:-
“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 af
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pecific 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 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 brough
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ion, 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 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
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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:-
“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 sim
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dustrial 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, 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 fo
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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 be considered as having been discharged. We find merit in his argument and hence the demand of Rs. 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 abov
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