MVL Ltd Vs Commissioner of Central Goods And Service Tax (CESTAT Delhi)
Summary: The Customs, Excise & Service Tax Appellate Tribunal, New Delhi Principal Bench, Court No. IV, disposed of four connected appeals arising from common Order-in-Original No. 99/16-17 dated 17.02.2017. In accordance with the first-case rule, the principal matter is the appeal of M/s. MVL Ltd. The connected appellants were Shri Satinder Prasad, Shri Rakesh Gupta and Shri Prem Adip Rishi.
M/s. MVL Ltd was engaged as a builder/developer in construction of residential flats and was registered for “Construction of Complex Services”. Revenue alleged that, apart from consideration for flats, the appellant collected external development charges, parking charges, power backup charges, preferential location charges, interest-free maintenance security, meter charges and sewer treatment plant charges. A service tax liability of Rs. 12,29,16,928/- was alleged for August 2010 to March 2015. The appellant had deposited Rs. 1,41,57,357/- after an audit objection, but Revenue alleged that certain additional amounts, including car parking charges, had not been included in taxable value. The appellant had also not timely filed service tax returns for October 2012 to September 2014 or paid the applicable late fee.
The appellant submitted that the dispute concerned three residential complexes in Bhiwadi, Rajasthan and that agreements with buyers provided for construction-linked payments, while title was ultimately transferred through sale deeds. It relied upon the decision of the Delhi High Court in Suresh Kumar Bansal V/s Union of India, contending that the absence of a mechanism for determining the service component in a composite contract rendered the levy unsustainable. It further argued that the agreements involved supply of services and materials and therefore fell within works contract service rather than construction of complex service, relying upon Larsen & Toubro Ltd.. Other submissions concerned pre-July 2010 services, cancelled flats, waived sums, flats sold after completion certificates, abatement, CENVAT credit, the composition scheme and limitation.
The Department contended that from 01.07.2010 construction activity involving receipt of consideration before completion was taxable, and from 01.07.2012 the activity was also covered as a declared service under section 66E of the Finance Act, 1994. Revenue further alleged that the appellant had produced a bogus completion certificate, that the issuing company had not existed on the date stated on the certificate, and that its director had denied issuing it. Revenue relied upon the circumstances to contend that there was deliberate suppression with intent to evade service tax and that the extended period and penalties were therefore justified.
The Tribunal recorded admitted facts including that MVL Ltd was constructing residential flats, entered into agreements with buyers and received construction-linked payments, collected service tax after July 2010 while the payments were received before completion certificates, remained unregistered until 13.02.2013 despite the investigation, and had made a VCES declaration of Rs. 57,93,613/- which was rejected because investigation was pending. On these facts, the Tribunal held that the appellant was aware of the service tax liability but had not obtained registration until departmental intervention and had collected service tax without depositing it. It consequently held that material facts had been suppressed with a definite intent to evade service tax and that the extended limitation period was rightly invoked.
The Tribunal also upheld the consequences relating to delayed/non-filing of returns and penalties under sections 76, 77 and 78 of the Finance Act, 1994, read with Rule 7C of the Service Tax Rules, 1994. In this context, it relied upon M/s. Stemcyte India Therapeutics Pvt. Ltd. V/s Commissioner of Central Excise and Service Tax, Ahmedabad-III, referred to in the order as 2025 INSC 841, for the proposition concerning a deliberate act to evade tax.
For the merits, the Tribunal bifurcated the dispute into the period 2010 to 01.07.2012 and the period from July 2012 to March 2015. For the earlier period, it examined the legislative and administrative history concerning construction of residential complexes, including Circular No. 79/09/2004-5.T., Circular No. 81/6/2005-TRU, Notification No. 1/2006-S.T. and Circular No. 108/02/2009-S.T..
The Tribunal relied upon Larsen & Toubro Ltd. in holding that construction of complex service and commercial/industrial construction service applied only to pure service contracts, while composite contracts involving transfer of property in goods were liable under works contract service. It therefore concluded that the demand for the period 2010 to July 2012 under construction of complex service/commercial or industrial construction service was not sustainable and was liable to be set aside to that extent.
For July 2012 to March 2015, the Tribunal held that the classification distinction was no longer the governing criterion because every activity was taxable unless covered by the negative list or an exemption. The activity was treated as a taxable declared service under section 66E. In the absence of a valid completion certificate, and because the certificate relied upon by the appellants was denied by the purported issuer, the Tribunal concluded that the appellant was rendering works contract service to flat buyers during the relevant period. The service tax demand for this period and the penalties were consequently upheld.
Accordingly, the Tribunal modified the impugned order by setting aside the demand for the period prior to 01.07.2012 while upholding the remaining order. M/s. MVL Ltd’s appeal was partly allowed, whereas the remaining appeals filed by the directors of M/s. MVL were dismissed.
Cases Discussed
- Suresh Kumar Bansal Vs Union of India & Ors. — 2016 (6) TMI 192.
- Larsen & Toubro Ltd. Vs. CST — 2015 (39) S.T.R. 913 (S.C.).
- Karmvir Builders and Dharamvirsingh Rajpurohit Vs. CCE — 2024 (12) TMI 1407.
- Precision Rubber Industries Vs. CCE — 2016 (334) ELT 577 (S.C.).
- M/S Munjal Showa Limited Vs. Commissioner, CCE, Delhi-IV — 2022 (382) E.L.T. 145 (S.C.).
- Commissioner of C.Ex. Madras Vs. Systems & Components Pvt. Ltd. — 2004 (165) E.L.T. 136 (S.C.).
- Stemcyte India Therapeutics Pvt. Ltd. Vs Commissioner of Central Excise and Service Tax, Ahmedabad-III — 2025 INSC 841.
FULL TEXT OF THE CESTAT DELHI ORDER
Present order disposes of four appeals arising out of the common Order-In-Original (O-I-O) No. 99/16-17 dated 17.02.2017. First pertaining to the company, namely M/s MVL limited (Appeal No. ST/50886/2017) another pertains to the Director of the said company namely, Shri Rakesh Gupta (Appeal No. ST/50887/2017), The Manager Accounts namely Shri Satinder Prasad (Appeal No. ST/50885/2017) and Managing Director namely Shri Prem Adip Rishi.
1.1 Briefly stated, the facts relevant for the present adjudication are that M/s MVL limited is holding service tax registration being engaged in providing “Construction of Complex Services”. Revenue got an intelligence that the appellant is providing the said services as builder/ developer by way of building residential flats and was also charging external development charges, parking charges, power backup charges, preferential location charges, interest free maintenance security, meter charges and sewer treatment plant charges for the residential projects to be constructed.
1.2 The appellant company was asked to provide the details. Based on the documents submitted and the statement of the Director, Shri Rakesh Gupta, it was observed that the appellant is liable to pay service tax of rupees 12,29,16,928/- against the taxable services provided by them during the period from August 2010 to March 2015. The amount of service tax as was deposited, post audit objection, amounting to Rs 1,41,57,357/- was without including the various amount as that of car parking charges in the taxable value. The service tax returns for the period October 2012 to September 2014 were not filed within the prescribed time but late fee for delayed filing was also not paid.
1.3 Accordingly, the Show Cause Notice No. 1/2015-16/6491 dated 16.10.2015, the aforesaid amount of service tax with interest and proportionate penalties was proposed to be recovered from the appellant. The said amount of late fee was also proposed. The said proposal has been confirmed vide the aforementioned Order-In-Original dated 17.02.2017. Being aggrieved the appellant is before this Tribunal.
2. We have heard Ms. Reena Khair, Ms. Shreya Dahiya and Shri Ankush Gupta, learned Advocates for the appellant and Shri Ms. Jaya Kumari, learned Authorized Representative for the department.
3. Learned counsel for the appellant submitted that the demand in question is with respect to three residential complexes being constructed by the appellant i.e. MVL oral, MVL palm and MVL indigo, all located in Bhiwadi, Rajasthan. The appellant company entered into agreement with the buyers for sale of flat in those complexes with payments to be made in accordance with construction/ plans. However, the transfer of title of the property/ those flat was affected through execution of sale deed. The appellant was not receiving any service tax on the amounts received from buyer of those flats prior to July 2010. It was when the investigation started and the appellant was asked to deposit service tax for the period from July 2010 to September 2012 the service tax registration was obtained by the appellant on 13.02.2013.
3.1 Ld. Counsel further submitted that the appellant also opted for Service Tax Voluntary Compliance Encouragement Scheme 2013 (VCES) disclosing the service tax liability of Rs.57,93,613/-. However the request was rejected due to ongoing investigation against the appellant. It is thereafter that the audit in March 2015 was conducted and the impugned show Cause Notice was issued. Learned Counsel also mentioned that the demand of tax was exclusively based on a chart extracted from the email account of Shri Manoj Kumar containing booking information including the name of alloties, payment plan, broker details,area of flat, basic sale price, amounts paid, advances, service tax realized/waved and outstanding dues. The demand was also raised on various additional charges such as external development charges etc. (as already mentioned above).
3.2 It is further submitted that the appellant is not liable to pay Service Tax as was also mentioned in the reply to show cause notice dated 22.12.2016, in view of the decision of Hon’ble Delhi High Court in the case of Suresh Kumar Bansal V/s Union of India reported as 2016 (6)TMI 192 wherein it was held that in absence of any mechanism for determining the service component in the composite contract, the levy would not be sustainable. The demand, therefore, has wrongly been confirmed against the appellant. Ld. Counsel has objected the impugned order for the following reasons also:
(a) The basis for the computation of the service tax demand had not been clearly set out in the notice.
(b) Without prejudice to the main argument, it was submitted that the composite agreements entered into with the buyers involved both the supply of services and materials and therefore could not be classified under ‘Construction of Complex Service’. In light of the decision of the Hon’ble Supreme Court in Larsen & Toubro Ltd. reported in 2015 (39) S.T.R. 913 (S.C.), the more appropriate classification would be under ‘Works Contract Service’. Accordingly, the demand raised under the head of construction services was not sustainable.
(c) The notice also erroneously included the value of services provided prior to July 2010, as well as amounts pertaining to cancelled flats, sums waived, and flats sold after the issuance of the completion certificate.
(d) The appellant relied on CBEC Circular No. 151/2/2012 dated 10.02.2012, which clarified that construction services rendered before 01.07.2010 would not be subject to service tax.
(e) In the alternative, the appellant claimed entitlement to abatement and CENVAT credit, as well as benefit of Composition Scheme applicable to works contract.
(f) The appellant contested the demand as being time-barred for the period prior to 30.09.2013, on the ground that there was neither any suppression of facts nor wilful misstatement. It was further submitted that there was considerable ambiguity regarding taxability during the relevant period.
With these submissions and relying upon the following decisions, the order under challenge is prayed to be set aside and the appeal is prayed to be allowed:
(i) Karmvir Builders and Dharamvirsingh Rajpurohit Vs. CCE reported as 2024 (12) TMI 1407
(ii) Precision Rubber Industries Vs. CCE – 2016 (334) ELT 577 (SC)
4. While rebutting the submissions made on behalf of the appellants, Ld. DR appearing for the department has submitted that the appellant was collecting service tax from the prospective buyers of the flats in three of their projects but was not depositing the same. Appellants had not even obtained the service tax registration till the investigation was initiated them.
4.1 Learned DR submitted that with effect from 01-07-2010, in cases where any sum is received from the prospective buyer before completion of construction, the activity of construction is deemed to be a taxable service provided by the builder/developer to the prospective buyer. With the effect from 01-07-2012 the same is also one of the declared services under section 66E (b) of Finance act 1994. Hence, the contention of the appellant that activities performed were classifiable under works contract service is a wrong submission. Further it is submitted that the appellant submitted a bogus completion certificate, the said certificate was issued by M/s D Mason’s Consortium Pvt. Ltd. and issued the said certificate dated 11.05.2010 as the company was incorporated only on 24.04.2012. The director of said D Mason’s Consortium Pvt. Ltd. denied to ever worked for M/s MVL Ltd. On finding the certificate to be bogus that the director of M/s MVL/ co-appellant Shri Rakesh Gupta were even arrested. The proper completion certificates were never produced by the appellant.
4.2 The appellant even after getting registered, was not discharging the proper service tax liability as all the additional amounts as were collected by the appellant from the buyers of the flats (EDC etc.) were not included a gross taxable value. Even the service tax returns were not filed in time. The instant case is not a case of interpretation of law or prevailing legal confusion regarding the taxability rather it is a clear case of suppression with intent to evade service tax. The appellant had neither obtained the Service Tax registration nor admittedly filed returns as provided under the law within the stipulated period & had obtained Service Tax registration for Bhiwadi site only after initiation of the proceedings by the department against them. The appellant would have escaped from the tax net had the Anti-evasion branch not detected the evasion and not investigated the matter. Therefore, it is evident that the appellant had consciously avoided obtaining service tax registration and payment of due tax, and they had intentionally produced bogus completion certificate and willfully suppressed the information from the department with intent to evade payment of Service Tax. Thus, the provisions of extended period have rightly been invoked while issuing the SCN.
4.3 Learned DR while relying upon the following decisions and reiterating the findings of the impugned order has prayed for dismissal of the appeal:
(i) 2022 (382) E.L.T. 145 (S.C.) of M/S Munjal Showa Limited Vs. Commissioner, CCE, Delhi-IV, wherein it is held that “fraud” vitiates everything”.
(ii) 2004 (165) E.L.T. 136 (S.C.), of Commissioner of C.Ex. madras vs. Systems & Components Pvt. Ltd. wherein it is held that “what is admitted need not be proved”.
5. Having heard both the parties and pursuing the entire record following are observed to be the admitted facts; –
a) the appellant M/s MVL Ltd. as a developer/builder was constructing residential complex of multistoried flats.
b) The appellant company through its director was entering into agreements with the buyers for sale of flats and were receiving payments in accordance of construction linked plans.
c) Post July 2010 appellant was collecting service tax from those buyers, as the payments were being received prior getting the completion certificate.
d) Appellant was not registered with the service tax department till 13.02.2013. It is only after initiation of investigation against the appellants that the registration was obtained.
f) The appellant applied under VCES, scheme declaring the service tax liability of Rs. 57,93,613/- but the declaration was rejected on the ground that investigations were in progress as on 01.03.2013.
These admitted facts are sufficient for us to hold that appellants were aware about the service tax liability vis-à-vis the amount received towards sale of the flats to be constructed by the appellants as builder and developer. But the appellant had not taken service tax registration till it was objected by the department. The appellant without being registered started collecting service tax from the said buyers and never deposited the same with the government exchequer. These observations are sufficient for us to hold that the appellant has committed an act of suppressing material facts with a definite intent to evade the payment of service tax. Hence, it is held that extended period of limitation has rightly been invoked by the revenue while issuing the impugned show cause notice.
6. The penalty of section 76 of Finance act 1994 read with rule 7C of Service Tax Rules, 1994 for not filing the returns with the stipulated period along with late fee has also been rightly confirmed. Since four of the appellants were aware of their liability still not discharged the same, it is held that the penalty on three of the appellants under section 77 and 78 of the Finance acts also been rightly confirmed, by the adjudicating authority below, the act of the appellants was deliberate. We rely upon the decision of High Court Ahmedabad in the case of M/s Stemcyte India Therapeutics Pvt. Ltd V/s Commissioner of central excise & service tax, Ahmedabad-III reported in 2025 INSC 841 wherein it was held that deliberate act on part of assesses to evade payment of tax is sufficient to invoke the extended period of limitation while issuing the SCN and for imposing penalties upon the assessee.
7. Coming to the merits of the case, in light of admitted facts only, it is observed that the disputed period is from the financial period 2010-2011 to the year 2014-2015. In the year 2012, with effect from 01.07.2012, there was introduced the concept of negative list in terms of section 66 D of Finance act/ the amendment act of 2012.
8. Every activity rendered is held to be ‘Service’ in terms of section 65 B (44) of the said amendment act/Finance Act except those which fall under section 66D of the Act or are exempted under any exemption notification. Prior to this date, there was the concept of classification of the services. Resultantly the demand in the present appeal has to be bifurcated into two; –
1. For the period 2010 to 2012 (01-07-2012)
2. From July 2012 to March 2015
10. Since the appellant has claimed their activity as that of works contract service the said argument is relevant for the first period of disputed demand. It is important to look into the legislative history with respect to construction of residential complex/multistoried building and sale of units/ flats there. As per clause-13-of the Circular No. 79/09/2004-5.T., dated 17th September, 2004, it was clarified that any person who constructs buildings for his own use or renting or for selling it subsequently, will not be subjected to service tax as levy of service tax primarily depends upon the rendering of service by a person called service provider and rendering of service to another person by service provider /i.e. service receiver. Circular No. 81/6/2005-TRU, dated 27th July, 2005 issued by the Ministry of Finance to all Service Tax Authorities provided the services covered for construction of residential complexes and commercial or industrial construction services. By Notification No. 1/2006-S.T., dated 1st March, 2006, certain rebates on payment of service tax leviable in respect of two entries being Entry (zzq) and (zzzh) were provided. Circular No. 108/02/2009-S.T., dated 29th January, 2009 provided imposition of service tax on buildings wherein it was stipulated that till the completion of the construction activity and the same is handed over to the prospective flat purchaser or buyer, no services can be said to have been rendered to the flat purchaser and that it is a transaction in respect of sale of immovable property. It was also provided to dispose of all the pending cases as per the circular.
11. Thereafter, Union Budget was presented on 26th February, 2010 for the year 2010-2011 which introduced clauses 75 and 76 in the Finance Act, 2010 which provided changes in Chapter V of the Finance Act, 1994 by inserting additional entries for levy of service tax being Section 65(105)(zzq), Section 65(105)zzzh) and new Entry 65(105)(zzzzu) on the commercial and industrial construction and construction of residential complex before obtaining the completion certificate from the competent authority and special services provided by the builder to prospective buyers such as providing preferential location or external or internal development of the complexes,it was clarified that any person who constructs buildings for his own use or renting or for selling it subsequently, will not be subjected to service tax as levy of service tax primarily depends upon the rendering of service by a person called service provider and rendering of service to another person by service provider i.e. service receiver.
12. Circular No. 81/6/2005-TRU, dated 27th July, 2005 issued by the Ministry of Finance to all and commercial or industrial construction services.
By Notification No. 1/2006-S.T., dated 1st March, 2006, certain rebates on payment of service tax leviable in respect of two entries being Entry (zzq) and (zzzh) were provided.
Circular No. 108/02/2009-S.T., dated 29th January, 2009 provided imposition of service tax on buildings wherein it was stipulated that till the completion of the construction activity and the flat/unit is handed over to the prospective flat purchaser or buyer, no services can be said to have been rendered to the flat purchaser and that it is a transaction in respect of sale of immovable property. It was also provided to dispose of all the pending cases as per the circular.
13. In the case titled as Larsen & Toubro Ltd. & others V/s CST, Delhi & others in the Service Tax Appeal No. 58658 of 2013, 550 of 2007 & 322 of 2007 dated 19.03.2015 held that levy of service tax of construction of complex service [CCS] & construction of industrial complex service [CICS] would be applicable only in case of pure service contracts & composite contracts involving transfer of property in goods would be liable to service tax only under works contract service [WCS] which was introduced with effect from 01.07.2012 under section 65(105)(zzzza) of the Finance Act, 1994. Thus, any demand under CICS/CCS on composite contracts involving transfer of property in goods post 01.07.2012 will not be sustainable. This view got confirmed by Hon’ble Supreme Court in the appeal filed by department against said decision of larger bench titled as Larsen & Toubro Ltd. (supra). It was clarified that building contracts between developer & buyer of propertyare the species of work contracts. From this discussion it is clear that demand for this period (2010-July2012) under service simplices of CICS & CCS is not sustainable. Order confirming the same is liable to be set aside to this extent.
14. Coming to the demand for the subsequent period (July 2012-March 2015):
Hon’ble Apex Court in Larsen & Toubro Ltd. (Supra) has held that service element in works contract is liable to service tax port 01.07.2012 either by vivisecting the value of service element & labor or by way of composition or abetment. Para 115 of the Hon’ble Supreme Court decision clarifies that activity of construction undertaken by the developer would be works contract from the stage when developer enters into a contract with the flat buyer, till it gets the completion certificate.
15. Further during the period 2012 to 2015 the classification of composite service or service simpliciter was no more the criteria as every activity is taxable unless covered under negative list or is exempted. The impugned activity is specifically categorized as taxable declared service under section 66 E of the Finance Act 1994. Since, it is a record that there was no completion certificate produced by the appellants except the one issued by M/s D Mason’s Consortium Pvt. Ltd. The said company has denied issuing the same, the appellant was rendering Works Contract Service to the flat buyers during this entire period. Thus, it is concluded that for this period of impugned demand, the appellant was liable to pay service tax but the tax was not paid and not paid in time even after taking the registration that the demand of service tax during this period is held to have rightly been confirmed and the penalties of section 70,76,77 and 78 are rightly being imposed. In totality of above discussion, the impugned order is modified to the extent that the demand for the period prior 01.07.2012 is hereby set aside. Remaining order is hereby upheld. Consequently, the appeal filed by M/s. MVL Ltd. is partly allowed and remaining appeals of the directors of M/s. MVL are hereby dismissed.
[Order pronounced in the open court on 12.08.2026]
