Rosh Properties Pvt Ltd. Vs Commissioner of Central Excise & Service Tax (CESTAT Chennai)
Summary: CESTAT Chennai allowed the appeal of Sree Rosh Properties Pvt Ltd. and set aside the service tax demand for the period October 2008 to June 2010. The Revenue alleged liability under Commercial or Industrial Construction Service and, for projects commenced after 1 June 2007, Works Contract Service. The appellant contended that it was only a developer and that services rendered before 1 July 2010 could not attract the proposed service tax.
The Tribunal found from the agreements that the appellant was required to use standard construction materials and that the services were clearly in the nature of works contract. It further noted that the Revenue did not dispute the appellant’s status as a builder/developer and that the entire disputed period preceded 1 July 2010, when the Explanation to Section 65(105)(zzzh) was introduced by the Finance Act, 2010.
Relying principally on the CESTAT Delhi decision in Krishna Homes, which considered CBEC Circular No. 108/2/2009-ST dated 29 January 2009, and the Supreme Court ruling concerning works contracts, the Tribunal held that service tax could not be levied for the disputed pre-1 July 2010 period. It also observed that the other decisions relied upon by the appellant followed substantially similar principles. Consequently, the Tribunal held that the demand lacked merit, set aside the impugned Order-in-Original and allowed the appeal with consequential benefit, if any, according to law.
Cases Discussed
1. Krishna Homes Vs Commissioner of Central Excise, Bhopal — 2014 (34) S.T.R. 881 (Tri.-Delhi) — Relied upon/Followed. The Tribunal relied on this decision for the effect of the Explanation inserted in Section 65(105)(zzzh), noting that service tax under Construction of Residential Complex Service could not be levied prior to 01.07.2010. The decision also considered the position where the services were rendered as Works Contract Service.
2. Commissioner of C. Ex. & Cus., Kerala Vs Larsen & Toubro Ltd. — 2015 (39) S.T.R. 913 (SC) — Relied upon by appellant. The appellant invoked the Supreme Court ruling in support of its contention that the service tax demand was contrary to the settled position governing works contracts.
3. M/s. L & T Ltd. and Others Vs State of Karnataka and Others — 2014 (24) S.T.R. 481 (SC) — Followed through Krishna Homes. The Tribunal recorded that the Delhi Bench, while dealing with the applicability of the pre-01.07.2010 position to Works Contract Service, had followed this Supreme Court decision.
4. M/s. Jain Housing & Construction Limited – Final Order Nos.40077-40079/23 dated 24.02.2023 — Relied upon by appellant.
5. M/s. South India Shelters Pvt Ltd Vs. Commissioner of Central Excise- Final Order No. 40123-40124/2023, dated 07.03.2023 — Relied upon by appellant.
6. Srinivasa Shipping and Property Developers Ltd. Vs Commissioner of GST and Central Excise — Final Order Nos. 41107-41108/2023 dated 08.12.2023 — Relied upon by appellant.
7. URC Construction Pvt. Ltd. Vs Commissioner of Central Excise, Salem — 2017 (50) S.T.R. 147 (Tri.-Chennai) — Relied upon by appellant.
8. Casa Grande Private Limited Vs Commissioner of Service Tax — Final Order No. 40255/2023 dated 06.04.2023 — Relied upon by appellant.
9. Hindustan Steel Works Construction Ltd. Vs Commissioner of Service Tax — 2019 (26) G.S.T.L. 45 (Tri.-Hyd.) — Relied upon by appellant.
10. Indus Engineering and Construction Co. Vs Commissioner of Central Excise, Nagpur — 2015 (40) S.T.R. 737 (Tri.-Mumbai) — Relied upon by appellant.
11. LCS City Makers Pvt. Ltd. Vs Commissioner of Service Tax, Chennai — 2013 (30) S.T.R. 33 (Tri.-Chennai) — Relied upon by Revenue; applicability not examined. In view of the Supreme Court decision governing the issue, CESTAT considered it unnecessary to examine the applicability of the Chennai Bench ruling relied upon by the Department.
FULL TEXT OF THE CESTAT CHENNAI ORDER
1. The period of dispute in this appeal is from October 2008 to June 2010.
2. It is the case of the revenue that during the course of audit of accounts of the assessee / appellant, they appear to have noticed that the appellant had discharged service tax till September 2008 for the services rendered under Construction of Residential Complex Service (CRCS for short) and Work Contract Service (WCS); upon enquiry the appellant appears to have informed that their customers did not pay service tax and hence, the same was not paid from October 2008 onwards.
3. The above resulted in the issuance of a Show Cause Notice dated 13.01.2011 wherein, the issuing authority namely the Commissioner of service tax having noticed the various projects undertaken by the appellant and various agreements entered into by the appellant with land owner/s in some cases and joint venture/development agreements in some, entertained a doubt that from the nature of work undertaken by them they were liable to pay service tax under Commercial or Industrial Construction Service (CICS) and in respect of projects commenced after 01.06.2007, tax to be paid under WCS, inter alia proposed to recover the service tax along with interest at appropriate rate as applicable, apart from penalty under Sections 76 and 78 ibid.
4. It appears that the appellant filed a written reply thereby denying tax liability and it also appears that the appellant seriously contested the invocation of extended period of limitation. On merits the appellant had urged that they were only the developer and hence, any service provided by them prior to 01.07.2010 would not attract the service tax as proposed.
5. The Adjudicating Authority having considered the explanation of the appellant during adjudication, however, proceeded to confirm the demands as proposed in the Show Cause Notice vide Order in Original No.61/2012 dated 30.03.2012 and it is against this order that the present appeal has been preferred by the appellant before this forum.
6. Smt. Radhika Chandrasekhar, Ld. Advocate appearing for the appellant would contend at the outset that the demand of Service Tax against the appellant is against the settled position of law as interpreted by various Benches of CESTAT following the decision of Hon’ble Apex court in Commissioner of C. Ex. & Cus., Kerala Vs. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (SC)]. She would further submit that the period of dispute is October 2008 to June 2010 which is prior to the introduction of explanation to Section 65 (105) (ZZZH) in the Finance Act 2010, whereby the liability has been fastened inter alia on the builder. In this regard, she has also relied on the following judgements / orders of various judicial fora:
i. M/s. Jain Housing & Construction Limited – Final Order Nos.40077-40079/23 dated 24.02.2023
ii. Commissioner of Service Tax Vs M/s. Jain Housing and Construction Limited – Civil Appeal Diary No.31457/2023
iii. Krishna Homes Vs. Commissioner of Central Excise Bhopal – 2014 (34) S.T.R. 881 9 (Tri. Delhi)
iv. Commissioner of Customs C. Excise and ST, Vishakapattinam – I Vs. Pragathi Ediffice Pvt. Ltd. – Final Order No.A/31010-31011/2019 dated 18.09.2019
vi. M/s. Srinivasa Shipping and Property developers Ltd. Vs. Commissioner of GST and Central Excise- Final Order No.41107-41108/2023 dated 08.12.2023
vii. M/s. URC Construction Pvt. Ltd Vs. Commissioner of Central Excise, Salem – 2017 (50) STR 147 (Tri-Chennai)
viii. M/s. Casa Grande Private Limited Vs. The Commissioner of Service Tax – Final Order No.40255/2023 dated 06.04.2023
ix. M/s. Hindustan Steel Works Construction Ltd. Vs. Commr. Of CST 2019 (26) GSTL 45 (Tri. Hyd)
x. M/s. Indus Engg and Construction Co Vs. Commr. Of C. Ex and Nagpur – 2015 (40) STR 737 (Tri – Mum).
7. Per contra Shri M. Ambe, the Ld. Deputy Commissioner, defended the order of the Original Authority. He also took us through specific paragraphs of the impugned order, to contend that the demand has been correctly made. He would also rely on an order of this Bench in the case of “LCS City Makers Pvt. Ltd. Vs. Commissioner of Service Tax, Chennai” 2013 (30) S.T.R. 33) Tri – Chennai.
8. Having heard the rival contentions, we find that the only issue to be decided by us is, “whether on the facts of the case, for the period under dispute, the demand of service tax on the appellant is correct?”
9. We have carefully gone through the Show Cause Notice as well as the impugned order. We find that undisputedly the service rendered by the appellant is clearly in the nature of works contract since in respect of all the projects undertaken by it, the agreements itself clearly specify that it was for the developer to use standard materials for construction. Further, the Revenue has not at all disputed that the appellant was only a builder and hence, it is clear that the appellant, as a builder/developer had provided the work contract services and the period involved is prior to 01.07.2010, which is before the introduction of explanation to Section 65 (105) (ZZZH) vide Finance Act, 2010.
10. In this regard, we have the benefit of the order of principal Bench of CESTAT, New Delhi in the case of Krishna House (Supra) wherein, the Ld. Bench has examined the effect of introduction of the above explanation to Section 65 (105) (ZZZH) ibid, wherein it has been clarified that no Service Tax could be levied prior to 01.07.2010 under CRCS for which reference has also been made to the clarification issued by CBSE in Circular No.108/2/2009 – Service Tax dated 29.01.2009. Further, the question as to whether the above would apply to cases where the services were rendered as WCS was also examined and answered in affirmative in the above case as well, by the Ld. Bench, by following the decision of the Apex Court in the case of M/s. L & T Ltd. and others Vs. State of Karnataka and others, reported in 2014 (24 STR 481 SC).
11. We also find that the ratio of the other decisions / Orders of the cases relied upon by the Ld. Advocate are more or less similar to the ratio laid down in the above cases. In view of the decision of the Hon’ble Apex Court, we do not find it appropriate to examine the applicability or otherwise of the order of Chennai Bench in the case of NCS City (supra) relied upon by the Ld. Deputy Commissioner.
12. In view of our discussion above, we are of the clear view that the demand raised against the appellant lacks merit and hence, the impugned order cannot sustain.
Resultantly, we set aside the impugned order and allow the appeal with consequential benefit if any, as per law.
(Pronounced in court on 01.03.2024)
