DBF Infrastructure Pvt. Ltd. Vs Commissioner of CGST (CESTAT Allahabad)
No levy of service tax if preferential location charges were not separately charged & included in taxable value for service tax
Conclusion: Where preferential location charges charged by the builder includible in the taxable value of the service tax levy and no separate charge was levied, the liability to pay service tax did not arise as it was only when a particular service was separately charged that the liability to pay service tax arose.
Held: Assessee was in the business of providing taxable services, namely “construction of residential complexes,” and was registered with the service tax authorities. During the audit of the records of assessee for the period April 2013 to June 2016, the department noted that assessee was not paying service tax on the preferred location charges (PLC) services provided to his customers. The service tax short paid was Rs. 3,25,123. A Show Cause Notice was issued assessee as to why service tax amounting to Rs. 3,25,123/- not paid on PLC recovered from service recipients while providing the said construction of residential complex services should not be demanded and recovered from them under proviso to Section 73(1) of Chapter V of the Finance Act, 1994. Department held the demand for service tax payable on PLC recovered from service recipients against the party for the period from April 2014 to June 2016 under Section 73(1) of the Finance Act, 1994, and ordered its recovery. Assessee-company contended that it had sold the flats in the building at different prices by adding a preferential location charge (PLC) to the base price depending upon their location in the building. Hence, PLC was not considered for the rendering of services but merely a premium price charged for the sale of that particular flat. It was held that if no charge was levied for a preferential location or development, no service tax would be attracted in the first place. Builders, however, follow the practice of levying charges under diverse circumstances, including the preferred development of the property intended to be sold or a preferred location that was made available to the buyer. The fact that the service was rendered in the context of a location, did not make it a tax on land within the meaning of Entry 49 of List II. If no separate charge was levied, the liability to pay service tax did not arise, and it was only when a particular service was separately charged that the liability to pay service tax arose.
