Commissioner of CGST & C.Ex. Vs Ethics Infra Development Pvt. Ltd. (CESTAT Mumbai)
In the present case the respondent has discharged the complete service tax liability on the gross amount received by him for providing the taxable services. Once he have discharged the tax liability on the gross consideration received by him by the sale of flats to new buyers, the demand of service tax for the flats handed over to the existing members of the societies without any consideration cannot be sustained. We also find that in case of Vasantha Green Projects [2019 (20) GSTL 568 (T-Hyd)] Hyderabad Bench has observed as follows:
“10. The adjudicating authority, in the impugned order, had relied upon Board Circular No. 151/2/2012-S.T., dated 10-2-2012 to arrive at the value in the case of flats given to land owners to be determined based upon the value of the villas sold to prospective customers seems to be inappropriate reasoning and when the cost for acquisition of land has already been considered for discharge of service tax of an amount received from prospective customers, taxing the same under the laws of service tax liability for the consideration received for the services to land owners, seems to be incorrect, as also on the case of LCS City Makers Pvt. Ltd. [2013 (30) S.T.R. 33 (Tri.-Chennai)].
11. We find that C.B.E. & C. vide circular dated 16-2-2006 in respect of collection of service tax under construction of complex services had issued instructions under Section 57B of Central Excise Act, 1944 which are made applicable to service tax under Section 83 of Finance Act, 1994, in Para No. 8 of the said instructions stated as under :
“8. It is noticed that in the construction business different practices and financial arrangements concerning (a) promoters, developers & builders, (b) land owners (c) contractors and (d) buyers exist. These practices influence the ‘taxable value’ under the construction of complex services. In all such situations, the taxable value under section 67 shall be the gross amount charged by the service provider (builder in this case) for such services provided or to be provided by him. This read with notification No. 18/2005-S.T., dated 7-6-2005 entitles a builder/contractor an abetment of 67% on the gross amount charged, which shall include the value of goods and material supplied. Further, there is no deductions/exemptions provided for computation of such taxable value in the composite contract.”
(emphasis supplied)
12. It can be seen from the abovesaid instructions, the gross amount charged by the builder is liable to tax. The said instructions are in force till today and has not been withdrawn by the Board. As already detailed herein above, the appellant has discharged the service tax liability on the gross amount charged i.e. consideration received from land owners in the form of kind other than cash (value of the land/development rights) + consideration received from prospective buyers in cash by way of financial arrangements on the construction services undertaken by the appellant on joint development basis. We also note that appellant had declared the same in the books of account like IT returns and ST-3 returns which has been certified by Chartered Accountant wherein it is stated that service tax compliance is towards the payment of gross amount of the construction undertaken on joint development basis and received from the customers has been made. This leads to conclusion that it is evident that appellant has complied with the service tax liability on the construction undertaken on joint development basis on the value of construction which is mandated in Section 67 of Finance Act, 1994, read with rules made thereunder. In our view, if once the service tax liability has been discharged on the gross amount, demand of service tax on the same amount again would amount to double taxation.
13. The reliance placed by Ld. DR on the case of LCS City Makers Pvt. Ltd. will also not carry the case of Revenue any further, as in that case Bench upheld the contention of the Revenue on a recording that “the facts and circumstances of the case do not warrant assessment of a different value, for services in respect of flats sold to individual buyers as compared to flat handed over to the land owners”; and recorded that the flats which were allotted to land owners were sold by land owners. In the case in hand, the facts are different.
14. In respect of the arguments put forth on limitation, we do find that in the situation wherein the interpretation of the provisions of Section 67 and the rules were involved and there could be different interpretation. It is undisputed that appellant had declared the value received from prospective customers in their returns and discharged the service tax liability thereon, which include the value of consideration paid in kind towards the land, there cannot be any allegation that there was a deliberate intention on the part of the appellant as to non-payment of differential service tax liability. In our view, in the peculiar facts and circumstances of this case, it cannot be held that there was a mala fide intention on the part of the appellant to suppress any facts or make misstatements, with an intention to evade service tax liability. Accordingly, we hold that demands are also hit by limitation and extended period cannot be invoked for the demands received.”
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal filed by revenue is directed against the order in original No 26/MRM-14/THCGST-03/2019 dated 26.11.2019 of the Commissioner, CGST and Central Excise, Thane. By the impugned order, the Commissioner has dropped the entire demand of service tax made from the appellant as per the Show Cause Notice dated 09.10.2018.
2.1 Appellant is providing the taxable services under the category of “Construction of residential complex” as defined by Section 65(105) (zzzh) of the Finance Act, 1994 as amended.
2.2. During the course of audit, it is noticed that appellant has provided the services of “construction of residential complex services” to Borivali Ashwini Co-op Housing Society Ltd., Borivali (West), Chaitanya Residency (Dabke Building) Goregaon (East) and Raj Bhawan Co-operative Housing Society, Andheri (E).
2.3 These projects were undertaken for re-development. For which appellant entered into Development Agreements with the existing Societies stating as follows
(i) to appoint M/s EIDPL as the Developer for the redevelopment of all that piece and parcel of land or ground as mentioned
(ii) to grant Development Rights to the Developer for constructing residential complex by demolishing the already existing structures (for both society members and the builder themselves).
(iii) that the Developer will provide specific number of flats with fixed carpet area free of cost to all the existing members of the Society in lieu of the development rights passed on to
(iv) that after allotting the flats (inclusive of parking places) to the existing owners, the Developer shall become entitled to remaining slats & parking spaces as Developer’s Allocation, which they were entitled to sell in the open
2.4 It was observed during the course of audit that the appellant did not discharged service tax on the services viz., “construction of residential complex services” rendered by them towards the flats allocated to existing members.
2.5 From 1.7.2012 these services had become classifiable as ‘declared service under Section 66E(b) of the Finance Act, 1994. Its valuation method also had been highlighted vide CBEC Circular NO. 151/2/2012-ST dated 10.02.2012 r/w High Level Committee clarification issued vide Board’s letter F.No. 354/311/2015-TRU dated 20.01.2016;
2.6 Thus, a Show cause cum demand notice was issued under F. No. CGST/ Audit Thane/ Cir-V/ Gr. 25/ EIDL/2017-18 dated 09.10.2018, to the appellant asking them to show cause as to why:
a. Their activities pertaining to construction under redevelopment scheme should not be considered as a taxable service within the meaning of service category of construction of residential complex service defined under sub clause (zzzh) of section 65 (105) of the Finance Act, 1994 read with explanatory clause and further read with section 66 E (b) of the Finance Act, 1994;
b. Service Tax amounting to Rs. 6,47,88,658/- should not be demanded and recovered from them under provisions of sub section (1) of Section 73 read with Section 66 & 68 of the Finance Act, 1994,
c. Interest as applicable should not be demanded & recovered on the amount of service tax recoverable from them under Section 75 of the Finance Act, 1994,
d. Penalty should not be imposed on them under Section 77 of the Finance Act, 1994,
e. Penalty should not be imposed on them under Section 78 of the Finance Act, 1994.
2.7 Aggrieved by the impugned order revenue has filed this appeal.
2.8 Respondents have filed cross objection to the appeal.
3.1 We have heard Shri Nitin Ranjan, Deputy Commissioner, Authorized Representative for the revenue and Shri Bharat Raichandani, Advocate for the respondents,
3.2 Arguing for the revenue learned Authorized representative, reiterated the grounds taken by the revenue in their appeal, and submitted that the Adjudicating authority has grossly erred while observing that the there was no material change in the scheme of taxation of these services. With effect from 01.07.2012, the entire regime of taxation of services underwent a change and the switch was from the positive definition of taxable services to negative list of taxable services. Section 66E provided for declared services, which were declared as taxable services in all circumstances. In view of the failure to appreciate the changes made in respect of taxation of these services, adjudicating authority relied upon the Circular Issued by the CBEC for period prior to the 01.07.2012 and dropped the entire demand. In view of the changes made with effect from 01.07.2012 the reliance placed by the adjudicating authority on the Circular issued for past period cannot be sustained and the order set aside.
3.3 Arguing for the respondent, learned counsel submits that
> the issue involved in the matter is no longer res-integra and adjudicated by the CESTAT in their favour in the case of DLF Commercial Projects Corporation Pvt Ltd [2019-TIOL-1514-CESTAT-CHD] and Vasantha Green Projects [2019 (20) GSTL 568 (T-Hyd)]
> They have discharged the Service Tax on the gross amounts received by them for providing such taxable services.
> Since they have discharged service tax on the entire taxable value of the service rendered, determined on the basis of gross amounts received by them for providing these services, no further service tax could be demanded by them.
4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments on the appeal.
4.2 Commissioner has dropped the proceedings initiated against the appellant stating as follows:
“6. The demand notice in nutshell is whether after amendment to the Finance Act, 1994 with effect from 01.07.2012 and introduction of negative list of services, the noticee ought to have paid service tax for the flats given to existing members of the societies with whom they had entered into redevelopment agreement?
7. Before going into the other details, it is necessary to see the provisions which were prevalent before and after 01.07.2012.
