Case Law Details
Royal Shelter Vs Commissioner of GST & Central Excise (CESTAT Chennai)
The department was of the view that the appellants are liable to pay service tax on the taxable services of construction of residential complex rendered by them. Show Cause Notice demanding service tax for the period January 2009 to January 2010 was issued to the appellant.
In para 6.9 of the Order in Original, the adjudicating authority after considering the Board Circular dated 29.1.2009 has also looked into the clarification of the Board issued vide Circular No. 151/2/2012-ST dated 10.2.2012. In the said circular, it is stated that prior to 1.7.2010, construction service provided by the builder / developer will not be taxable in terms of Board circular dated 29.1.2009. It was observed in para 6.7 that the appellant had rendered the construction service after selling the land to the customers. Thus, the land belonged to the customers and not the builder / developer while rendering the service. On such ground, the adjudicating authority held that the construction being rendered to an individual, it is not taxable as per the Board circular.
it is not in dispute that the construction services are composite in nature involving both supply of goods and rendering service. The definition of works contract was introduced under sec. 65(105)(zzzza) with effect from 1.6.2007. The service portion in the composite work contract was specifically made taxable under works contract service with effect from 1.6.2007. The manner of determination of the value of such service portion is prescribed vide Rule 2(A) of Service Tax (Determination of Value) Rules, 2006 framed under sec. 94(2) of the Act. Alternatively in the form of Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was introduced to pay service tax at a lesser rate on the gross amount (including the value of transfer of property in the goods). The issue as to whether a composite contract which has both transfer of property in goods as well as rendering of service would fall under CICS / CCS / CRCS was examined and finally settled by the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. reported in 2015 (39) STR 913 (SC). The Hon’ble Supreme Court observed that the service classified under CICS and CCS as defined under clause (zzzq) and (zzzh) of section 65(105) would cover only pure service contracts which does not involve any transfer of property in goods. The Tribunal in the case of Real Value Promoters Pvt. Ltd. (supra) following the decision of the Hon’ble Supreme Court held that the demand prior to 2012 cannot sustain under the heads Commercial or Industrial Construction Service, or Construction of Complex Service if the contracts are composite in nature.
CESTAT held that that the demand under construction of residential complex service cannot sustain and requires to be set aside.
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