SERVICE TAX Appeal No. 11405 of 2013-DB
[Arising out of Order-in-Original/Appeal No 31-SERVICETAX-2012 dated 28.02.2013 passed
by Commissioner of Central Excise, Customs and Service Tax-SURAT-I]
C R Patel
VERSUS
C.C.E. & S.T.-Surat-i
APPEARANCE:
Shri S. J. Vyas, Advocate for the Appellant
Sh. Vijay G. Iyengar, Assistant Commissioner (Authorized representative) for the
Respondent
CORAM: HON’BLE MEMBER (TECHNICAL), MR. RAJU
HON’BLE MEMBER (JUDICIAL), MR. SOMESH ARORA
Final Order No. A/ 10185 /2023
DATE OF HEARING:31.01.2023
DATE OF DECISION:31.01.2023
RAJU
This appeal has been filed by M/s. CR Patel against demand of service
tax as “Works Contract Service”.
Learned Counsel for the appellant pointed out that they were engaged
by Gujarat State Police Housing Corporation Ltd. (GSPHCL). The construct
residences for police personal. Learned Counsel pointed out that the service
provided by them is covered under the definition of “Works Contract Service”.
He relied on the decisions in the case of Larsen & Toubro Ltd SC – 2015 (8)
TMI 479 to assert that for the period prior to 01.06.2007 no service tax could
have been demanded as service provided by them was in the nature of “Works
Contract Service”, and the said service became taxable only with effect from
01.06.2007. He relied on decisions of Tribunal in the case of Lanco Tanjore
Power Co. Ltd. and Sima Engineering to assert that, they are not covered in
definition of “Works Contract Service”.
Learned (AR) relied on the impugned order. He argued that GSPHCL is
not a Government body.
We have considered rival submissions. We find that so far as the period
prior to 01.06.2007 is concerned it is not in doubt that the demand has been
made in the category of “works contract service”. The works contract service
was not taxable prior to 01.06.2007 has held by Hon’ble Apex Court in the
case of Larsen & Toubro Ltd (Supra) , consequently the demand for the period
01.06.2007 made under the category of the “works contract service is set
aside.
4.1 So far as the period after 01.06.2007 is concern it is seen that the
definition of the above “works contract service” reads as under:
“Works contract”, for the purposes of section
65(105)(zzzza), means a contract wherein,-
(i) transfer of property in goods involved in the execution of
such contract is leviable to tax as sale of goods, and
(ii) such contract is for the purposes of carrying out,—
(a) erection, commissioning or installation of plant,
machinery, equipment or structures, whether pre-fabricated
or otherwise, installation of electrical and electronic devices,
plumbing, drain laying or other installations for transport of
fluids, heating, ventilation or air-conditioning including related
pipe work, duct work and sheet metal work, thermal
insulation, sound insulation, fire proofing or water proofing,
lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part
thereof, or of a pipeline or conduit, primarily for the purposes
of commerce or industry; or
(c) construction of a new residential complex or a part
thereof; or
(d) completion and finishing services, repair, alteration,
renovation or restoration of, or similar services, in relation to
(b) and (c); or
(e) turnkey projects including engineering, procurement and
construction or commissioning (EPC) projects; (Explanation to
Section 65 (105) (zzzza) of Finance Act, 1994)
4.2 The definition of residential complex excludes from the levy of Service
Tax “complex which is constructed by a person directly engaging any other
person for designing or planning of the lay out and the construction of such
complex is intended for personal use as residence by such persons.” This
expression has been interpreted by Tribunal in the case of Sima Engineering-
2018 (5) TMI 405 (Tri.-Chennai), wherein after examining this conclusion para
7 & 8 as follows:
“7. Undisputedly, the appellants have entered into an agreement
with TNPHCL for providing services in relation to construction of
residential complex. However, these are meant for use of police
personnel. The said issue was considered by the Tribunal in the case
of Nithesh Estates (supra), wherein theTribunal has observed as
under:-
“7.1 In this case there is no dispute and it clearly emerges that
the residential complex was built for M/s. ITC Ltd. and
appellant was the main contractor. Appellant had appointed sub
contractors all of whom have paid the tax as required under the
law.
The questionthat arises is whether the appellant is liable to pay
service tax in respect of the complex built for ITC. From the
definition it is quite clear that if the complex is constructed by a
person directly engaging any other person for design or planning
or layout andsuch complex is intended for personal use as per
the definition, service tax is not attracted. Personal use has been
defined as permitting the complex for use as residence by
another person on rent or without consideration. In this case
what emerges is that ITC intended to provide the
accommodation built to their own employees. Therefore it is
covered by the definition of „personal use‟ in the explanation.
The next question that arises is whether it gets excluded under
the circumstances. The circular issued by C.B.E.&C. on 24-5-
2010 relied upon by the learned counsel is relavant. Para 3 of
this circular which is relevant is reproduced below :
“3. As per the information provided in your letter and during
discussions, the Ministry of Urban Development (GOI) has
directly engaged the NBCC for constructing residential complex
for Central Government officers. Further, the residential
complexes so built are intended for the personal use of the GOI
which includes promoting the use of complex as residence by
other persons (i.e. the Government officers or the Ministers). As
such the GOI is the service receiver and NBCC is providing
services directly to the GOI for its personal use. Therefore, as for
the instant arrangement between Ministry of Urban Development
and NBCC is concerned, the Service Tax is not leviable. It may,
however, be pointed out that if the NBCC, being a party to a
direct contract with GOI, engages a sub-contractor for carrying
out the whole or part of the construction, then the sub-contractor
would be liable to pay Service Tax as in that case, NBCC would
be the service receiver and the construction would not be for
their personal use.”
It can be seen that if the land owner enters into a contract with
a promoter/builder/developer who himself provided service of
design, planning and construction and if the property is used
for personal use then such activity would not be subject to
service tax. It is quite clear that C.B.E.&C. also has clarified that
in cases like this, service tax need not be paid by the
builder/developer who has constructed the complex. If the
builder/developer constructs the complex himself, there would
be no liability of service tax at all. Further in this case it was
different totally, the appellant, has engaged sub- contractors and
therefore rightly all the sub-contractors have paid the service
tax. In such a situation in our opinion, there is no liability on the
appellant to pay the service tax.”
4.3
The said decision was followed by the Tribunal in the case of Lanco
Tanjore Power Co. Ltd. (supra) wherein the Tribunal discussed as under:-
“7. Construction of residential complex activity was carried out
by the assessee for M/s. Lanco. It is submitted that such residential
units were constructed for use as quarters of the employees of M/s.
Lanco. It is evident from the facts of the case that M/s.Lanco has
engaged the assessee with the specific purpose of construction of
such residential units which are meant for personal use of the
employees of M/s. Lanco. We extract below the statutory definition
of section 65(91a) of the Finance Act, 1994:-
“Residential complex” means any complex comprising of —
(i)
a building or buildings, having more than twelve residential
units;
(ii)
a common area; and
(iii) any one or more of facilities or services such as park, lift,
parking space, community hall, common water supply or effluent
treatment system, located within a premises and the layout of such
premises is approved by an authority under any law for the time
being in force, but does not include a complex which is constructed
by a person directly engaging any other person for designing or
planning of the layout, and the construction of such complex is
intended for personal use as residence by such person.
Explanation. — For the removal of doubts, it is hereby declared that
for the purposes of this clause, —
(a)
“personal use” includes permitting the complex for use as
residence by another person on rent or without consideration;
(b)
“residential unit” means a single house or a single apartment
intended for use as a place of residence;”
The above definition specifically excludes construction undertakenfor
personal use and such personal use includes permitting the
complex for use as residence by another person. We find that the
above exclusion clause covers the construction activity undertaken by
the assessee.
We have gone through the case law relied upon by the
respondents where a similar case has been dealt with by the
Tribunal. Following the decision of the Tribunal in Nithesh Estates
Ltd. (supra), we find no reason to interfere with the impugned
orders which are sustained and the appeals filed by Rvenue are
rejected.”
4.4 Similar view has also been taken in the case of Khurana Engineering-
2010 (11) TMI 81 CESTAT –Ahmd, wherein following has been observed:
“2. Learned advocate on behalf of the appellants, first of all
submitted that the service was provided by the appellant to Govt.
of India for providing the same as residential accommodation for
the employees of the Income Tax department. He drew our
attention to the definition of the construction of complex services
given under the clause (30a) of Section 65 to submit that personal
use, according to the definition includes permitting the complex
for use as residence by another person on rent or without
consideration. In view of the definition of ‘Personal Use’ in the
definition of ‘Construction of Complex’ services, the services
provided by the appellant is covered by exclusion, which provides
that definition of service does not include the complex which is
constructed by a person directly engaging any other person for
designing or planning of the layout and the construction of such
complex. In this case, the Govt. of India provides 80 flats to
Income Tax department on rent and therefore, it is excluded from
the definition of construction services. He also relies upon the
reply given by the Central Board of Customs and Excise to
National Building Construction Corporation Limited (NBCC), vide
Letter No. F. No. 332/16/2010-TRU., dated 24-5-2010, in support
of this contention. On the other hand, learned DR submits that it
is not correct to say that service has been provided to Govt. of
India directly. He submits that the land is owned by Income Tax
department and Income Tax department has requested the CPWD
to construct the quarters for them and funds have been made
available to CPWD by Ministry of Finance for this purpose. CPWD
in reality has acted as a bridge between Income tax department
and the contractor and after the residential complex is
constructed, the same was handed over by CPWD to Income tax
department and therefore, in terms of the clarification issued by
the Board also, the appellant would be liable to pay service tax.
He drew our attention to the letter relied upon by the learned
advocate and submitted that in that letter, it has been clarified by
the Board that if NBCC were to construct residential
accommodation and handover to Govt. of India, there would be
no liability to service tax. However, if NBCC were to entrust the
work to sub-contractor and such sub-contractor constructed the
residential complex and handed over to NBCC who in turn handed
over the same to Govt. of India, service tax would be leviable. He
drew our attention to the observation of learned Commissioner in
his order wherein he has also held that this is not a case where
residence is for personal use of a person and is not covered by
the explanation given under clause (30a). We have considered
this submission. We find ourselves in agreement that the
contention of the learned advocate that service has been provided
by the appellant to Govt. of India in this case and CPWD and
Income Tax department cannot be treated as separate entities
just because service has been provided to CPWD who in turn
handed over the same to Income Tax department. Further,
learned advocate also drew our attention to the notice issued by
the CPWD inviting tenders. The tender starts with words “Tenders
are invited on behalf of the President of India”. Further, we also
find that the guarantee executed by the contractor and agreement
entered by the contractor have been accepted by CPWD for and
on behalf of the President of India. Learned DR also fairly admitted
that he has not got any clarification from the department as to
whether there is any evidence to show that CPWD and Income
Tax departments are separate entities and have to be treated as
separate entities. It is well known that various departments of
Govt., of India act on behalf of the President of India and
therefore, it cannot be said that CPWD can be equated with NBCC
which is a Public Sector under taking. It is also well settled that
Public Sector undertakings are not considered as Govt.,
departments and also cannot be considered as “STATE”. Further,
learned DR also could not show whether there was any agreement
between Income tax department and CPWD for the purpose of
construction of residential complex. Invariably when two parties
are independent entities, there would be an agreement. Absence
of any agreement between CPWD and Income tax department
also supports the case of the learned advocate. Further, since on
behalf of the President of India contractors are entered into,
agreements are entered into and bonds are accepted, Govt. of
India is treated as “Person”. Therefore, we are unable to agree
with the learned Commissioner when he says that the exclusion
clause in the definition cannot be applied to the Govt. of India.
For ready reference, definition of Construction of Complex
Services is reproduced :-
(a) Construction of a new residential complex or a part thereof;
or
(b) Completion and finishing services in relation to residential
complex such as glazing, plastering, painting, floor and wall tiling,
wall covering and wall preparing, wood and metal joinery and
carpentry, fencing and railing, construction of swimming pools,
acoustic applications or fittings and other similar services; or
(c) Repair, alteration, renovation or restoration of, or similar
services in relation to, residential complex]
The definition of residential complex service has been given under
clause (91a) of Section 65 as under;
“Residential complex” means any complex comprising of-
(i) a building or buildings, having more than twelve residential
units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift,
parking space, community hall, common water supply or effluent
treatment system, located within a premises and the layout of
such premises is approved by an authority under any law for the
time being in force, but does not include a complex which is
constructed by a person directly engaging any other person for
designing or planning of the layout, and the construction of such
complex is intended for personal use as residence by such person.
Explanation – For the removal of doubts, it is hereby declared that
for the purposes of this clause —
(a) “personal use” includes permitting the complex for use as
residence by another person on rent or without consideration;
(b) “residential unit” means a single house or a single apartment
intended for use as a place of residence.”]
We have already explained the submission of learned advocate in
brief and as explained by him in this case, residential complex
constructed by the appellant is meant for use by the Income Tax
department to provide the same on rent to the employees and
therefore, it is clearly covered by the explanation given for
“Personal use” in the definition. In this case the CPWD has
engaged the appellant for construction of residential complex for
giving it on rent to the employees of Income Tax department and
therefore this service cannot be included in the definition of
residential complex services. It is basically the case of one
department taking the help of another department to get the work
done basically because of specialization of that department in
preparing documents and get the work executed.
- We also find alternative submissions made by the learned
advocate are to be sustained. The first alternative submission
made was that the show cause notice was issued on 4-10-2007
whereas, the service tax was payable for the period from 16-6-
2005 to 30-7-2007 and therefore, a portion of the demand is time
barred. Even if a view is taken that CPWD is to be treated as
separate entity, in our opinion appellant would be justified to
entertain a belief that CPWD and Income Tax department are to
be treated as part of the Govt. of India and therefore, services
provide by him would not be liable to service tax. Further, as
submitted by the appellant in his submission, the agreement also
provides that in case of liability of any tax, the service receiver is
liable to pay. In these circumstances, the appellants had no
reason to resort to suppression or mis-declaration of the facts to
avoid payment of service tax since if the service tax was liable, as
per the contract, CPWD was liable to pay service tax. Under these
circumstances, invocation of extended time limit cannot be
justified in this case. Therefore, penalties imposed under various
sections of Finance Act, 1994 also cannot be upheld.
- Another alternative submission made by the learned advocate
was that the contract between the appellant and the CPWD was a
works contract and VAT has been paid treating the same as works
contract and therefore, no service tax was liable to be paid for the
period prior to 1-6-2007. He has cited several decisions in support
of this contention. However, we find that the decision of the
Tribunal in the case of Cemex Engineers v. Commissioner of
Service Tax Cochin – 2010 (17) S.T.R. 534 (Tri. – Bang.) is
relevant. In this case, the Tribunal had considered the definition
of residential complex services and works contract services and
had come to the conclusion that in view of the fact that
construction of new residential complex was included in the
definition of works contract, the construction of residential
complex on the basis of works contract, cannot be leviable to
service tax prior to 1-6-2007. In view of the fact that this decision
is applicable to the facts of the present case, this would also go in
favour of the appellants.
- Further, in view of the fact that on merits, we have held that
service provided by the appellant is to be treated as service
provided to Govt. of India directly and end use of the residential
complex by Govt. of India is covered by the definition “Personal
Use” in the explanation to definition of residential complex
service, the other aspects need not be considered. In view of the
discussion above, the impugned order cannot be sustained and
accordingly the same is set-aside. Appeal is allowed with
consequential relief to the appellant.”
Relying on the aforesaid decision, we hold that the use of the residential
complex by (GSPHCL) is excluded from the definition of residential Complex
as “intended for personal use as residence by such persons”. In view of above,
we do not find any merit in the order, the order is set aside and appeal is
allowed.
(Dictated & pronounced in the open court)
(Raju)
Member (Technical)
(Somesh Arora)
Member (Judicial)
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