R N Dobariya VERSUS C.C.E. & S.T.-Surat-i

Service Tax Appeal No. 11571 of 2013

(Arising out of OIO-29/SERVICETAX/2012 Dated-28/02/2013 passed by Commissioner of

Central Excise, Customs and Service Tax-SURAT-I)

 

R N Dobariya

VERSUS

C.C.E. & S.T.-Surat-i

 

APPEARANCE:

Shri. S J Vyas, Advocate for the Appellant

Shri. Ghanasyam Soni, Additional Commissioner (AR) for the Respondent

CORAM:

HON’BLE MR. RAJU, MEMBER (TECHNICAL)

HON’BLE MR. SOMESH ARORA MEMBER (JUDICIAL)

Final Order No. A/ 10257 /2023

DATE OF HEARING:01.02.2023

DATE OF DECISION:01.02.2023

RAJU

This appeal has been filed by M/s. R N Dobairya against demand of

service tax as “Construction of Residential Complex Service” and “Works

Contract Service”.

Learned Counsel for the appellant pointed out that they were engaged

by Gujarat State Police Housing Corporation Ltd. (GSPHCL). He relied on

decisions of Tribunal in the case of LancoTanjore Power Co. Ltd. and Sima

Engineering to assert that, they are not covered in definition of “Works

Contract Service” or “Construction of Residential Complex”.

Learned (AR) relied on the impugned order. He argued that GSPHCL is

not a Government body.

We have considered rival submissions.

4.1 It is seen that the definition of the above “Works Contract Service” and

“Construction of Residential Complex 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)

“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 layo

ut of suchpremises is approved by an authority under any law for

the

time being in force, but does not include a complex which is constr

ucted 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 purp

oses 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 theabove exclusion clause covers the construction

activity undertaken by the assessee”.

4.2 The definition of residential complex in both the above services

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 in to 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 bythe Tribunal in the case

of Nithesh Estates (supra), wherein the Tribunal has observed as

under:-

“7.1In 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 question hat arises is whether the appellant is liable to pay

service tax in respect of the complex built for ITC. From the

definition it is

quiteclearthatifthecomplexisconstructedbyapersondirectlyengagi

nganyotherpersonfor design or plan ingorlayout and such

complex is intended for personal use as per the

definition,servicetaxisnotattracted.Personalusehasbeendefineda

spermitting the complex for use as residence by another person

on rent or without consideration. In this case what emerges is

that

ITCintendedtoprovidetheaccommodationbuilttotheirownemploye

es.Thereforeitiscoveredbythedefinitionof„personal use‟ in the

explanation. The next question that arises is whether

itgetsexcludedunderthecircumstances.ThecircularissuedbyC.B.E.

&C.on24-5-

2010relieduponbythelearnedcounselisrelavant.Para3ofthiscircula

rwhichisrelevantisreproducedbelow:

“3.Aspertheinformationprovidedinyourletterandduringdiscussion

s, 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

promotingtheuseofcomplexasresidencebyotherpersons(i.e.theG

overnmentofficersortheMinisters).AssuchtheGOIistheservice

receiver and NBCC is providing services directly to the

GOIforitspersonaluse.Therefore,asfortheinstantarrangementbet

ween Ministry of Urban Development and NBCC is

concerned,theServiceTaxisnotleviable.Itmay,however,bepointed

outthatif 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 thatcase, 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,planningandconstructionandifthepropertyisusedforperson

aluse 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

constructedthecomplex.Ifthebuilder/developerconstructsthecom

plexhimself,therewouldbenoliabilityofservicetaxatall.Furtherinthi

s case it was different totally, the appellant, has engaged sub

contractorsandthereforerightlyallthesub-contractorshavepaidthe

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

theemployeesofM/s.Lanco.Weextractbelowthestatutorydefinitiono

fsection65(91a)oftheFinanceAct,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.—

Fortheremovalofdoubts,itisherebydeclaredthatforthepurposesofthiscla

use,—

(a)

“personaluse”includespermittingthecomplexforuseasresiden

cebyanotherpersonon 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 undertaken

for 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 under

taken 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 Revenue

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.

3. 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.

4. 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.

5. 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)