SERVICE TAX Appeal No. 12013 of 2013-DB
(Arising out of OIA-153/RAJ/CE/AK/COMMR-A/AHD Dated-04.04.2013 passed by Commissioner of
Central Excise, CUSTOMS (Adjudication)-RAJKOT)
KAVERI BUILDCON
VERSUS
C.C.E. & S.T. RAJKOT
APPEARANCE:
Shri Jigar Shah & Amber Kumrawat (Advocate) appeared for the Appellant
Shri G. Kirupanandan, Assistant Commissioner (Authorized Representative) for
the Respondent
CORAM: HON’BLE MR. RAJU, MEMBER (TECHNICAL)
HON’BLE MR. SOMESH ARORA (JUDICIAL)
Final Order No. A/ 10277 /2023
DATE OF HEARING:07.02.2023
DATE OF DECISION:07.02.2023
RAJU
This appeal has been filed by the appellant against the demand of
service tax on construction of complex service.
Learned counsel pointed out that the appellants constructed houses
for Essar Limited. The said houses were used by Essar Limited for their
own staff. He argued that the service provided by them is not covered
under the construction of complex service, since the residential
construction was for personal use. He relied on the following decisions:
CR Patel vide Final Order No. A/10185/2023 dated
31.01.2023.
Khurana Engineering Ltd. Vs CCE 2011 (21) STR 115 (T-Ahm)
Shri S. Kadirvel Vs CCE 2018 (6) TMI 926 – CESTAT
PC Snehal Construction Co. vs CST 2022 (9) TMI 390-CESTAT
Real Value Promoters Pvt. Ltd. GST 2018 (9) TMI 1149-
CESTAT
Learned authorized representative relies on the impugned order.
We have considered the rival submissions. We find that it is not in
dispute that the residential house constructed by the appellant were used
by Essar Limited for its own staff. The appellants have claimed that the
said use amounts to the personal use as defined in the definition of
residential complex and therefore, the service provided by them is not
covered under the definition of construction of complex service. It is
seen that the identical service has been defined by Tribunal in the case of
CR Patel. In the said case following has been observed.
―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)
4.2The 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 the Tribunal 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 question that 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 and such 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. on24-5-2010 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 issued 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
theemployeesofM/s.Lanco.Weextractbelowthestatutorydefinitionofs
ection65(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.—For the removal of doubts, it is here by declared that for
the purposes of this clause,—
(a)
―personaluse‖includespermittingthecomplexforuseasresidence
byanotherpersonon 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 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 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.
- 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.‖
4.1 Learned counsel also pointed out that the service provided by them
is not in the nature of works contact. He took us through para 5 of the
show cause notice wherein it is clearly seen that the entire contract was
inclusive of all the material and goods.
We find that the appellants are making residential properties for
the use of Essar Group for their employees. In view of the above case
law and since the facts are similar to the facts in the case of CR Patel
(supra) , the impugned order is set aside. Appeal is allowed.
(Dictated and Pronounced in the open court)
(RAJU)
MEMBER (TECHNICAL)
(SOMESH ARORA)
MEMBER (JUDICIAL)
Leave a Reply