Custom, Excise & Service Tax Tribunal
M/S.B.L.Mehta Construction Pvt.Ltd vs Cce & St, Chandigarh on 9 August, 2017
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SCO 147-148, SECTOR 17-C, CHANDIGARH-160 017 COURT NO.1 Appeal No. ST/58107/2013-(DB) [Arising out of the OIO No.23/ST/CHD-II/13 dt.26.3.2013 dt.31.1.2011 passed by the CCE, Chandigarh) Date of Hearing: 09.02.2017 Date of Decision:09.08.17 M/s.B.L.Mehta Construction Pvt.Ltd. Appellant Vs. CCE & ST, Chandigarh Respondent
Appearance Shri Jagmohan Bansal, for the appellant Shri Harvinder Singh, AR for the respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. Devender Singh, Member (Technical) FINAL ORDER NO.: 61480/2017 Per Ashok Jindal:
The appellant is in appeal against the impugned order confirming the demand of service tax alongwith interest and imposing penalty under the category of construction of residential and commercial complexes and work contract service.
2. The facts of the case are that the appellant has provided services to M/s.Chandigarh Housing Board (CHB) for construction of residential of complex under composite works contract. On the basis of enquiry conducted, the show cause notices were issued to the appellant to demand service tax under the category of work contract. The show cause notices were adjudicated and the adjudicating authority confirmed the demand as proposed in the show cause notices of Rs.3,14,42,183/- alongwith interest and also to impose penalty under section 77 and 78 of the Finance Act, 1994. The demand has also been confirmed under section 73 of the Finance Act, 1994. Aggrieved from the said order, the appellant is before us.
3. Learned Counsel appearing for the appellant submits that the impugned order is not sustainable on the following ground:
(a) the adjudicating authority has no jurisdiction to pass the impugned order as work has been executed by the appellant at Chandigarh which is falling under the jurisdiction of Commissioner of Central Excise, Chandigarh-I whereas the adjudications order was passed by the Commissioner of Central Excise, Chandigarh-II holding that subsequently the appellant got registered under the jurisdiction of Commissioner of Central Excise, Chandigarh-II. The jurisdiction is to be determined on the date of rendering services and not subsequently. As the cause of action arose at Chandigarh and there is no notification or change of jurisdiction, in that circumstance, the adjudicating authority has no jurisdiction to decide the issue, therefore, the impugned order is to be set aside.
(b) He further submits that the appellant has constructed houses for CHB who in turn let out to slum dwellers on payment of monthly lease and houses were not sold by CHB but these were allotted on lease/licence basis. It is well settled law that if a complex is constructed which is meant for personal use, no service tax is payable. The personal use includes letting out the houses. Therefore, in the light of the following decisions:
(1) Khuran Engineering Ltd. vs. CCE-2011 (21) STR 115 (T), (2) Nitesh Estate Ltd. vs. CCE-2015 (40) STR 815 and (3) CCE vs. Mall Enterprises-2016 (41) STR 119 (T).
the demand is not sustainable.
(c) He further submits that the demand has been confirmed by invoking the extended period of limitation alleging suppression of facts on the ground that the appellant has failed to get themselves registered and did not file returns. It is settled law that onus to prove that there is suppression of facts lies upon the Revenue. Mere non registration and consequently non filing of return cannot be called as suppression of facts. The Revenue has failed to discharge its burden. Further, the appellant has acted in a bonafide manner and there was a reason for not paying service tax. The appellant has sought an opinion prior to execution of work from Shri J.k.Mittal, Advocate a leading lawyer of service tax matter who opined that the service tax is not liable on the services in question. As there was confusion about liability of service tax in respect of construction activities in view of the Honble Supreme Courts decision in the case of Larsen & Toubro wherein the Apex Court has held that no service tax is payable on work contract prior to 1.6.2007 and the Honble Delhi High Court in the case of Suresh Kumar Bansal held that no service tax is payable on flats booked prior to construction. Further, the Honble Punjab & Haryana High Court in the case of Bharat Bhushan Gupta vs. State of Haryana-2016 (44) STR 195 (P&H) has held that no service tax is payable on construction for government authority. In that circumstance, the appellant was under bonafide belief that the unit constructed under Jawahar Lal Nehru National Urban Renewal Mission fall under the category of construction activity carried out for government authority. Therefore, there is doubt of liability of service tax. In that circumstance, the extended period of limitation is not invokable.
(d) Alternatively he submits that during the period in question the appellant got a sum of Rs.69.48 crores whereas contractual consideration was Rs.79.36 crores. The adjudicating authority has confirmed the demand taking contractual value i.e. Rs.79.36 crores and the appellant has paid VAT on Rs.44.30 crores, therefore, if at all liability arises, the appellant is required to pay service on Rs.25 crore of which service tax worked out to Rs.2.14 crores whereas the respondent has confirmed the demand of Rs.3.14 crores.
(e) He further submits that the respondent has confirmed the demand under section 73 of the Act or under section 73A of the Act. The demand raised in the show cause notice is more than double of the tax confirmed. The Revenue is considering the tax demanded under section 73 equal to the tax payable under section 73A of the Act. It shows that department has never sure that how much amount has been actually collected and retained by the appellant. Apart from this fact, the demand cannot be raised under section 73A of the Act merely on the ground that contract was inclusive of service tax . He submits that there are number of cases where the tax was inclusive of all taxes but service tax was not considered at the time of allotment of tender, the courts held that the tax is not payable by the contractee. The Courts have further held that where contract is between only two parties, the department cannot retain any amount because it is purely commercial transaction between two parties. To support this, he relied on the decision of the Honble Patna High Court in the case of Shapoorji Paloonji vs. CCE-2016 (42) STR 681 (Patna).
(f) He further submits that the contractee may retain amount if contract includes service tax and it is not payable as held by the Honble Punjab & Haryana High Court in the case of Malwa Engineering Works vs. Union of India Civil Writ Petition No.2032 of 2016. As the appellant has worked only for Chandigarh Housing Board so the department has no authority to claim any amount in the name of service tax under section 73A of the Act.
(g) Further, no penalty is imposable on the appellant.
4. On the other hand, learned AR reiterated the findings of the adjudicating authority and submitted that the appellant has located at Bhatinda which fall under the jurisdiction of Commissioner of Central Excise, Chandigarh-II. The adjudicating authority is having jurisdiction over the appellant to adjudicate the above show cause notice.
5. Heard both sides and considered the submissions.
6. In this case, at the time of the execution of work, the appellant was not registered with the Central Excise/Service tax department. In that circumstance, the jurisdiction falls where the appellant has executed the work. Admittedly, in this case, the work has been executed at Chandigarh, therefore, the cause of action arose at Chandigarh and the Commissioner of Central Excise, Chandigarh-II has no jurisdiction for the work executed at Chandigarh. In that circumstance, the adjudicating authority has no jurisdiction to adjudicate the impugned show cause notice. Therefore, the impugned order is not sustainable in the eyes of law.
7. Admittedly the units constructed by the appellant has been lease out by CHB to slum dwellers on payment of monthly lease and houses were not sold by CHB but these were allotted on lease/licence basis. In that circumstance, as the said housing units have not been sold by CHB, therefore, relying on the decision of Tribunal in the case of Khurana Engineering Ltd. vs. CCE- Ahmedabad-2011 (21) STR 115 (Tri.) wherein this Tribunal has observed as under:-
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.
We hold that the said service of construction is for personal use, therefore, no service tax liability arose upon the appellant on the activity of construction of flats.
8. We further find that as the issue is debatable, therefore, extended period of limitation is not invokable in the instant case.
9. We further find that the adjudicating authority has confirmed the demand under section 73A of the Act. We have seen that the show cause notice proposed to demand under section 73 and section 73A of the Act. Admittedly, the respondent themselves are confused under which provisions, they want to demand service tax from the appellant as on the one hand, the demand has been raised under section 73 and on the other hand, the demand has also raised under section 73A of the Act. It shows that the respondent themselves are confused that how much amount has actually been collected by the appellant and retained. The provisions of section 73A of the Act are applicable where the amount of service tax has been collected and retained by the assessee. The demand in question has been confirmed merely on the ground that the contract was inclusive of service tax. We find that the Honble Patna High Court in the case of Shapoorji Paloonji (supra) has observed as under:
13.?At this stage, another argument advanced by Mrs. Nivedita Nirvikar, needs to be discussed. She argues that the petitioner shall not be entitled to refund of the service tax as it would be a case of undue enrichment. We do not find any merit in this argument as well. The payment of service tax has not been made by the numerous consumers and collected by the petitioner. It is paid by the petitioner alone. The petitioner is entitled for the reimbursement of the amount of service tax by Respondent No. 4 in terms of the letter of award of contract. Such payment of service tax by the petitioner is not indirect collection of taxes but the direct payment by the petitioner. Therefore, it is not a case of undue enrichment.
10. Further, Honble Bombay High Court in the case M.k.Kotecha (supra) wherein the Honble Bombay High Court has observed as under:
6.We have also perused the show cause notice and the? annexures thereto, and particularly our attention is invited to Page 34 of the paper-book. It is started in the show cause notice that the assessee had availed concessional rate of duty under Notification No. 175/86. The assessee was not aware of the rates of excise duty taken in the tender and denied about awareness of preparation of tender papers on the basis of project report. The show cause notice itself alleges that the assessee has paid the central excise duty as per the manufacturing cost and that he has not compared the price with others. In the face of such an allegation in the show cause notice and when reliance is placed on a single piece of evidence, we do not think that in its further appellate jurisdiction this Court can enter into the domain of appreciation and appraisal of oral and documentary evidence. The documentary evidence having been appreciated and consistent with the case of the Revenue, there is no perversity in the order of the Tribunal. The appeal is, therefore, dismissed.
In view of the above, as no separate amount has been collected by the appellant, no service tax is payable under section 73A of the Act by appellant. Therefore, section 73A of the Act is not invokable.
11. In these circumstances, the impugned order is set aside and the appeal is allowed with consequential relief.
(Pronounced in the open court 09.08.2017)
(Devender Singh) Ashok Jindal
(Member (Technical) Member (Judicial)
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