Custom, Excise & Service Tax Tribunal
Spl Developers (P) Ltd vs Commissioner Of Service Tax - ... on 17 December, 2013
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No . 27136 / 2013 Application(s) Involved: ST/Stay/1424/2012 in ST/1977/2012-DB Appeal(s) Involved: ST/1977/2012-DB [Arising out of Order-in-Appeal No. 66/2012 dated 30/04/2012 passed by the Commissioner of Service Tax, Bangalore] SPL DEVELOPERS (P) LTD No.40/43, Nagashree Chambers, 8th Main, 4th Cross, Sadashivanagar, Bangalore Appellant(s) Versus Commissioner of Service Tax - BANGALORE-SERVICE TAX 16/1 S.P.COMPLEX, LALBAGH ROAD, WILSON GARDEN, BANGALORE, KARNATAKA-560027 Respondent(s)
Appearance:
Mr. S. Ananthan, Adv For the Appellant Mr. Ganesh Haavanur, A.R. For the Respondent CORAM:
HON'BLE SHRI RAGHURAM GODA, PRESIDENT HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER Date of Hearing: 17/12/2013 Date of Decision: 17/12/2013 Order Per : JUSTICE RAGHURAM GODA The assessee has preferred this appeal against the adjudication order dated 30.04.2012 passed by the learned Commissioner of Service Tax Bangalore. The order confirmed service tax demand of Rs. 5,56,15,882/-; disallowed CENVAT credit of Rs. 1,73,85,377/-; directed recovery of disallowed CENVAT credit availment of Rs. 1,22,53,815/-; appropriated Rs. 48,84,111/- already remitted by the appellant, towards the assessed service tax liability; and imposed interest and penalties, as specified.
2. Proceedings were initiated by the show-cause notice dated 5.5.2011 on the basis of intelligence gathered by officers of the anti-evasion unit of the Bangalore Commissionerate, which indicated that the appellant was providing construction of residential complex service, a taxable service and without obtaining registration under that category; filing returns or remitting service tax due. The period covered by the proceedings was 01.11.2006 to 30.09.2010. Verification of the records disclosed that no returns were filed by the appellant during October 2006 to March 2008, but were filed thereafter.
3. In response to the show-cause notice, the appellant raised several distinct and discrete defenses including that it was involved in construction of residential apartments classifiable under construction of residential complex; had entered into agreements with prospective buyers of built-up space and under such agreements agreed to transfer land and built-up space to prospective buyers; that the essence of the agreement was transfer of property in goods; and since the construction was on land belonging to itself intended for sale to others, it was a service to self, therefore not taxable as construction of residential complex service ; that after 1.6.2007. (as the works in issue were all subsequent to 1.6.2007 and in fact from November 2007), the services provided by the appellant were truly and squarely classifiable only under works contract service defined in Section 65(105)(zzzza) of the Finance Act (the Act); that these being complex agreements involving a deemed sale of goods by incorporation into the works as well as rendition of service, only the service component was liable to tax under the provisions of the Act and the value of the goods incorporated and transferred to the buyers requires to be excluded and to effectuate such vivisection, the appellant was entitled to the benefits of composition under the Works Contract (Composition Scheme of Payment of Service Tax) Rules, 2007. The appellant further contended that it had obtained registration under construction of complex service; registration is not conclusive and the adjudicating authority is required to classify the service provided strictly in terms of (the legislative mandate enjoined after introduction of) works contract service with effect from 1.6.2007; and that as service tax was remitted after availing the benefit of 4% composition and excluding the value of land transferred to the buyers under the agreements, there was no balance liability to tax nor a correlative liability to interest and penalties as proposed. The appellant also referred to Board circulars providing guidance on classification of the service into construction of residential complex or works contract services and availment of the benefits of abatement under the earlier service and composition under the later service, respectively.
4. The adjudicating authority recorded its analysis and conclusions from para 61 to 87 of the adjudication order. After extracting the appellants contention that it had been providing services akin to construction of residential complex service but the service is classifiable as works contract service after 1.6.2007, the Authority concluded that since the appellant had obtained registration under the category of construction of residential complex service and had remitted service tax in GAR-7 challan as construction of complex service, the service provided cannot be classified as works contract service even if it falls squarely within the scope of the later category of the taxable service. Dealing with the appellants claim (for exclusion of the value of the proportionate extent of land belonging to it sold to the prospective buyers along with built up space from the ambit of the gross consideration received for having provided the taxable service, whether as construction of residential complex, or as works contract), the learned Commissioner concluded that Section 67 of the Act, as operative since from 1.5.2007 enjoins that where the consideration for provision of a service is in money, the gross amount charged by the service provider for such service provided or to be provided would be the amount liable to the levy of service tax, in accordance with the rate prescribed under Section 66.
5. The above conclusion of the learned Authority is fundamentally flawed. It is clear that on a true and fair construction of the provisions of Section 67(1)(i), that in a circumstance as in this case, wherein the consideration for service is in money, the appropriate value exigible to service tax would be the gross amount charged for providing the service and that would not include the component of any consideration received for sale of immovable property. This is clear from several precedents including the recent judgement of the Delhi High Court in G.D. Builders Vs UOI [2013-TIOL-908-HC-DEL-ST], wherein the High Court in unequivocal terms reiterated and clarified the position that the gross value which is liable to service tax under Section 67 of the Act excludes however the value of goods incorporated in a works contract service i.e. the consideration received for transfer of immovable property, which is outside the concept of taxable service.
6. Analysis of the issue relating to irregular availment of CENVAT credit is set out in paragraphs 76 to 81 of the adjudication order. The show-cause notice alleged that the appellant had irregularly availed and utilized CENVAT credit on the basis of ineligible documents in contravention of Rule 9 of CENVAT Credit Rules-2004. The Learned commissioner recorded that Revenue had called upon the appellant to produce details of CENVAT credit availed along with copies of invoices/bills on the strength of which the credit was availed; and that the appellant failed to produce any documentary evidence in support of availment of credit. On this analysis of factual scenerio, set out in para 79, the adjudicating authority held that the appellant had irregularly availed CENVAT credit to the extent of Rs. 1,73,85,377/-. Since the appellant strenuously contended that it had produced the entire material including the invoices and bills in support of the availment of CENVAT credit before the adjudicating authority, the Tribunal by order dated 24.5.2013 directed the jurisdictional Commissioner to report to this Tribunal, by way of an affidavit, whether the relevant material such as invoices, bills etc. were furnished to the adjudicating authority.
7. The Commissioner, Service Tax Bangalore has filed an affidavit dated 26.6.2013, stating that the appellant had stated that invoices were enclosed with a statement containing details of CENVAT credit availed, appended as Annexure-5 to its reply to the show-cause notice; however, on verification of Annexure-5, the statement of CENVAT credit availed was not available in the records. It is also stated that Annexure-5 is merely a summary of CENVAT credit availed for the period March 2008 to August 2008 but no copies of any invoices or bills were furnished.
8. It requires to be noticed that after introduction of works contract as an independent and distinct taxable service with effect from 1.6.2007 any service provided which involve rendition of service such as those amounting to erection, commissioning or installation of plant, machinery equipments or structure; construction of a new building or a civil structure or a part thereof; construction of a new residential complex or a part thereof and other enumerated activities falling within the defined ambit of works contract under Section 65(105) (zzzza) of the Act would necessarily have to be classified as a works contract service irrespective of whether these services answer the description of or were earlier classifiable as other preexisting taxable services. Construction of residential complex may involve apart from rendition of a clutch of services defined in Section 65(30a), transfer of property in goods or of immovable property involved in the execution of such contract, components which are exigible to levy of tax as sale of goods or amounting to transfer of immovable property. The obligation to correctly classify a contested class of service is not discharged by the adjudicating authority, by abdication of such responsibility of classification on the assumption that the registration is conclusive of the class of taxable service provided. If the Authority has accepted the returns filed by an assessee without demur that would be another matter but if the Adjudicating authority initiates proceedings either in the context of an assessee failing to file a return or on a premise that the assessee has under valued the liability to tax; and wherever in such proceedings initiated, the assessee contests the alleged classification, the obligation of the adjudicating authority to properly classify the service provided by reference to the appropriate taxable service, is a non-derogable obligation.
9. We are not persuaded to accept the view canvassed by Revenue that the 2007 Rules indicate an option available to the assessee to opt for works contract service or any other similar service such as construction of commercial or industrial construction service. Neither the adjudicating authority nor the assessee have an option to decide as a matter of subjective choice, which taxable service a particular transaction falls into. The rendition of a service on the basis of a transactional document/agreement/contract gives rise to jurisdictional facts analysis of which, require resolution of a difficult but not impossible and inevitable issue, whether the relevant facts warrant classification as which appropriate taxable service was provided. Once such classification is arrived at, as part of the duty and functions of the adjudicating authority; all the incidences consequent on such classification would follow.
10. The classification of a service must always be an analysis of the characteristics of the service, analyzed in terms of the provisions of the Act; considered in the light of the guidance provided in Section 65A of the Act; and identification of which of the clauses of Section 65(105) that the service in issue falls.
11. On the aforesaid analysis we are unable to sustain the Adjudication order. We waive pre-deposit and allow the appeal. No costs.
(Order dictated and pronounced in open court) JUSTICE RAGHURAM GODA PRESIDENT B.S.V.MURTHY TECHNICAL MEMBER Pnr...
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