Custom, Excise & Service Tax Tribunal
Puneet Bansal vs Commissioner, Central Excise & ... on 28 February, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH COURT NO.IV
SERVICE TAX APPEAL NO. 50776/2021
[Arising out of Order-in-Appeal No. Comm(A)/47/2020-21 dated
31.03.2021 passed by the Commissioner (Appeals II), CGST, New
Delhi]
PUNEET BANSAL APPELLANT
Vs.
COMMISSIONER, CGST
Central Excise & Service tax Division RESPONDENT
Connaught Place, Delhi South New Delhi.
WITH SERVICE TAX APPEAL NO. 50787/2021 [Arising out of Order-in-Appeal No. Comm(A)/46/2020-21 dated 31.03.2021 passed by the Commissioner (Appeals II), CGST, New Delhi] VANITA BANSAL APPELLANT Vs. COMMISSIONER, CGST Central Excise & Service tax Division RESPONDENT Connaught Place, Delhi South New Delhi.
APPEARANCE:
Shri Sourabh, Advocate for the Appellant Ms Tamana Alam, Authorised Representative for the Department CORAM:
HON'BLE MRS RACHNA GUPTA, MEMBER (JUDICIAL) Date of Hearing/Decision: February 28, 2022 ST/50787/2021 FINAL ORDER No. 50236-50237 /2022 PER RACHNA GUPTA Present order disposes of two appeals issue being common in both these appeals.
S.No. Appeal No. Order in Original No. Order in Appeal No. 1 ST/50776/2021 11/Refund/RK/Div- Comm(A)/47/2020-21 Puneet Bansal CP/2020-21 dated dated 31.03.2021 20.5.2020 2 ST/50787/2021 09/Refund/RK/Div- Comm(A)/46/2020-21 Vanita Bansal CP/2020-21 dated dated 31.03.2021 20.5.2020 The facts in brief are for adjudication are as follows:
That appellants in both the appeals had purchased an independent floor bearing No. No. A-T-FF-86 located on the ground floor in Appeal No. ST/50776/2021 and on 1st floor in Appeal No. ST/50787/2021 in Building Topaz having a super area of 167.82 square meters each. For the purpose the appellant entered into a home buyer's agreement with Emaar dated 27.09.2011 in case of Puneet Bansal and agreement dated 22.9.2011 in the case of Vanita Bansal. As per the agreement, the appellants were supposed to make the payment towards the receipt of Construction of Complex' service being provided by Emaar along with the element of service tax. The Emaar accordingly raised the demand upon completion of each milestones to recover the payments to purchase of flats, charging therewith service tax also. However pursuant to the decision of Hon'ble High Court of Delhi in W.P.(C) No. 2235/2011 and W.P.(C) 2971/2011 in the matter of Shri Suresh Kumar Bansal and Shri Anuj Goyal and others vs Union of India. The appellants filed refund claim of Rs.5,14,952/- on 11.9.2020 in Appeal No. 2 ST/50787/2021 ST/50776/2021 and of Rs.3,53,821/- on 8.5.2019 in Appeal No. ST/50787/2021. However, the deficiency memo was issued to both the appellants and their refund claim was rejected vide respective Order in Originals as mentioned in the order above.
The appeals thereof have been rejected in both the case vide Order-in-Appeals as tabulated above. Still being aggrieved both the appellants are is before this Tribunal.
2. I have heard Shri Sourabh, learned Counsel appearing for the Appellant and Ms Tamana Alam, learned Authorised Representative appearing for the Department.
3. Learned Counsel has submitted that refund claim has wrongly been rejected as it amounts to violation of directions of Hon'ble Delhi High Court in the case of Shri Suresh Kumar Bansal. It is submitted that there was incorporated retrospective amendment in Rule 2A of Service Tax Valuation Rules but to counter the said retrospective amendment there has been decision in favour of the appellant by Hon'ble High Court of Delhi itself in the case of Ruchi Goyal vs NBCC (India) Ltd. reported as [2019(29) GSTL 392 (Del)]. Learned Counsel has further impressed upon that there is sufficient evidence on record to prove that the appellants have borne the burden of Service tax. The Chartered Accountant certificate issued by the statutory auditors of Emaar is also emphasised towards acknowledgement on part of Emaar in the element of Service Tax to have been paid by the appellant. Emaar's no objection to the refund thereof in the terms of decision of Shri Suresh Kumar Bansal (supra) has also been impressed. Learned Counsel has also brought to the notice that second floor of the same property as the one in question was purchased by Shri Puneet Gupta. Refund claim of service tax paid by him to M/s. Emaar was claimed by him placing similar reliance upon the decision of Shri Suresh Kumar Bansal (supra) case. This Tribunal in the Single Member Bench vide decision dated 3 ST/50787/2021 10.11.2021 reported as 2021-VIL-644-CESTAT-DEL--ST has already sanctioned the refund thereby setting aside the order of the department. With these submissions the order under challenge in both the appeals are prayed to be set aside and both the appeals prayed to be allowed.
4. To rebut the submissions learned Departmental Representative has laid emphasis upon the finding in para 5.4 of the Order-in-Appeal /order under challenge wherein it has specifically been clarified by the Commissioner (Appeals) that composite contract for construction of complex and sale of units are squarely covered under the scope of work contract service. Hence the retrospective amendment under Rule 2A of Service Tax Valuation Rules has rightly been made applicable upon the present appellant. The denial of refund is therefore justified. Impressing upon no infirmity in the order under challenge, both the appeals are prayed to be dismissed.
5. After hearing the parties, the rival contentions and after perusing the record of the appeal as well as the decisions as relied upon while making respective submissions, my observations and findings are as follows:
There is no denial to the fact that while purchasing the different floors of a immovable property the appellants have been paying the Service Tax along with the demands which were raised by the construction company at the completion of each milestone. There is also no denial to the fact that the Hon'ble High Court of Delhi in Suresh Kumar Bansal case (supra) case has held that Service Tax could not be levied on value of undivided share of land acquired by buyer of dwelling unit or value of goods which are incorporated in project by Developer. The refund in question has been filed based upon aforesaid decision with respect 4 ST/50787/2021 to such amount of Service Tax as was already paid by the appellants.
The adjudicating authority have rejected the claim relying upon the retrospective amendment under Rule 2A of Service Tax Valuation Rules. The moot controversy therefore is as to whether the said amendment applies to the facts of the present case. Rule 2 A reads as follows:
"2A. Determination of value of taxable services involved in the execution of a works contract. - Subject to the provisions of section 67, the value of taxable service involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in clause (8) of section 66E of the Act, shall be determined by the service provider in the following manner, namely :-
(i) Value of works contract service shall be equivalent to the gross amount charged for the works contract less the value of transfer of property in goods involved in the execution of the said works contract.
Explanation. - For the purposes of this clause, -
(a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid, if any, on transfer of property in goods involved in the execution of the said works contract;
(b) value of works contract service shall include, -
(i) labour charges for execution of the works;
(ii) amount paid to a sub-contractor for labour and services;
(iii) charges for planning, designing and architect's fees;
(iv) charges for obtaining on hire or otherwise, machinery and tools used for the execution of the works contract;
(v) cost of consumables such as water, electricity, fuel used in the execution of the works contract;
(vi) cost of establishment of the contractor relatable to supply of labour and services;
(vii) other similar expenses relatable to supply of labour and services;
and
(viii) profit earned by the service provider relatable to supply of labour and services;
5ST/50787/2021
(c) Where value added tax has been paid on the actual value of transfer of property in goods involved in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax, shall be taken as the value of transfer of property in goods involved in the execution of the said works contract for determining the value of works contract service under this clause.
(ii) Where the value has not been determined under clause (i), the person liable to pay tax on the taxable service involved in the execution of the works contract shall determine the service tax payable in the following manner, namely :-
(A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract :
Provided that where the gross amount charged includes the value of the land, in respect of the service provided by way of clause (8) of section 66E of the Act, service tax shall be payable on twenty five per cent. of the total amount including such gross amount;
(B) in case of other works contracts including completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings not covered under sub-clause (A), service tax shall be payable on sixty per cent. of the total amount charged for the works contract;
Explanation 1. - For the purposes of this rule, -
(I) "original works" means -
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable;
(II) "total amount" means the sum total of gross amount and the value of all goods, excluding the value added tax, if any, levied on goods and services supplied free of cost for use in or in relation to the execution of works contract, under the same contract or any other contract :
Provided that where the value of goods or services supplied free of cost is not ascertainable, the same shall be determined on the basis of the fair market value of the goods or services that have closely available resemblance;"
6. The perusal therefore, makes it clear that the said rule provides the mechanism to separately determine value of land 6 ST/50787/2021 and value of goods under a Works Contract Service. The gross consideration charged for construction of complex service by builder promoter of a project of a buyer would not only include the element of cost of Service Tax but also the value of undivided share of land which would be acquired by the buyer. In the present case admittedly the service provided is of not work contract service but is a simplicitor contract of construction of residential building. Apparently the two are two distinct services. Works contract is defined under sub clause zzzzu of clause (105) of section 65 of Finance Act whereas Construction of Complex is the one under sub clause (zzzh) of clause (105) of Section 67 of Finance Act. The Hon'ble Delhi High Court in the case of Suresh Kumar Bansal (supra) case has held that no service tax under Section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the petitioners with the builder. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside. It was held that if the concerned officer of respondent No. 1 shall examine whether the builder has collected any amount as service tax from the petitioners for taxable service as defined in Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authorities, any such amount deposited shall be refunded to the petitioners with interest at the rate of 6% from the date of deposit till the date of refund.
7. The Hon'ble Apex Court while overruling the decision in the case G D builder vs. Union of India reported as [2013 (32) STR 673] has held held that sub-clauses (g), (zzd), (zzh), (zzq) and (zzzh) of Clause (105) of Section 65 of the Act would also take within their sweep indivisible composite works contracts. The Supreme Court further concluded that prior the enactment of the 7 ST/50787/2021 Finance Act, 2007 - by virtue of which Section 65(105)(zzzza) of the Act was introduced and Section 67 of the Act was amended - a composite contract was not taxable. This was so because in absence of Rule 2A of the Rules there was no machinery for excluding the non-service element from such composite works contracts involving an element of services and transfer of property in goods. Whilst the impugned explanation expands the scope of Section 65(105)(zzzh) of the Act, it does not provide any machinery for excluding the non-service components from the taxable services covered therein. The Rules also do not contain any provisions relating to determination of the value of services involved in the service covered under Section 65(105)(zzzh) of the Act. Thus the said clause cannot cover composite contracts such as the one entered into by the petitioners with the builder.
8. Hon'ble Delhi High Court in the case of Ruchi Goyal vs NBCC (India) Ltd. reported as [2019 (29) GSTL 392 (Del)] has given further clarity about the non-applicability of the amendment in Rule 2A of Valuation Rules with respect to the leviability of Service Tax upon the construction of residential complex service, it has been clarified as under:
"4. It does appear to the Court that the amendment to Rule 2A is specific to a works contract since the title of Rule 2A itself reads 'determination of value of service portion in the execution of the works contract.' In para 23 of the decision of this Court in Suresh Kumar Bansal (supra), this Court noted that while Section 65(105)(zzzza) deals with works contract and it is possible to argue that a composite contract for the development of complex and sale of units could fall within its scope, this Court did not propose to examine that issue since the entire argument revolved around the scope of taxable service as envisaged in Section 65(105)(zzzh) of the Finance Act, [1994] which is specific to 'construction of complex'. Therefore, there is merit in the contention of the Learned Counsel for the respondent that the amendment to Rule 2A of the Rules would not advance the case of the Respondents/Review Petitioners."
9. Telangana High Court also, in the case of Vasudha Bommireddy vs Assistant Commissioner of Service Tax 8 ST/50787/2021 reported as [2020 (2) TMI 632 (Tel)] has held that if the petitioners were not liable to undivided share of land at all, the payment which was made by the petitioners would not be a payment of service tax at all; that the department also could not have demanded payment of the same from the petitioners; and merely because the petitioners made the payment, it would not partake the character of 'service tax' and the department cannot retain the amount paid by the petitioners which was in fact not payable by them.
10. Reverting to the facts of the preset case, it is observed that Chartered Accountant certificate of the auditor of Emaar, the builder as annexed on record is sufficient to show that Emaar has duly paid the Service Tax for the period 2011-12 to 2017-18, which includes the period in question. Further it is also acknowledged that element of Service Tax has been borne by the appellant and the letter of Emaar dated 29.8.2019 as is available on record, shows that acknowledgement of Emaar to the said fact and it also conveys their no objection in favour of the appellant to claim the said refund. Keeping in view the same and the decision of Single Member Bench of this Tribunal in the case of Shri Pulin Kumar vs Commissioner (Appeals-I) reported as [2019 (4) TMI 1690-CESTAT New Delhi] the case on identical facts, in fact with respect to the portion of same property as the one involved in both the appeals, I find no reason to differ with the findings in the decision as discussed above. Both the order under challenge are accordingly set aside. Consequent thereto both he appeals stand allowed.
( RACHNA GUPTA ) MEMBER (JUDICIAL) ss 9