Custom, Excise & Service Tax Tribunal
Nithesh Estates Ltd vs Commissioner Of Central Excise, ... on 16 July, 2015
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Appeal(s) Involved: ST/1854/2010-DB [Arising out of Order-in-Original No. 11/2010 dated 08/07/2010 passed by the Commissioner of Central Excise, Bangalore II Commissionerate] For approval and signature: HON'BLE MRS. ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE MR. B.S.V. MURTHY, TECHNICAL MEMBER 1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? Yes 3 Whether Their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Nithesh Estates Ltd. 7th Floor, Nitesh Timesquare, No.8, M.G. Road, Bangalore - 560 001 Appellant(s) Versus Commissioner of Central Excise, Service Tax And Customs Bangalore-II PB 5400, CR Building, Queens Road, Bangalore 560 001 Karnataka Respondent(s)
Appearance:
Mr. N. Anand, Advocate # 152, Race Course Road, Bangalore 560 001 Karnataka For the Appellant Mr. A.K. Nigam, AR For the Respondent Date of Hearing: 10/02/2015 Date of Decision: 16/07/2015 CORAM:
HON'BLE MRS. ARCHANA WADHWA, JUDICIAL MEMBER HON'BLE MR. B.S.V. MURTHY, TECHNICAL MEMBER Final Order No. 21332 / 2015 Per: B.S.V. MURTHY The appellant is engaged in providing Construction of Residential Complex Service. The appellant undertook a project for M/s. ITC Ltd. for construction of building intended for making available residential accommodation for the managerial staff of M/s. ITC Ltd. For this purpose two agreements were entered into. The first agreement dated 01.04.2006 is the construction agreement followed by a supplemental agreement dated 30.03.2007. With the consent of ITC as per the supplemental agreement dated 30.03.2007, the appellant sub-contracted the construction work to M/s. L&T, ECC Division and other sub-contractors. M/s. L&T, ECC Division received a part of the contracted amount directly from M/s. ITC as sub contractors. There were other sub-contractors also namely Tech Services, Stone Workers, Schneider Electric India Pvt. Ltd. and all the sub-contractors have discharged the service tax liability on the payments received by them. Since the sub-contractors had discharged the service tax liability on the amounts received by them for the services rendered, according to the appellants, they did not pay the tax. Proceedings were initiated by issue of a show-cause notice dated 08.07.2009 culminating in confirmation of demand for service tax of Rs. 1,55,77,725/- (Rupees One Crore Fifty Five Lakhs Seventy Seven Thousand Seven Hundred and Twenty Five Only) for the period from March 2007 to March 2008 with interest. Penalties under Sections 76, 77 & 78 of Finance Act 1994 have also been imposed.
2. It was submitted by the learned counsel on behalf of the appellant that appellants entertained a bonafide belief that they were not liable to pay service tax at all; they had written a letter to the CBE&C on 30.10.2008 and had sought clarification. However CBE&C replied to them that concerned Commissioner would reply. He submits that this shows that appellant entertained a bonafide belief and therefore extended period could not have been invoked at all. In this case the demand is for the period from March 2007 to March 2008 and show-cause notice should have been issued before 25.04.2009 to cover the period from October 2007 to March 2008 leave alone the earlier period. Entire demand is time-bared and in the absence of any evidence to show that appellant had intended to evade payment of tax, the entire demand cannot be sustained. Moreover all the sub-contractors had paid the tax on the amount received by them.
3. He also relies upon the CBEC Circular issued on 29.01.2009 and 24.05.2010 to submit that even the CBEC has taken a view that in cases like this no tax is liable to be paid.
4. He also relies on the decision in the case of Khurana Engineering Ltd. Vs. CCE, Ahmedabad [2011 (21) S.T.R. 115 (Tri.-Ahmd.)] to submit that in this case the residential complex was meant for personal use of ITC as per the definition of Personal Use in the definition of residential complex and therefore the decision of the Tribunal in the case of Khurana Engineering Ltd. is straightaway applicable to the facts of this case.
5. He also submits that the appellant is a developer and only after 01.07.2010 the liability would arise and addition of explanation to the definition w.e.f. 01.07.2010 is only prospective.
6. Learned AR submits that in this case the appellant has appointed sub-contractors. They have executed the work and he has handed over the complex to M/s. ITC Ltd. and therefore ITC cannot be considered as the one who has received the service but it is the appellant who has received the service. Therefore he submits that the tax was liable to be paid by the appellant.
7. We have considered the submissions made by both the sides. The relevant definitions during the relevant period are as under:
Section 65(30a) Construction of complex means-
(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 papering, 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;] (91a) 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;] 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 CBEC on 24.05.2010 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 is used for personal use then such activity would not be subject to service tax. It is quite clear that CBE&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.
8. Even though we have held in favour of the appellant on merits, the facts and circumstances in this case would show that appellant could have entertained a bonafide belief and therefore extended period could not have been invoked. CBE&C has issued a clarification in 2010 and appellants had written a letter in October 2008 to CBE&C seeking clarification wherein they had given the details of agreement also. If the Board takes a view after a period of two years just before the amendment and also if that view is applicable to the facts of this case before us, we cannot find fault with the appellant for entertaining such a belief that they are not liable to pay tax. Since the entire demand is beyond the normal period of limitation, the appellants succeed on the ground of limitation also.
9. In view of the above, the appellants have made out a case in their favour entirely and accordingly the appeal is allowed with consequential relief, if any, to the appellants.
(Order pronounced in open court on )
(B.S.V. MURTHY)
TECHNICAL MEMBER (ARCHANA WADHWA)
JUDICIAL MEMBER
iss