Custom, Excise & Service Tax Tribunal
Rajendra Mittal Construction Company ... vs Commissioner, Central Excise And ... on 29 March, 2022
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. II
Service Tax Appeal No. 52516 of 2016
[Arising out of Order-in-Original No. ALW-EXCUS-OIO-COM-03/16-17 dated
13.04.2016 passed by the Commissioner, Central Excise And Service Tax, Alwar
(Rajasthan)]
M/s Rajendra Mittal Construction Company Appellant
Private Limited
1/81, RHB Colony, Bhiwadi,
District-Alwar (Rajasthan)
New Address-210-211, Corporate Suites,
Vashundra Nagar, Bhiwadi-301019,
District-Alwar (Rajasthan)
Versus
Commissioner, Central Excise and Service Respondent
Tax, Alwar (Rajasthan) Appearance Shri Ajay Kumar Mishra, Advocate - for the Appellant. Shri Harsh Vardhan, Authorized Representative- for the Respondent CORAM :HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Date of Hearing : 01/12/2021 Date of Decision : 29/03/2022 Final Order No. 50296/2022 P. Anjani Kumar The appellants - M/s Rajendra Mittal Construction Company Private Limited are engaged in execution of contracts with M/s Shree Cement Limited, Beawar and M/s Wonder Cement Limited and M/s Power Grid Corporation of India for construction of residential quarters for their employees. On the conduct of an audit on the records of the appellant, the Department concluded that the activity undertaken by the appellant 2 falls under the taxable service "works contract Service". Accordingly, a show cause notice dated 29.05.2015 was issued to the appellants and was confirmed vide Order-in-Original dated 13.04.2016 for an amount of Rs. 85,93,182/- for the period 1.04.2011 to 30.06.2012. Hence, this appeal.
2. Learned Counsel for the appellants submits that the activity of construction of residential quarters for the staff/employees for personal use of their client hence excluded the ambit of the taxable services "construction of complex", "commercial or industrial construction"; the learned Commissioner has accepted the position that the activity of construction of residential quarters, if meant for personal use by the business/commercial entities, is excluded from the purview of "works contract service"; the residential staff quarters constructed by the appellant in the present case are for personal use of the respective service recipient and not for the purpose commerce or industrial; no evidence has been adduced by the Department that may show use of constructed staff quarters for any commercial or industrial activity other than as residence for the staff/employees. Learned Counsel submits that in view of the definition of works contract service, the activity should be for the purpose of commerce or industry; the residential staff quarters are for the personal use by service recipients and not for the purpose of commerce or industrial, the construction activity cannot be classified under the taxable services "construction of complex", "commercial or industrial construction" or "works contract"; the only reasoning given by the learned adjudicating authority was that the staff quarters may be subsequently sold by the employer and, therefore, do not merit to be said to be for personal use.
3. Learned Counsel submit that this view is not tenable, that a service is decided at the time of its provision and not linked to any uncertain 3 events in future; if one goes by the logic of the Commissioner all the construction could become taxable; CBEC vide instructions F.No. 332/16/2010-TRU dated 24.05.2010 has clarified that service tax was not leviable under construction of complex service as the complex build are intended for personal use of Government of India; the same logic should apply to the activity undertaken by the appellants .
4. He further submits that construction of residential quarters cannot be subjected to levy of service tax under any taxable services of works contract service or construction of complex service or commercial or industrial construction service as held by the Tribunal in the case of Khurana Engineering Ltd. Vs. Commissioner - 2011 (21) STR 115 (Tribunal) and Sugandha Construction Pvt. Ltd. Vs. CCE, Bhopal - 2018 (9) GSTL 399 (Tri.-Del.). He also submits that it was held in Final Order No. ST/A/58728/2017-CU(DB) dated 29.12.2017 that construction of a guest house by the appellant for a cement company was not taxable. He submits that works contract service introduced with effect from 1.6.2007 essentially incorporates the existing "construction of complex service"
and "erection, commissioning or installation services" and, therefore, if the activity is excluded from the existing services the same would remain excluded from works contract service; in view of the Circular dated 24.-
5.2010 construction of residential quarters for staff being for personal use and not for commerce or industry are excluded from the purview of taxable services.
5. Learned Counsel further submits that extended period cannot be invoked as entire records of the appellant for the period were audited and no objection was raised on the issued and more so because the issue involves interpretation of statute, accordingly, penalty under Section 78 cannot also be invoked. The facts of the case of Jambeshwar 4 Construction Co. and Pragati Edifice Pvt. Ltd. relied upon by the respondents are not applicable as the facts of the case are different.
6. Learned Authorised Representative appearing for the Department submits that as the classification of service has been done under "works contract service" even the construction of residential complex is covered under taxable service as per explanation „c‟ of Section 65(105)(zzzza) of Finance Act, 1995, he relies upon the decision of the Tribunal in the case of Jambeshwar Construction Co. (MANU/CE/0477/2019) and Pragati Edifice Pvt. Ltd. (MANU/CH/0137/2019), wherein it was held that after 1.07.2010 service tax is chargeable under the head "construction of complex services" if it is service simplicitor and under "works contract service" if it is a composite works contract."
7. Heard both sides and perused the records of the case.
8. The brief issue that requires to be decided in this case is whether the service undertaken by the appellants falls under construction of complex services or works contract service. And as to whether the appellant is required to pay the applicable service tax on the construction of residential flat for the use of employees of their customers that is M/s Wonder Cement Limited, M/s Shree Cement Limited, M/s. Power Grid Corporation of India. Learned counsel for the appellants submits that the service under taken by them is excluded from the service of construction of "residential complex" and does not get covered under "Works Contract". Whereas the department claims that it falls under "works contract service".
9. It will be beneficial at this juncture to have a look at the provision of the statute. We find that in terms of explanation under the definition of "works Contract services" as defined under Section 65(105) (zzzza) is as under:-
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"Taxable Service" means any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, transport terminals, bridges, tunnels and dams.
Explanation: For the purposes of this sub-clause, "works contract" means a contract Wherein,-
(a) Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and
(b) (ii) such contract is for the purpose 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, hearing, 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 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;
10. As per Section 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 6 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 singly apartment intended for use as a place of residence;‟
11. Learned counsel for the appellants relies upon CBEC circular F No. 332/16/2010-TRU dated 24.05.2010. He further submits that settled position of law that the construction of residential quarters cannot be subjected to levy of service tax under any of the taxable services of "Works Contract Service", "Construction of Complex"[65(30a)] or „Commercial or industrial construction‟ [65(25b)] as held by the Hon‟ble CESTAT in Khurana Engineering Ltd. V. Commissioner-2011 (21) S.T.R. 115 (Tribunal), Sugandha Construction Pvt. Ltd. Vs CCE, Bhopal-2018 (9) GSTL 399 (Tri.-Del.) Learned counsel for the appellants submits that the only reason that the adjudicating authority gives in the findings is that "Activity of construction of residential quarters for business/ commercial entities does not satisfy the condition of „personal use‟ as the quarters at later stage can be sold out, hence, classifiable under "Works Contract Service" as defined under Section 65(zzzza) of the Finance Act, 1994".
12. We find that The Board‟s circulars No. B2/8/2004-TRU dated 10.9.2004 and Circular No. 80/10/2004/ST, dated 17.09.2004 also clarifies that -
"13.2 The Leviability of service-e tax would depend primarily upon whether the building or civil structure is 'used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building 7 or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non- commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax."
13. In the instant case, it is not the case of the department that the residential quarters, the construction of which was undertaken by the appellants, for Shree Cements Ltd, Bewar, Wonder Cements Ltd, Nimbahera and Power Grid Corporation of India are for commercial use in any manner. We find that Tribunal in the case of M/s. Manisha Project Pvt Ltd. vs. CCE2019 (3) TMI 448 held that "5.Having considered the submissions from both the sides and on perusal of record and the said circular issued by C.B.E. & C., we note that Departmental officers are bound by the Circular issued by Central Board of Excise and Customs. We note that C.B.E. & C. had issued Circular No. 80/10/2004-S.T., dated 17-9-2004 and in Para 13.2 clarified that the leviability of Service Tax was primarily dependent upon the use of the building or civil structure. Further, it clarified that it was to be ascertained where building or civil structure was used or to be used for commercial or industrial purpose and further required or gather the information as to whether the buildings or civil structures were being used or to be used for the purpose of making profit or not and clarified that if the building or civil structure was used or to be used not for the purposes of profit then the same are not taxable.
14. We find that Kolkata Bench of the Tribunal, vide final order no. 75657/2021 dated 12-10-2021, has gone in to identical issue in the case of Yogendra Rai. The Bench had difference of opinion between the Member (Judicial) and Member (Technical) and the issue was referred to the third member, who upheld the view taken by Member (Judicial). The Bench decided the issue in favour of the 8 appellants. We find that Member (Judicial) observed as follows. The opinion was upheld by third member.
15.3 Accordingly, we hold that the activities of construction of staff quarters under dispute is not taxable to service tax under Section 65(30a) read with section (91a) read with Section 65(105)(zzzza) read with Section 65 (105)(zzzh). Further, it is held that extended period of limitation is not attracted in the facts and circumstances. Accordingly, the appeal is allowed and the impugned order is set aside. The appellant is entitled to consequential benefit in accordance with law.
We also find that Tribunal in the cases of M/s Khurana Engineering Ltd (supra) and M/s Sugandha Construction PvtLtd( supra) held that construction of residential quarters cannot be subjected to levy of service tax under any taxable services of works contract service or construction of complex service or commercial or industrial construction service
15. We find that the department relied upon the ratio of Tribunals decisions in the case of M/s Jambeshwar Constructions Co Manu/ CE/ 0477/2019 and M/s Pragati Edifice Pvt Ltd (Manu/CH/0137/ 2019). We find that the facts of the case are not similar to the case of M/s Jambeshwar Constructions as in that case demand of service tax was made on „Construction of Residential Complex Service‟. Tribunal held that as the work undertaken by the appellants therein was „works Contract Service‟ demand under „Construction of Residential Complex Service‟ cannot be sustained after 1.6.2007. Similarly, the facts of the case of M/s Pragati Edifice Pvt Ltd are not comparable, as the construction of a Hospital and Administrative Building were in question therein and not the Residential quarters.
16. We find that the appellants have contested the invocation of extended period. They submit that extended period cannot be invoked as entire records of the appellant for the period were audited and no objection was raised on the issued and more so because the issue 9 involves interpretation of statute, accordingly, penalty under Section 78 cannot also be invoked. We find that the issue involved is of interpretation and thus, the bona fides of the appellants to hold a different opinion cannot be suspected and thus extended period cannot be invoked.
17. In view of the above, we hold that the impugned order is not sustainable on merits as well as limitation. Accordingly, the same is liable to be set aside. We do so and allow the appeal along with consequential relief, if any, as per law.
(Pronounced in open Court on 29.03.2022).
(Anil Choudhary) Member (Judicial) (P. Anjani Kumar) Member (Technical) Radha