Quality Builders & Contractor vs Jodhpur on 27 February, 2023

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Custom, Excise & Service Tax Tribunal

Quality Builders & Contractor vs Jodhpur on 27 February, 2023

New Central Revenue Building, Statue Circle.... C Scheme, Jodhpur WITH Service Tax Appeal No. 50767 of 2017 (Arising out of Order-in-Appeal No. 02-05/AK/ST/JPR/2017 dated 18.01.2017 passed by the Commissioner of Central Excise, Jodhpur.) M/s Quality Builders & Contractor ....Appellant Plot No. 2/1301, Kudi Bhagtasani Housing Board, Jodhpur (Raj.) Versus Commissioner of Customs, Excise & ...Respondent Service Tax, Jodhpur Jodhpur HQRS.. New Central Revenue Building, Statue Circle.... C Scheme, Jodhpur AND Service Tax Appeal No. 50768 of 2017 (Arising out of Order-in-Appeal No. 02-05/AK/ST/JPR/2017 dated 18.01.2017 passed by the Commissioner of Central Excise, Jodhpur.) M/s Quality Builders & Contractor ....Appellant Plot No. 2/1301, Kudi Bhagtasani Housing Board, 2 ST/50766-50768/2017 Jodhpur (Raj.) Versus Commissioner of Customs, Excise & ...Respondent Service Tax, Jodhpur Jodhpur HQRS.. New Central Revenue Building, Statue Circle.... C Scheme, Jodhpur APPEARANCE:

Mr. O.P. Agarwal, Chartered Accountant for the Appellant Shri Ravi Kapoor, Authorized Representative for the Department CORAM:

HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) Date of Hearing/ Decision: February 27, 2023 FINAL ORDER NO. 50307-50309/2023 JUSTICE DILIP GUPTA These three appeals filed by M/s Quality Builders & Contractor1 seek to assail the common order dated 09.01.2017 passed by the Commissioner (Appeals) by which the appeals have been dismissed and the impugned orders passed by the Assistant Commissioner rejecting the refund claimed by the appellant have been upheld.

2. The issue involved in all the three appeals is regarding refund of service tax which had been deposited by the appellant under a mistaken belief that service tax was leviable on construction of individual independent residential houses.

3. The details of the Appeals with the period for which refund was claimed and the amount of refund are contained in the following chart. 1 the Appellant 3 ST/50766-50768/2017 Appeal No. Period of Refund Amount of Refund ST/50766/17 01.07.2013 To 30.09.2013 84,504/- ST/50767/17 01.01.2014 to 31.02.2014 25,456/- ST/50768/17 01.04.2013 to 30.06.2013 1,90,944/-

4. The appellant constructed individual/independent residential houses as per the work orders given by the Rajasthan Housing Board2. The appellant has stated that the Resident Engineer of the Housing Board has given a certificate that the houses that have been constructed by the appellant are as per the work orders issued by the Housing Board and that they are independent residential houses having independent approach and entry with separate electricity and water connections. According to the appellant, service tax was deposited by the appellant on such constructed houses by mistake and even the Housing Board had also mistakenly deposited 50% of the service tax under reverse charge mechanism. The appellant claimed refund of the service tax deposited by the appellant as also the Housing Board since the Housing Board had awarded the contract in favour of the appellant for a gross amount, inclusive of all taxes and 50% of the service tax paid by the Housing Board was deducted from the amount payable to the appellant by the Housing Board. The appellant further claims that construction of the individual/independent residential houses was not subject to levy of service tax prior to July 01, 2012 and even after July 01, 2012 it was exempted under the Exemption Notification dated June 20, 2012.

5. The Commissioner (Appeals) denied the refund of service tax for the reason that the appellant cannot claim benefit of the Exemption Notification dated June 20, 2012 for the period after July 01, 2012. 2 the Housing Board 4 ST/50766-50768/2017 The Commissioner (Appeals) has also rejected the refund claim on the ground of unjust enrichment.

6. Shri O.P. Agarwal, learned Chartered Accountant appearing for the appellant submitted that the appellant is entitled to exemption under the Notification dated June 20, 2012 since individual/independent houses were constructed by the appellant. In support of this contention, learned Chartered Accountant has placed reliance upon the decision of the Division Bench of the Tribunal in Beriwal Constructions Co. vs Commissioner of Central Excise & Service Tax-II, Agra3. Learned Chartered Accountant also submitted that refund can be claimed by any person who has borne the incidence of tax and in support of this contention he has placed reliance upon the judgment of the Allahabad High Court in Commissioner of Customs, Central Excise & Service Tax vs Indian Farmers Fertilizers Coop. Ltd.4

7. Shri Ravi Kapoor, learned Authorized Representative appearing for the Department has, however, supported the impugned order and submitted that the appellant was not entitled to claim benefit of the Exemption Notification dated June 20,2012.

8. The submissions advanced by the learned Chartered Accountant appearing for the appellant and the learned Authorized Representative appearing for the Department have been considered. 3 2017(5) GSTL 198 (Tri-All.) 4 2014 (35) STR 492 (All.) 5 ST/50766-50768/2017

9. To appreciate the submissions, it would be useful to first examine the position regarding levy of service tax as it existed prior to July 01, 2012.

10. The appellant had constructed residential houses for the Housing Board. Section 65(105)(zzzh) of the Finance Act, 19945 provides that "taxable service‟ means "any services provided or to be provided to any person, by any other person in relation to construction of complex".

11. "Construction of complex‟ has been defined in section 65(30a) of the Finance Act as follows :

"Section 65(30a) - "Construction of Complex"

"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 application or fittings and other similarservices; or c. Repair, alteration, renovation or restoration of, or similar services in relation to, residential complex;"

12. A "residential complex‟ has been defined in section 65 (91a) of the Finance Act as follows:

"Residential Complex - Section 65(91a) "Residential Complex‟ means any complex comprising of -

i) a building or buildings, having more than 12 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 layout of such premises is approved by an authority under 5 the Finance Act 6 ST/50766-50768/2017 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 the clause,

(a) "Personal use" includes permitting the complex for the use a 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;"

13. It is seen that a "residential complex‟ has been defined to mean any complex comprising of a building or buildings, having more than twelve residential units; and a "residential unit‟ has also been defined in Explanation (b) to mean a single house or a single apartment intended for use as a place of residence.

14. The definition of a "residential complex" leaves no manner of doubt that it would be a complex comprising of a building or buildings, having more than twelve residential units. In other words a complex may have a building having more than twelve residential units or a complex may have more than one building each having more than twelve residential units. Independent buildings having twelve or less than twelve residential units would not be covered by the definition of "residential complex"

15. The contention of the appellant is that independent residential houses were built, each having a separate entry with separate electricity and water connection and a single building did not have more than twelve residential units. It is for this reason that the appellant contends that the houses constructed by it for the Rajasthan 7 ST/50766-50768/2017 Housing Board will not be covered by the definition of a "residential complex" and, therefore, would not be taxable as the contract executed with the Housing Board was not in relation to construction of a complex.

16. This submission, for the reasons stated above, deserves to be accepted. In this connection reliance can be placed on a Division Bench judgment of the Tribunal in Macro Marvel Projects Ltd. v/s Commissioner of Service Tax, Chennai6 wherein the demand of service tax was for the period 16 June, 2005 to November, 2005 under "construction of complex‟ service under section 65(30a) of the Act. The Bench examined the scope of "construction of complex‟ and the meaning of a "residential complex‟ under section 65(91a) of the Finance Act and the observations are as follows:-

"It is abundantly clear from the above provisions that construction of residential complex having not more than 12 residential units is not sought to be taxed under the Finance Act, 1994. For the levy, it should be a residential complex comprising more than 12 residential units. Admittedly, in the present case, the appellants constructed individual residential houses, each being a residential unit, which fact is also clear from the photographs shown to us. In any case, it appears, the law makers did not want construction of individual residential units to be subject to levy of service tax. Unfortunately, this aspect was ignored by the lower authorities and hence the demand of service tax. In this view of the matter, we are also not impressed with the plea made by the appellants that, from 1-6-2007, an activity of the one in question might be covered by the definition of „works contract‟ in terms of the Explanation to section 65 (105)(zzzza) of the Finance Act, 1994 as amended. According to this Explanation, "construction of a new residential complex or a part thereof‟ stands included within the scope of "works contract‟. But, here again, the definition of "residential complex‟ given under section 65(91a) of the Act has to be looked at. By no stretch of imagination can it be said that individual residential units were intended to be considered as a "residential complex or a part thereof."

6 2008 (12) STR 603 (Tri.-Chennai) 8 ST/50766-50768/2017 (emphasis supplied)

17. It needs to be noticed that the Bench also examined whether "construction of a new residential complex or a part thereof‟ would be covered within the meaning of a "works contract‟, after 1 June, 2007 and held that in this case also the definition of a new "residential complex‟ given in section 65(91a) of the Act was required to be looked. The Civil Appeal filed by the Department to assail the aforesaid order of the Tribunal was dismissed by the Supreme Court on 7 July, 2009.

18. This is what was also observed by a Division Bench of the Tribunal in M/s Lakhlan & Qureshi Construction Company vs Commissioner of Central Excise and Service Tax, Jaipur- I7.

19. A Division Bench of the Tribunal in Beriwal Constructions Co. also examined the position both prior to July 01, 2012 and post July 01, 2012 and observed as follows:

"6. Having considered the rival contentions and the admitted facts that the appellant have constructed individual units or row houses we find that it is evident from the aforementioned provisions both for the period prior to 1 July, 2012 and subsequent to that date, that construction of residential complex having not more than 12 residential units per building or block prior to 1 July, 2012 and two or more units after 1 July, 2012 is not sought to be taxed under the provisions of the Finance Act/Service Tax provisions. For the levy, it should be registered complex comprising more than 12 units prior to1 July, 2012 and more than one residential unit in a complex from 1 July, 2012. Admittedly in the present case, the appellant constructed individual residential houses, each block, being a residential unit which is an admitted fact. In any case, it appears that the legislature did not want to tax construction of individual residential units to the levy of service tax. We find that the learned Commissioner have erredin 7 Service Tax Appeal No. 55701/2014 decided on 14.10.2019 9 ST/50766-50768/2017 considering the approved plan for construction of more than 12 individual units on a large plot of land as a residential complex which we find is wrong and misconceived. Accordingly, we find that the show cause notice is not maintainable. Accordingly, we allow this appeal and set aside the impugned order. The appellant shall be entitled for consequential benefits in accordance with law."

(emphasis supplied)

20. A Division Bench of the Tribunal in Shri A.S. Sikarwar vs CCE, Indore8 also observed that service tax can be demanded only if the building concerned has more than 12 residential units in the building and such levy will not apply in cases where one compound has many buildings, each having not more than 12 residential units. This decision of the Tribunal was also assailed before the Madhya Pradesh High Court. Central Excise Appeal No. 31 of 2012 was dismissed on 01.08.20139. The observations are as follows :

"It is not disputed by the learned counsel for the appellantthat the respondent had performed the work of the house construction of 15 HIG at Laxmi Nagar, Ujjain in the financial year 2004-05 to 2006-07. He submitted that the activity of the respondent is liable for Service Tax under the services of "Construction of Complex Services" as defined under Section 65 of the Finance Act, 1994. It is also not disputed by the learned counsel for the appellant that the Service tax has been paid by the M.P Housing Board.

The sole contention of the learned counsel for the appellant is that the respondent has built more than 12 residential units in a complex and, therefore, they are liable to pay Service tax.

In the case of Macro Marvel Projects Ltd. (supra), this question has been considered by the Tribunal and the learned Tribunal very categorically stated that as per Clause (91a) of Section 65 of the Act, that construction of residential complex having not more than 12 residential units is not to be taxed under the Finance Act, 1994. For the levy, it should be a residential complex comprising more than 12 residential houses. Admittedly in the present case, the respondent constructed 15 independent HIG Houses, each being a residential unit.

8 Service Tax Appeal No. 871/2011 decided on 20.04.2012 9 Union of India vs Shri A.S. Sikarwar 10 ST/50766-50768/2017 In view of the aforesaid, we are of the view that the learned Tribunal has not committed any legal error in allowing the appeal of the respondent. The decision of Macro Marvel Projects Ltd. (supra) has been affirmed by the Hon'ble Apex Court."

(emphasis supplied)

21. It is true that w.e.f July 01, 2012 "construction of complex‟ is a declared service, but the Exemption Notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex have been exempted.

22. In this view of the matter, the Commissioner (Appeals) was not justified in holding that the appellant would not be entitled to the benefit of the Exemption Notification.

23. The Commissioner (Appeals) was also not justified in holding that the refund was hit by the principles of unjust enrichment. As per the work orders, service tax was to be borne by the appellant and the Commissioner (Appeals) has also found, as a fact, that the contract awarded by the Housing Board to the appellant mentions that service tax shall be borne by the contractor. The Allahabad High Court in Indian Farmers Fertilizers Coop. Ltd. held that a refund can be claimed by a person who has borne the incidence of tax. Even in accordance with the Exemption Notification dated June 20, 2012, 50% of the tax to be deposited by the Housing Board under the reverse charge mechanism was deducted by the Housing Board from the amount payable to the appellant.

ST/50766-50768/2017

24. The Order dated 09.01.2017 passed by the Commissioner (Appeals) in so far as it has decided the aforesaid three Service Tax Appeals is set aside and the appeal is allowed.

(Order dictated in the Open Court) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R PRIYA) MEMBER (TECHNICAL) Sb

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