Custom, Excise & Service Tax Tribunal
Mcm Construction And Real Estate ... vs Commissioner Of Cgst-Delhi West on 11 September, 2025
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CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. III
SERVICE TAX APPEAL NO. 51222 OF 2025
[Arising out of Order-in-Original No.DL/GST/WEST/COM/PK/09-10/2023-24
dated 05.01.2024 passed by the Commissioner, CGST, Delhi West
Commissionerate, New Delhi]
M/s. MCM CONSTRUCTION AND REAL ESTATE ...APPELLANT
PRIVATE LIMIED,
C-041B, Super Mart DLF Phase-IV,
Gurugram-122 003.
Versus
COMMISSIONER OF CGST,
Delhi West Commissionerate, ...RESPONDENT
New Delhi.
Plot No.2B, 3rd Floor, EIL Annexe,
Bhikaji Cama Place,
New Delhi-110 066.
APPEARANCE:
Shri P.K. Sahu, Advocate for the appellant
Shri S.K. Meena, Authorised Representative for the Revenue.
CORAM:
HON'BLE MS. BINU TAMTA, MEMBER (JUDICIAL)
HON'BLE MR. P. V. SUBBA RAO, MEMBER (TECHNICAL)
FINAL ORDER NO. 51274/2025
DATE OF HEARING: 26.08.2025
DATE OF DECISION: 11.09.2025
BINU TAMTA:
1. M/s. MCM Construction and Real Estate Private Limited1 is assailing the
impugned order 2 confirming the entire demand of service tax alongwith
interest and penalty under the provisions of the Finance Act, 19943.
2. The appellant is engaged in "construction of commercial and
residential buildings". An intelligence was gathered by the officers of Anti-
evasion branch of Service tax Commissionerate, Delhi that the Appellant had
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The Appellant
2
Order-in-Original No.DL/GST/WEST/COM/PK/09-10/2023-24 dated 05.01.2024
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Act
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not paid due service tax on the taxable services. It was also gathered that
they have evaded the payment of service tax on the full amount of the
services provided by them under the categories of „Construction of Complex
Services‟ and „Commercial or Industrial Construction Services‟, in as much as
they had wrongly availed the benefit under exemption Notification
No.18/2005-ST, 15/2004-ST and Notification No. 01/2006-ST by claiming
abatement of 67% from the amount charged by them on the services
provided to their clients. On scrutiny of the documents submitted by the
Appellant, it was found that the Appellant had provided construction services
to various projects of different developers. It was found that they have
received major construction materials i.e.steel, cement & readymix concrete
on 'free of cost' basis from all clients except in the case of M/s. Ansal
Buildwell Ltd.. Further, it has been observed that they have not considered
the cost of such material received from their clients while calculating their
service tax liability. They have availed notification benefit and had paid
service tax on 33% of their gross receipts. The abatement of 67% from the
gross value is available only when the service provider includes the value of
all materials used by him in execution of such works, therefore, the
Appellant has wrongly availed exemption and short paid service tax.
3. Show cause notice dated 07.03.2008 for the period 2005-06 & 2006-
07 was issued to the appellant for demand of service tax of Rs.4,28,08,029/-
alongwith applicable interest and penalty under Section 76 & 78 of the Act.
Further, it was found that the Appellant had entered into a contract
agreement with M/s. Ansal Properties for providing only completion &
finishing service in relation to multi-storied residential building and availed
benefit of 67% abatement from the value of taxable services, however as
per Notification no. 18/2005-ST & 1/2006-ST such exemption is not
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available to completion and finishing services in relation to residential
complex w.e.f. 16.06.2005.
4. Further, on scrutiny of ST-3 Return for the period April, 2007 to
September, 2007 and Oct, 2007 to March, 2008, it was observed that the
Appellant had paid service tax under „Commercial or Industrial Construction
Service‟ upto May, 2007. But, from June, 2007 and onward the Appellant
had paid service tax under Works Contract Composition Scheme. It appears
that the Appellant had shifted themselves from „Commercial or Industrial
Construction Service‟ to „Works Contract Service‟ with intent to avail Works
Contract Service Composition Scheme. Vivisecting a single composite service
and classifying the same under two different taxable services depending
upon the time of receipt of the consideration is not legally sustainable.
Further, on scrutiny of the relevant ST-3 returns, it was observed that the
value of completion and finishing service has not been shown in the said
return separately for the month April, 2007 & May-2007 and the value of
material received free of cost during the month of April, 2007 & may, 2007,
which appears that they have availed benefit of abatement under
Notification No.01/2006-ST on the value of completing and finishing service.
Therefore, another SCN dated 28.11.2008 was issued to the Appellant for
demand of Service tax of Rs. 4,01,44,996/- along with applicable interest
and alleging penalty under section 76,77 & 78 of the Act.
5. On adjudication, the Commissioner of CGST passed the impugned
order confirming the demand. Hence the present appeal before this Tribunal.
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6. Heard Shri P.K. Sahu, Advocate for the appellant and Shri S.K. Meena,
Authorised Representative for the Revenue and perused the records of the
case.
7. The submissions of the appellant is that they had executed "Works
Contract Service" and in view of the decision of the Apex Court in CCE Vs.
Larsen & Toubro Ltd.4 holding that service tax on works contract was not
leviable prior to the amendment introducing the definition of "Works
Contract" under sub-clause (zzzza), the appellant is not liable to pay service
tax for the period prior to 01.06.2007.
8. Learned Departmental Representative for the Revenue fairly accepted
that the issue has been settled by the Apex Court in Larsen Toubro Ltd.
and the present controversy stands concluded in terms thereof. The
relevant para from the decision of the Apex Court in Larsen & Toubro Ltd.
reads as under:-
17. We find that the assessees are correct in their
submission that a works contract is a separate species of
contract distinct from contracts for services simpliciter
recognized by the world of commerce and law as such, and
has to be taxed separately as such. In Gannon Dunkerley,
1959 SCR 379, this Court recognized works contracts as a
separate species of contract as follows :-
"To avoid misconception, it must be stated that the
above conclusion has reference to works contracts,
which are entire and indivisible, as the contracts of the
respondents have been held by the learned Judges of
the Court below to be. The several forms which such
kinds of contracts can assume are set out in Hudson on
Building Contracts, at p. 165. It is possible that the
parties might enter into distinct and separate contracts,
one for the transfer of materials for money
consideration, and the other for payment of
remuneration for services and for work done. In such a
case, there are really two agreements, though there is
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2015 (39) STR 913 (SC)
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a single instrument embodying them, and the power of
the State to separate the agreement to sell, from the
agreement to do work and render service and to
impose a tax thereon cannot be questioned, and will
stand untouched by the present judgment.
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24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service"
as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract.
It was also observed that while introducing the concept of Service Tax on service element of indivisible works contract various exclusions are also made, such as, works contract in respect of roads, airport, airways transport, bridges, tunnels and dams, possibly in the national interest. The implication of the exclusion means that such contracts were never intended to be the subject-matter of the Service Tax."
9. The Apex Court in the case of Total Environment Building Systems Vs.CCT5 was once again required to consider the issue "whether, Service Tax could be levied on composite works contracts prior to the introduction of the Finance Act, 2007, by which the Finance Act, 1994 came to be amended to introduce Section 65(105)(zzzz-a) pertaining to works contracts?" Both the learned Judges concurred with the view in their separate judgements rejecting the submissions of the Revenue to re- 5 (2022)16 SCC 219 6 consider the decision in Larsen & Toubro Ltd., observing that the judgement of the Court in Larsen & Toubro Ltd. has stood the test of time and has never been doubted earlier. The observations made by Hon‟ble Justice B.V. Nagarathna in the context of the decision in Larsen & Toubro Ltd. are quoted below:-
"Therefore, it was found that the assesses were right in contending that the Service Tax charging section itself must lay down with specificity the levy of Service Tax on the service element of a works contract, and the measure of tax can only be on that portion of works contract which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. Since this had not been done by the Finance Act, 1994, any charge to tax under the five heads in Section 65(105) would only be of service contracts simpliciter and not composite indivisible works contract.
70.6. Speaking about the mutually exclusive taxation and powers of the Centre and the State, the dichotomy between the Sales Tax leviable by the State and Service Tax leviable by the Centre was emphasised by this Court in the aforesaid judgment. In the context of composite indivisible works contract, only Parliament can tax the service element contained in these contracts and State only can tax the transfer of property in goods element contained in these contracts. Thus, it is important to segregate the two elements completely for the purpose of taxation. Hence, it was held that works contract is a separate species of contract distinct from contracts for service simpliciter recognised in the world of commerce and law as such and has to be taxed separately as such. Referring to the decision of works contract in Gannon Dunkerley (1)6. Kone Elevator India (P) Ltd.7 Larsen & Toubro Ltd. v. State of Karnataka 8 all arising under the Sales Tax law, it was emphasised that there was no charging section to tax works contract in the Finance Act, 1994 i.e. until the amendment made with the insertion of sub-clause (zzzz-a) to clause (105) of Section 65 of the Finance Act, 1994. Ultimately, in para 23, it was observed as under:-(Larsen & Toubro case9) (Emphasis laid) 6 State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., 1958 SCC OnLine SC 100: 1959 SCR 379: AIR 1958 SC 560 7 Kone Elevator India (P) Ltd. v. State of T.N., (2014) 7 SCC 1 8 (2014) 1 SCC 708 9 CCE & Customs v. Larsen & Toubro Ltd., (2016) 1 SCC 170 7
10. Resultantly, the decision of the Larsen & Toubro Ltd. holding that for the period pre-Finance Act, 2007, service tax was not leviable on the indivisible/composite works contracts would apply to all such cases. We find that in the present case, the appellant was paying tax under the "construction of complex service" and "commercial or industrial construction service" availing the abatement of 67% under the exemption notification, which in terms of the decision in Larsen & Toubro Ltd., they were not liable to pay. Also the Apex Court has held that in such cases, the application of exemption notifications is to be disregarded as found to be non-existent and levy of service tax on composite works contract itself is not leviable for the period prior to 01.06.2007. In the circumstances, the appellant was not liable to pay any service tax for the pre-amended period and, therefore, the issue of levy of exemption notification would also not apply.
11. The other issue raised in the impugned order is regarding the nature of work undertaken by the appellant would fall within the category of "finishing and completion service" in relation to the residential complex to M/s. Ansal Properties and Industries Limited (APIL). The nature of services provided by the appellant has been noted as electrical, sanitary, flooring, tiling, etc., which, according to the Revenue, are not finishing or completion services as specified in Section 65(30a&b) defining the expression, "construction of complex", which reads as under:-
"Section 35(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;"8
12. In this regard, we would rely on the earlier decision of this Tribunal where we have taken the view that the nature of the work load falls within the concept of original work and, therefore, the appellant would be entitled to 60% abatement and service tax has to be paid only on 40% of the value. Reliance is placed on the order passed by this Tribunal in Kalpakaaru Projects Pvt. Ltd. Vs. Principal Commissioner, CGST-Delhi South dated 26.05.2025 10 followed in M/s. Jangid Interior Décor Pvt. Ltd. Vs. Principal Commissioner, CGST, New Delhi dated 02.07.202511 and recently followed in M/s. BDS Infrastech Pvt. Ltd. Vs. CCE and CGST, Rajasthan12. The relevant paras from the decision in the case of M/s. BDS Infrastech Pvt. Ltd. are quoted below:-
"8. The two decisions referred by the learned Counsel specifically deals with the issue at hand and resolves the controversy as to whether the nature and scope of the "Works Order" executed by the sub-contractor/appellant has to be categorized as "Original Work" and, therefore, the assessee is liable to pay service tax on 40% of the amount charged. In the case of Kalpakaaru Projects Pvt. Ltd. (supra), the Bench noticed the extensive nature of work carried out by the appellant and held that the appellant converts a bare skeletal structure of a building into a complete show room including the electricity, HVAC plumbing, flooring, ceiling, air-conditioning, partitioning etc., which has to be considered as "Original Works" and cannot be called merely "finishing or completion work". The fact that they have to be considered as "Original Works", they will be covered by Rule 2A(ii)(A) of the Valuation Rules, 2006 and will be entitled to 60% abatement and service tax has to be paid only on 40% of the value. The demand on this account was, accordingly, held to be unsustainable. The said decision has been followed subsequently in extenso in the case of M/s. Jangid Interior Décor Pvt. Ltd. (supra), where also the appellant was carrying out the works related to plumbing, fixtures, tiling, doors, flooring, railing work, water proofing, etc. to the incomplete structures given by the main contractor. The Bench while considering the issue whether this work can be considered as "Original Works" observed that the appellant was given the shell of a building and was to carry out all the necessary activities to complete the building including the final finishing works and which cannot be said to be the finishing work only.10
2025 (5) TMI 1832 -CESTAT-New Delhi 11 2025 (7) TMI-214 -CESTAT-New Delhi 12 Final Order No.51091/2025 dated 30.07.2025 (S.T. Appeal No.50108 of 2020) 9
9. Considering the observations with reference to the nature of work carried out by the assessee, while agreeing with the same, we find that the nature of work in the present case involves not merely cosmetic finishing work but also includes extensive work in terms of making the building habitable. In todays‟ modern concepts, construction cannot be restricted to merely the brick work or the basic structure of a building. Any building whether residential/non-residential is made useable only after the activities, like in the present case are carried out and which may be termed as miscellaneous civil construction. The project on which the appellant carried out those miscellaneous activities are the two towers raised by the Developer, which is a new construction and were completed by the appellant by carrying out the remaining activities. The term "construction" would involve multifarious activities. In other words, the concept of construction necessarily has an inbuilt part of finishing to make the building/tower/complex habitable and workable. In the context from the "Work load" mentioned in the "Work Orders" read with the letter issued by the Developers, there is no iota of doubt that the work sub-contracted to the appellant was part of the main contract, which is an original work. The "Work Contract Services" provided by the appellant would fall under the purview of the definition of "Original Works"
under Explanation-I to Rule 2A of the Valuation Rules."
13. The impugned order being contrary to the decision of the Apex Court, as discussed above, on the leviability of service tax for the period prior to amendment is unsustainable. On the services rendered by the appellant to APIL, the findings are contrary to the decisions of the Tribunal as referred above. We, therefore, set aside the impugned order. The appeal is, accordingly allowed.
[Order pronounced on 11th September, 2025] (BINU TAMTA) MEMBER (JUDICIAL) (P. V. SUBBA RAO) MEMBER (TECHNICAL) Ckp.