Custom, Excise & Service Tax Tribunal
Vishal Infrastructure Limited vs Commissioner Of Central Tax, Bangaluru ... on 2 May, 2024
Service Tax Appeal No. ST/3100/2011
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL BANGALORE
REGIONAL BENCH - COURT NO. 2
Service Tax Appeal No. 3100 of 2011
(Arising out of Order-in-Original No. 142/2011 dated
24.08.2011 passed by Commissioner of Service Tax,
Bangalore).
M/s. Vishal Infrastructure Limited
No.52, R.V. Road,
Basavanagudi,
Bangalore- 560 004. .......... Appellant
VERSUS
The Commissioner of Service Tax
No.16/1,5th Floor,
S.P. Complex,
Lalbagh Road,
Bangalore ....... Respondent
Appearance:
Shri Mr. Akbar Basha, Advocate for the Appellant
Shri P. Saravana Perumal, Authorised Representative for the
Respondent
CORAM:
Hon'ble P.A. Augustian, Member (Judicial)
Hon'ble Mr. Pullela Nageswara Rao, Member (Technical)
Final Order No. 20333/2024
Date Of Hearing:12.12.2023
Date Of Decision: 02.05.2024
Per : Pullela Nageswara Rao
M/s. Vishal Infrastructure Limited, appellant is registered
under the taxable services of 'Renting of Immovable Property
Service' and 'Works Contract Service'.
Page 1 of 9
Service Tax Appeal No. ST/3100/2011
2. The brief facts of the case are the appellant is engaged in
the construction of various buildings and structures including
airports, Roads, runways, bridges, canals, dams, Commercial
complexes, office/administrative buildings, etc. They have also
entered into agreement with various departments of Ministry of
Defence for construction of buildings, Residential complexes,
canteens, etc. DGCI initiated investigation on the premise that
appellant had failed to obtain registration, pay service tax for
providing services of 'Renting of Immovable Property Service'
and 'Works Contract Service' and file returns.
3. During the investigation, statements were recorded and
appellant had furnished details of payments received for an
amount of Rs. 55,08,87,101/ towards construction of residential
complex for Army Personnel. Alleging that appellant is liable to
pay service tax of Rs. 6,63,03,048/- for the period from
16.06.2005 to 31.05.2010, show cause notice was issued
demanding the said amount with interest and proposed penalties
under Sections 68, 77 and 78 of the Finance Act, 1994.
Thereafter, the Respondent vide the impugned order confirmed
the demand of service tax of Rs. 6,63,03,048/- for the period
from 16.06.2005 to 31.05.2010, along with interest and imposed
penalties. Aggrieved by impugned order present appeal is filed.
4. During the hearing of the appeal, Learned CA for the
appellant submits that prior to 01.06.2007, there was no
charging section to demand service tax on 'Works contract
service'. Learned Chartered Accountant (CA) drew our attention
to the judgment of Hon'ble Supreme Court in the matter of CC
Page 2 of 9
Service Tax Appeal No. ST/3100/2011
Vs. Larsen & Toubro Ltd (2015 (39) STR 913 (SC) and submits
that demand for the period from 2005-2007 is unsustainable,
Since the issue is squarely covered by the judgment of the
Hon'ble Supreme Court.
5. As Regards the liability of Service tax for the period from
01.06.2007 to 01.07.2010, Learned CA submits that only those
complexes, which require the approval of any statutory authority
fall under the definition of residential complex but does not
include a complex, which is constructed by a person directly
engaging any other person for designing and planning of the
layout, and construction of such complex is intended for personal
use as residence by such person.
6. Learned CA also drew our attention to letter dated F. No.
137/26/2006-CX.4 dated 05.07.2006, wherein Ministry of
Finance clarified that service tax is leviable on construction of
only such residential complexes, where the layout of the premise
requires approval by an authority under any law for the time
being in force. The learned CA submits that in the case of
Defence Services layout, there is no such requirement of
approvals. Hence service tax is not leviable on the activity
undertaking by the appellant, being construction of residential
complex for Army personnel. Therefore, service tax is not
applicable for the remaining period i.e., from 01.06.2007 to
31.05.2010. Learned Counsel also drew our attention to the
judgment of Hon'ble High Court of Karnataka in the matter of CC
Bangalore Vs. Nithesh Estates Ltd (Reported in 2018 (17) GSTL
414 (Kar.) where it is held that :-
Page 3 of 9
Service Tax Appeal No. ST/3100/2011
"23. In our opinion, the Learned Tribunal was perfectly
justified and correct in applying the Circular, dated
24.05.2010 also, while holding that if the Government of
India Department could be treated as using the
„Residential Complex‟ in question constructed by the NBCC
for its „personal use‟, how another corporate body like ITC
Limited in the present case could be denied the benefit of
that type of user of „Residential Complex‟ to be occupied
by its Managerial Staff. The law does not envisage any
such distinction among the Private Sector operated Entity
and the Departments of Government or Government
Companies or Undertakings.
7. Learned Counsel also drew our attention to the decision
of the Tribunal in the matter of Sugandha Construction Pvt Ltd
Vs. Commissioner of C. Ex., Bhopal 2018 (9) GSTL 399 (Tri. -
Del.), wherein it is held that:-
"2. Ld. Counsel for the appellant submitted that with
reference to "Construction of Residential Complexes", the
appellants have undertaken such construction for use by army
personnel. These constructions do not attract service tax
liability as they are not covered by the statutory definition for
such tax. First of all, these residential units are for personal
use of the army personnel and were built for Directorate
General of Married Accommodation Project Indian Army.
Further, it is also submitted that these constructions do not
require any approval from any authority under any law for the
time being in force. On these grounds, the appellants are not
liable to service tax under "Construction of Residential
Complexes Service".
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7. On the first issue, we note that the tax liability of such residential units built for DGMAP, Ministry of Defence, has been clarified by the jurisdictional Commissionerate vide letter dated 10-8-2008 based on the Board‟s clarification to the effect that Page 4 of 9 Service Tax Appeal No. ST/3100/2011 construction of complexes for MAP for army personnel is not liable to tax if their layout does not require approval by an authority under any law for the time being in force. This clarification has been issued after a specific reference has been made by the Director (Contracts), DGMAP, Army Headquarters, New Delhi. In view of this fact, we note that such construction activity will get excluded from the tax entry. Further, we also note that the construction is for the Ministry of Defence for use of the army personnel and as such, these are for personal use. In such situation also, it gets excluded from the tax entry. In this connection, we refer to the decision of the Tribunal in Khurana Engineering Ltd. - 2011 (21) S.T.R. 115 (Tribunal- Ahmedabad).
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9. In view of the above discussion, we hold that the appellants are not liable for service tax for construction of residential units for the army personnel".
8. Learned CA also drew our attention to the CBEC Circular F.N0. 332/16/2010-TRU dated 24.05.2010, where it is held that service tax is not applicable for the construction of Residential complex for the Government Ministry of Urban Development. Learned CA also drew our attention to the following judgments:-
i. Delhi Jal Board Contractors Welfare Association Vs. Union of India 2019 (26) GSTL 180 (Del.) ii. Larsen & Toubro Ltd Vs. Commissioner of Service Tax, Kolkata 2020 (32) GSTL 538 (Cal.) iii. Ircon International Ltd Vs. Commissioner of Service Tax, Delhi 2017 (5) GSTL 221 (Tri.-Del) iv. Sugandha Construction Pvt Ltd Vs. Commissioner of C. Ex., Bhopal 2018 (9) GSTL 399 (Tri.-Del.) Page 5 of 9 Service Tax Appeal No. ST/3100/2011 v. Khuran363.0a Engineering Ltd Vs. Commr. of C. Ex., Ahmedabad 2011 (21) STR 115 (Tri.-Ahmd.) vi. Commissioner of C. Ex., ST & Cus., Bangalore II Vs. -
Nithesh Estates Ltd 2018 (17) GSTL 414 (Kar.) vii. URC Construction (P) Ltd Vs. Commissioner of Central Excise, Salem 2017 (50) STR 147 (Tri.-Chennai) viii. Commissioner of C.Ex., Ludhiana Vs. Dr. Lal Path Lab (P) Ltd 2007 (8) STR 337 (P&H)
9. Learned Authorized Representative (AR) reiterated the findings in the impugned order and submits that as far as the demand for period prior to 01.06.2007, the issue is now covered by the judgment of the Hon'ble Supreme Court in CC Vs. Larsen & Toubro Ltd (2015 (39) STR 913 (SC). However, for the post 2007 period, the service provided by the appellant is a taxable service as held by adjudication authority.
10. Heard both sides. We have gone through the records and the submissions. The construction carried out by the appellant is for the personal use of Defence personnel and as per the statement recorded from the Finance Manager of the appellant recorded on 19.08.2010, it is stated that the construction of the project for Ministry of Defence was carried out by the appellant and the appellant was liable for payment of Sales Tax/VAT. Accordingly appellant discharged the Sales Tax/VAT on the projects. Moreover, as per the Ministry of Finance letter F. No. 137/26/2006-CX.4 dated 05.07.2006 dated 05.07.2006 construction of residential complex for Army personnel is not to be subjected to levy of service tax.
Page 6 of 9Service Tax Appeal No. ST/3100/2011
11. We find as per the impugned order, the services provided by the appellant were held to be taxable for the period 16.06.2005 to 31.05.2007 under the category of 'Construction of Residential Complex Services' and with effect from 01.06.2007 under 'Works Contract Services'.
12. We find that from period prior to 01.06.2007 service tax is not leviable and in view of the judgment of the Hon'ble Supreme Court in the matter of CC Vs. Larsen & Toubro Ltd (Supra), and in the case of Total Environment Building Systems Pvt., Ltd., reported in 2022(63) G.S.T.L. 257(S.C.), wherein it is held that:-
"22. As already noted, the definition of works contract was brought under the service tax net as per Section 65(105)(zzzza) of the Finance Act, 1994 by the insertion of the said definition. The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service element in such works contract liable to service tax w.e.f. 1st June, 2007. By the said amendment, works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed under the heading "Service Tax".
23. It is in the above backdrop that the definition of Works contract inserted for the first time by virtue of Section 65(105)(zzzza) under the Finance Act, 2007 assumes significance and has to be applied w.e.f. 1st June, 2007. Thus, on and from the enforcement of the amendment in the Financial Year 2007, i.e. 1st June, 2007 the tax on the service component of works contract became leviable. Therefore, till then it was not so leviable as there was no concept of works contract under the said Act.
24. Recognising this aspect of the matter in Larsen and Toubro Ltd. (supra), this Court held that Service Tax on works contract Page 7 of 9 Service Tax Appeal No. ST/3100/2011 was not leviable, meaning thereby, that such tax on the service component of works contract as defined above did not attract Service Tax prior to the amendment.
25. Further, in Commissioner of Service Tax and Others v. Bhayana Builders Private Limited and Others [(2018) 3 SCC 782], this Court considered the correctness of the judgment of the Larger Bench of Customs, Excise and Service Tax Appellate Tribunal (for short, "CESTAT") dated 6-9-2013 in the case of Bhayana Builders (P) Ltd. v. CST [(2013) SCC OnLine CESTAT 1951]. In the said case, reliance was placed on Larsen and Toubro Ltd. (supra) and it was held that when there was no levy of service tax on works contract, no question of any exemption would arise. It was further held that the Central Government is empowered to grant exemption from the levy of service tax either wholly or partially, only when there is any "taxable service" as defined in sub-clauses of clause (105) of Section 65 of the Finance Act, 1994 and not otherwise. This Court agreed with the view taken by the Full Bench of the CESTAT in the judgment dated 6-9-2013 and dismissed the appeals of the Revenue.
26. Therefore, reliance placed by the assessees in the present case on the aforesaid judgments is just and proper. On the other hand, the contention of Ms. Diwan, Learned ASG to the effect that even prior to the aforesaid amendment being made to the Finance Act, 1994 service tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a works contract till then. Hence, the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza) is not clarificatory in nature. Having found that the Service Tax was not at all leviable on service element of a works contract, Parliament felt the need for the amendment and was so incorporated by the Finance Act, 2007.
27. Thus, the judgment in Larsen and Toubro Ltd. (supra) has been correctly decided and does not call for a re-consideration insofar as the period prior to 1st June, 2007 is concerned. In Page 8 of 9 Service Tax Appeal No. ST/3100/2011 view of the above discussion, I agree with the result arrived at by His Lordship M.R. Shah J. vis-a-vis allowing all civil appeals under consideration except Civil Appeal No. 6792 of 2010 which is dismissed. No costs".
13. In view of the above discussion, the issue is squarely covered by the judgments of Hon'ble Supreme Court in the matter of CC Vs. Larsen & Toubro Ltd (supra) and in the case of Total Environment Building Systems Pvt., Ltd. (supra) for the period prior to 01.06.2007. As regards the period from 01.06.2007 to 31.05.2010, it is covered by the decisions of Tribunal in the case of Sugandha Construction Pvt Ltd (Supra) and other cases cited above, hence we find that the appeal is sustainable.
14. In the result the impugned order is set aside and the appeal is allowed with consequential relief, if any in accordance with law.
(Order Pronounced in Open court on 02.05.2024) (P.A. Augustian) Member (Judicial) (Pullela Nageswara Rao) Member (Technical) sasidhar Page 9 of 9