Custom, Excise & Service Tax Tribunal
The Housing Board vs Panchkula on 6 August, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 60139 of 2016
[Arising out of Order-in-Original No. 21/ST/Commr/PKL/2015-16 dated 11.02.2016
passed by the Commissioner of CE & ST, Panchkula]
The Housing Board ......Appellant(s)
Plot No. C-15, Sector 6,
Panchkula, Haryana 134109
VERSUS
Commissioner of Central Excise & ......Respondent
Service Tax, Panchkula
SCO 407-408, Sector 8,
Panchkula, Haryana 134119
WITH
(i) Service Tax Appeal No. 60140 of 2016
(The Housing Board vs. CCE & ST, Panchkula)
[Arising out of Order-in-Original No. 22/ST/Commr/PKL/2015-16 dated 23.02.2016
passed by the Commissioner of CE & ST, Panchkula]
(ii) Service Tax Appeal No. 60112 of 2020
(The Housing Board vs. CCE & GST, Panchkula)
[Arising out of Order-in-Original No. 10-11/ST/Commr/PKL/SSK/2019-20 dated
20.02.2020 passed by the Commissioner of CE & GST, Panchkula]
(iii) Service Tax Appeal No. 60113 of 2020
(The Housing Board vs. CCE & GST, Panchkula)
[Arising out of Order-in-Original No. 10-11/ST/Commr/PKL/SSK/2019-20 dated
20.02.2020 passed by the Commissioner of CE & GST, Panchkula]
AND
(iv) Service Tax/Cross-Objection/60261/2020 in
Service Tax Appeal No. 60163 of 2020
(CCE & GST, Panchkula vs. The Housing Board Haryana)
[Arising out of Order-in-Original No. 10-11/ST/Commr/PKL/SSK/2019-20 dated
20.02.2020 passed by the Commissioner of CE & GST, Panchkula]
(v) Service Tax/Cross-Objection/60260/2020 in
Service Tax Appeal No. 60164 of 2020
(CCE & GST, Panchkula vs. The Housing Board Haryana)
[Arising out of Order-in-Original No. 10-11/ST/Commr/PKL/SSK/2019-20 dated
20.02.2020 passed by the Commissioner of CE & GST, Panchkula]
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APPEARANCE:
Present for the Appellant/Assessee: Shri Pawan Kumar Pahwa, Advocate &
Shri R. R. Yadav, Consultant
Present for the Respondent/Revenue: Sh. Aneesh Dewan (Supdt.), A.R.
CORAM:
HON'BLE Sh. S. S. GARG, MEMBER (JUDICIAL)
HON'BLE Sh. P. ANJANI KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 60461-60466/2024
DATE OF HEARING: 31.07.2024
DATE OF DECISION: 06.08.2024
Per : S. S. GARG
Four appeals i.e. ST/60139/2016, ST/60140/2016,
ST/60112/2020 & ST/60113/2020 have been filed by the Housing
Board, Haryana against different impugned orders passed by the
Commissioner of CE & ST, Panchkula, whereby the learned
Commissioner has confirmed the demand of service tax under various
services viz. construction and sale of houses, real estate agents,
reverse charge mechanism (RCM) on legal services, manpower supply
services and works contract services.
1.2 Two appeals i.e. ST/60163/2020 & ST/60164/2020 have been
filed by the department against the impugned order dated
20.02.2020 whereby the learned Commissioner has dropped the
demand under RCM on manpower supply services and works contract
services.
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1.3 Since the issues involved in all these six appeals are identical
and there is only one appellant/assessee namely M/s The Housing
Board Haryana, therefore, all six appeals are taken up together for
discussion and decision. For the sake of convenience, the facts of the
Appeal No. ST/60139/2016 are taken up as a lead case because
the extended period of limitation has also been invoked in this appeal
only.
2. Briefly stated facts of the case are that the appellant/assessee
M/s The Housing Board Haryana, a government authority, was
created on 14.05.1971 under the Housing Board Act, 1971 with a
view to satisfy need of housing accommodation of general public. The
main activity of the appellant is to construct and sell Houses/Flats of
various categories and various types to general public. For the
purpose of carrying out its activities, the land is acquired by the
appellant from its funds. After acquisition of land is made, process of
construction is commenced by floating tenders for construction of
Houses/Flats and also bids are invited from contractors. Thereafter,
advertisement for sale of the schemes floated by the appellant is
advertised in newspaper inviting application for sale of Houses/Flats.
The appellant gets the houses constructed through various
contractors under Works Contract Scheme. On the basis of
investigation conducted against the appellant in 2014, it was
observed that the appellant was engaged in providing services under
the category of "construction of complex services" and "real estate
agent services" and was also receiving services for which they were
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liable for payment of service tax under reverse charge mechanism.
Based on the figures supplied by the appellant, the appellant was
issued four show cause notices. After following the due process,
demands were confirmed as tabulated below:
Sr. Appeal No. SCN OIO No. and Service Tax Penalty
No dated date Involved imposed
(Rs)
1 ST/60139/2016 21.10.2014 21/ST/Commr 11,37,62,479/- 11,37,62,479/-
covering / PKL/2015-16 under Sec 78 of
period dated the Finance Act
2009-10 to 11.02.2016 and Rs.5,000/-
2012-13 under Section 77
of
the Act
2. ST/60140/2016 20.02.2015 22/ST/Commr 2,69,24,734/- Rs. 100/- per
covering / PKL/2015-16 day under Sec
period dated 76 of the
2013-14 23.02.2016 Finance Act and
Rs.5,000/- under
Section 77 of the
Act
3. ST/60112/ 2020 19.04.2016 10-11/ ST/ 1,56,33,065/- Rs. 15,63,667/-
covering Commr/PKL/ under Sec 76 of
period /SSK/2019-20 the Finance Act
2014-15 dated and Rs.20,000/-
20.02.2020 under Section 77
of
4. ST/60113/2020 17.04.2018 10-11/ ST/ the Act
covering Commr/PKL/
period /SSK/2019-20
2015-16 dated
20.02.2020
5. ST/60163/2020 19.04.2016 10-11/ ST/ 17,75,19,254/- --
Commr/ PKL/
/SSK/2019-20
dated
20.02.2020
6. ST/60164/2020 17.04.2018 10-11/ ST/ 18,49,48,236/- --
Commr/ PKL/
/SSK/2019-20
dated
20.02.2020
3. Heard both the parties and perused the material on record. The
learned Counsel for the appellant/assessee as well as the learned AR
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for the respondent/Revenue has filed the written submissions
respectively, which have been taken on record.
4.1 Regarding service tax on „Construction of Complex
Services', the learned Counsel for the appellant has made the
following submissions:
A.1 That the Board (appellant) formulates various schemes for
constructions of houses below 60 meters and each and every such
scheme has sanction of the appropriate authority of Govt of
Haryana, as envisaged under Sections 23 and 24 of the Housing
Board Haryana Act, 1971. It is undisputed fact that the Appellant
sells the houses including the rights in the land. The Appellant is
not engaged in pure construction or works contract services on the
land under the ownership of any other person. Further, the activity
undertaken/ consideration involved include the value of land and
material in the sale/ transfer of the houses to the individual buyers.
A.2 That the demand has been confirmed with respect to the
levy of service tax on services in relation to „construction of
complex‟ as defined under Section 65(105)(zzzh) of the Finance
Act, 1994.
A.3 That with effect from 1st July, 2012, the Act has been
amended and service tax was imposed on all services other than
those specified in the negative list. The services covered under
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Section 65(105)(zzzh) are thereafter sought to be taxed by virtue
of Section 66E(b) read with Section 65B(22) and Section 65B(44)
of the Act. The position laid to the provisions of Section
65(105)(zzzh) of the Act would also be equally valid for the taxing
provisions introduced with effect from 1st July, 2012.
A.4 That prior to the Finance Act, 2010 by virtue of which
explanation to Section 65(105)(zzzh) was introduced, service tax
was not chargeable on builders/developers who were engaged in
construction of real estate residential projects and selling
residential units in those projects to prospective buyers. Thus,
unless the builder was rendering the service of construction of a
complex simplicitor, no service tax was chargeable for service
covered under sub-clause (zzzh) of Section 65(105) of the Act.
A.5 That by virtue of Finance Act, 2010, an explanation was
added to Section 65(105)(zzzh). After the insertion of the
impugned explanation, the said clause read as under:
"Section 65(105) "Taxable Service" means any service
provided or to be provided:
(zzzh) to any person, by any other person, in relation to
construction of complex.
Explanation. For the purposes of this sub-clause,
construction of a complex which is intended for sale,
wholly or partly, by a builder or any person authorised by
the builder before, during or after construction (except in
cases for which no sum is received from or on behalf of
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the prospective buyer by the builder or a person
authorised by the builder before the grant of completion
certificate by the authority competent to issue such
certificate under any law for the time being in force) shall
be deemed to be service provided by the builder to the
buyer;".
A.6 Insofar as the explanation is concerned, the same expands
the scope of the taxable service as envisaged in sub-clause (zzzh)
of the Act. By a legal fiction, construction of complex which is
intended for sale by a builder or any person authorized by him
before, during or after construction is deemed to be a service
provided by the builder to the buyer. The only exception
contemplated is where no sum is received from the prospective
buyer prior to grant of the completion certificate. The grant of
completion certificate implies that the project is complete and at
that stage all services and goods used for construction are
subsumed in the immovable property, thus at that stage sale of a
complex or a part thereof to a buyer constitutes an outright sale of
immovable property, which admittedly is not chargeable to service
tax.
A.7 That the service tax is essentially a tax on the services as
distinct from a tax on the value added by manufacturing goods/
trading. Construction of a complex essentially has three broad
components, namely, (i) land on which the complex is constructed;
(ii) goods which are used in construction; and (iii) various activities
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which are undertaken by the builder directly or through other
contractors. The object of taxing services in relation to construction
of complex is essentially to tax the various activities that are
involved in the construction of a complex and the resultant value
created by such activities.
A.8 That it is also essential to understand the measure of tax
used for the levy on the service portion of the contract. The
measure of tax must have a nexus with the object of tax and it
would be impermissible to expand the measure of service tax to
include elements such as the value of goods or value of land for the
purpose of the levy of service tax.
A.9 That Section 67 of the Act provides for valuation of taxable
services. The said section as amended by Finance Act, 2010 reads
as under:
―Section 67 : Valuation of taxable services for
charging Service Tax. - (1) Subject to the provisions
of this Chapter, service tax chargeable on any taxable
service with reference to its value shall, -
(i) in a case where the provision of service is for a
consideration in money, be the gross amount charged by
the service provider for such service provided or to be
provided by him;
(ii) in a case where the provision of service is for a
consideration not wholly or partly consisting of money, be
such amount in money, with the addition of service tax
charged, is equivalent to the consideration;
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(iii) in a case where the provision of service is for a
consideration which is not ascertainable, be the amount
as may be determined in the prescribed manner."
A.10 That prior to the amendment brought about by Finance
Act, 2010, Section 67 of the Act provided that the value of taxable
services would be "the gross amount charged by the service
provider for such service rendered by him". Section 67 of the Act
was amended also to provide for value in cases where the
consideration for the services was not wholly or partly consisting of
money and in cases where the consideration for the service was
not ascertainable.
A.11 That Section 65(86) of the Act defines the expression
"prescribed" to mean as "prescribed‟ by rules made under this
Chapter". Thus, by virtue of Section 67(1)(iii) of the Act, in cases
where the consideration for provision of services is not
ascertainable, the same was to be determined in accordance with
the Rules made under the Act.
A.12 That for the purposes of ascertaining the value of
services, the Central Government has made Service Tax
(Determination of Value) Rules, 2006 (hereafter „the Rules‟).
However, none of the rules provides for any machinery for
ascertaining the value of services involved in relation to
construction of a complex. Rule 2A of the Rules provides for
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determination of the value of service in execution of a works
contract and prior to 1st July, 2012; the said Rule read as under:-
―Rule 2A : Determination of value of taxable
services involved in the execution of a works
contract. - Subject to the provisions of section 67, the
value of taxable service involved in the execution of a
works contract (hereinafter referred to as works contract
service), referred to in clause (8) of section 66E of the
Act, shall be determined by the service provider in the
following manner, namely :-
(i) Value of works contract service shall be equivalent to
the gross amount charged for the works contract less the
value of transfer of property in goods involved in the
execution of the said works contract.
Explanation. - For the purposes of this clause, -
(a) gross amount charged for the works contract shall
not include value added tax or sales tax, as the case may
be, paid, if any, on transfer of property in goods involved
in the execution of the said works contract;
(b) value of works contract service shall include, -
(i) labour charges for execution of the works;
(ii) amount paid to a sub-contractor for labour and
services;
(iii) charges for planning, designing and architect‟s fees;
(iv) charges for obtaining on hire or otherwise,
machinery and tools used for the execution of the works
contract;
(v) cost of consumables such as water, electricity, fuel
used in the execution of the works contract;
(vi) cost of establishment of the contractor relatable to
supply of labour and services;
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(vii) other similar expenses relatable to supply of labour
and services; and
(viii) profit earned by the service provider relatable to
supply of labour and services;
(c) Where value added tax has been paid on the actual
value of transfer of property in goods involved in the
execution of the works contract, then, such value adopted
for the purposes of payment of value added tax, shall be
taken as the value of transfer of property in goods
involved in the execution of the said works contract for
determining the value of works contract service under this
clause.
(ii) Where the value has not been determined under
clause (i), the person liable to pay tax on the taxable
service involved in the execution of the works contract
shall determine the service tax payable in the following
manner, namely :-
(A) in case of works contracts entered into for execution
of original works, service tax shall be payable on forty per
cent. of the total amount charged for the works contract :
Provided that where the gross amount charged includes
the value of the land, in respect of the service provided by
way of clause (8) of section 66E of the Act, service tax
shall be payable on twenty five per cent. of the total
amount including such gross amount;
(B) in case of other works contracts including completion
and finishing services such as glazing, plastering, floor
and wall tiling, installation of electrical fittings not covered
under sub-clause (A), service tax shall be payable on
sixty per cent. of the total amount charged for the works
contract;
Explanation 1. - For the purposes of this rule, -
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(I) "original works" means -
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or
damaged structures on land that are required to make
them workable;
(II) "total amount" means the sum total of gross amount
and the value of all goods, excluding the value added tax,
if any, levied on goods and services supplied free of cost
for use in or in relation to the execution of works contract,
under the same contract or any other contract :
Provided that where the value of goods or services
supplied free of cost is not ascertainable, the same shall
be determined on the basis of the fair market value of the
goods or services that have closely available
resemblance;"
A.13 That the above Rule 2A of the Rules provides for
mechanism to ascertain the value of services in a composite works
contract involving services and goods, the said Rule does not cater
to determination of value of services in case of a composite
contract which also involves sale of land. The gross consideration
charged by a builder/promoter of a project from a buyer would not
only include an element of goods and services but also the value of
undivided share of land which would be acquired by the buyer.
A.14 Though Notification No. 1/2006-ST dated 01.03.2006 (as
amended by Notification No. 29/2010-ST dated 22.06.2010) and
Notification No 26/2012-ST dated 20.06.2012 provide for
abatement to the extent of 75%. In this regard it is submitted that
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no machinery provision is provided under the Act or the Rules to
determine the service value in construction of houses. The issue
has been decided against the Revenue by the judgment in the case
of Commissioner of Central Excise v. Larsen and Toubro Limited. In
that case, the Supreme Court had affirmed the decision of the
Orissa High Court in Larsen and Toubro Limited Vs State of
Orissa and Ors. : (2008) 12 VST 31 (Orissa), wherein the
Court held that Circulars or other instructions could not provide the
machinery provisions for levy of tax. The charging provisions as
well as the machinery for its computation must be provided in the
Statute or the Rules framed under the Statute.
A.15 That the issue has been settled by the Hon‟ble Delhi High
Court in case of Suresh Kumar Bansal Vs UOI - 2016 (43) STR
3 (Del.) wherein the Hon‟ble High Court held that neither the Act
nor the Rules framed therein provide for a machinery provision for
excluding all components other than service components for
ascertaining the measure of service tax. The abatement to the
extent of 75% by a notification or a circular cannot substitute the
lack of statutory machinery provisions to ascertain the value of
services involved in a composite contract.
A.16 The said decision of Hon‟ble Delhi High Court has been
followed in the Final orders passed by the Hon‟ble CESTAT
Chandigarh vide Final Order No. 61106-61107/2019 in the
case of M/s G S Promoters & Developers Vs CCE & ST,
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Chandigarh and Final Order No. 61137/2019 in the case of
Rajeev Chopra Vs. CE & ST, Shimla.
A.17 Though the department has filed an appeal before the
Apex Court against the judgment of the Delhi High Court in the
case of Suresh Kumar Bansal (supra), but the Hon‟ble Apex
Court has not granted any stay of the said judgment in favour the
department; therefore, the ratio is binding on the Tribunal and as
per said judgment, service tax is not leviable on „Construction of
Complex Services‟.
4.2 Regarding service tax on „Real Estate Agent Services', the
learned Counsel for the appellant made the following submissions:
B.1 That the learned adjudicating authority has also confirmed
the demand under the taxable category of "Real Estate Agent
Services" on the grounds that the Appellant has Charged
"processing fee/ transfer fee, supervision charges, misc. income/
enlistment fee/HPTA forms and earnest/registration money
forfeited" as "Real Estate Agent" Service alleging that the appellant
has collected the said charges in relation to sale and purchase of
Plots/Houses/Flats involving Real Estate only.
B.2 That the findings of the learned adjudicating authority that
the appellant has acted as a Real Estate Agent are wrong and
misstated. The appellant is not acting as a Real Estate Agent.
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B.3 That prior to 01.07.2012, the Service Tax was levied on the
services of Real Estate Agent, w.e.f. 16.10.1998, vide Finance Act,
1994 which read as under:
As per Section 65 (88)&(89) (ibid), the definition of the
Real Estate Agent is given below:-
(88) "real estate agent" means a person who is engaged
in rendering any service in relation to sale, purchase,
leasing or renting of real estate and includes a real estate
consultant;
(89) "real estate consultant" means a person who renders
in any manner, either directly or indirectly, advice,
consultancy or technical assistance , in Relation to
evaluation, conception, design, development,
construction, implementation, supervision, maintenance,
marketing, acquisition or management of real estate;"
B.4 That analysis of provision of Section 65(88)/65(89) reveals
that the real estate agent/consultant means a person, who is
engaged in rendering any service in relation to sale, purchase,
leasing or renting of real estate and includes a real estate
consultant and a "Real estate Consultant" is one who provides
advice, consultancy or technical assistance in relation to
evaluation, conception, development, construction,
implementation, supervision, maintenance, marketing, acquisition
or management of real estate.
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B.5 The appellant in no manner render advice or consultancy or
technical assistance in respect of Sale or purchase of real estate.
The Board is not acting as a real Estate Agent hence Service tax is
not chargeable on amounts/fees received by it in the course of
performing of statutory duties.
B.6 The nature of receipt/income under various heads is
explained hereunder:
(i) Income from Processing/Transfer fees
After the allotment of houses or plots is finally accepted, the Estate
Manager prepares an allotment Register and enters therein the
names of the allottees according to the number of houses allotted
to them.
If an allottee wants to sell his house to another person, he has to
seek permission from the Board. The Board allows transfer of
allotment on payment of administrative charges under the
statutory authority provided under the said Act and rules and
regulations made there under. After transfer of house from the
original allottee, the appellants being a statutory authority
undertakes the updation of their records with reference to transfer
of ownership of land or building or house, which it is statutorily
obliged to do in terms of the Regulations, cited supra.
In view of the above, it is submitted that the transfer fee and
processing charges is a pre- condition for transfer of rights in
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immovable property, imposed as per the provisions of Housing
Board Haryana Act, 1971.
The payment of such charges is merely fulfilment of condition of
allotment of immovable property and does not involve provision of
service per se. Thus, the transfer fee and administrative fee
charged by the Appellant cannot be held as consideration for a
service as there is no service been provided. The term „service‟ is
defined under section 66B (44) of the Act. The relevant extract of
the same has been reproduced below for ready reference:
(44) "service" means any activity carried out by a
person for another for consideration, and includes a
declared service, but shall not include--
(a) an activity which constitutes merely,--
(i). a transfer of title in goods or immovable
property, by way of sale, gift or in any other manner; or
(ii). Such transfer, delivery or supply of any goods which
is deemed to be a sale within the meaning of clause (29A)
of article 366 of the constitution; or
(iii). a transaction in money or actionable claim;
On the perusal of above definition it can be concluded that service
is any activity which is performed by one person for another person
in response of consideration but in the instant case, the Appellant
is charging Administrative fee and Transfer Fee as a condition of
the allotment of the immovable property and maintains its own
records as required by the Housing Board Haryana Act, 1971 and
Regulations referred above. Housing Board Haryana does not carry
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out any activity for the owners of property in reciprocate of
Administrative fee and Transfer Fee received from them. In
absence of activity, the provision of service as defined under the
Finance Act, 1994 could not be alleged.
Without prejudice to the submissions made above, even if it is
assumed, though not accepted, that there is an activity undertaken
by the Appellant, then the same fall within the exclusions to the
definition of "service" as defined under Section 65B(44) of the
Finance Act, 1994. As any activity which merely constitutes
transfer of immovable property is excluded from the definition of
"service" as defined under Section 65B (44) of the Finance Act,
1994. In the present case, Housing Board Haryana (Appellant)
changes the name of the owner in the records as required by the
Housing Board Haryana Act, 1971 and Regulations and which
results into the transfer of title of immovable property in the
records of Housing Board Haryana.
It is submitted that any amount charged under any statute for any
permission would not constitute any service. The Commissioner
(Appeals), Panchkula vide his O-I-A No.
APPL/ST/PKL/Commr/198/2017 issued on 24.11.2017, in
the case of Haryana Urban Development Authority, has
affirmed above view and the said O-I-A as per our knowledge has
been accepted by the department.
(ii) Miscellaneous Income
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Miscellaneous income comprises of extension fees of plots charged
from allottees, who are not able to construct plots with in
stipulated period of time, for issue of duplicate allotment letter, RTI
fees and watch and ward charges. This extension fee is charged for
the purpose of regulation of construction of building. None of the
activities mentioned herein falls under the category of „Service‟. In
any case, without prejudice to above, the service if any should fall
within the preview of exemption entry 39 of Notification No
25/2012 ST dated 20.06.2012.
(iii) Earnest/Registration money forfeited
This income comprises of forfeiture of registration money of the
allottees, who surrender houses/Houses/Flats after allotment. This
is type of penalty which is charged in cases where the allottees do
not pay installments after allotment or surrender the allotment.
There is no element of Service involved in this.
B.7 Accordingly, these amounts are in the nature of various
charges where no element of service is involved. Hence same
cannot be subject to service tax. The meaning of "consideration"
given under Clause (a) to Explanation to Section 67 clearly shows
that it includes any amount that is payable for the taxable services
provided or to be provided. Clause (a) to Explanation to Section 67
is reproduced below for the sake of reference:
"consideration" includes any amount that is payable for
the taxable services provided or to be provided;"
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B.8 Thus, for charging service tax the consideration should be
for taxable service provided or to be provided. If any other amount
is charged which is not for taxable service provided or to be
provided, service tax will not be payable on such charge. The
Tribunal in many cases has held that there will be no service tax on
amounts not related to taxable service. The Tribunal in the case of
M/s Thermax Ltd. Vs. C.C.E., Pune - 2007(8) S.T.R. 487 (Tri-
Bombay) while allowing the appeal of the party, has held that
interest is compensation fixed by an agreement or allowed by law
for use or detention of money or for loss of money by one who is
entitled its use. Interest cannot be considered as consideration for
rendering any service.
B.9 In this regard reliance is placed on the following decisions
wherein it has been held by the Tribunal that charges collected by
builder for authorizing transfer of allotment of property before sale,
as part of sale agreement is on principal to principal basis and no
service is provided to any person in relation to sale, purchase,
leasing or renting of any real estate and therefore such charges are
not covered under head of "Real Estate Agent services".
Ansal Buildwell Ltd Vs Commissioner of Service
Tax, New Delhi - 2019 (25) GSTL 96 (Tri. - Del.)
Ajay Enterprises Pvt Ltd Vs Commissioner of
Service Tax, Delhi - 2016 (42) STR 471 (Tri. -
Del.)
21 ST/60139-60140/2016
ST/60112-60113/2020
ST/60163-60164/2020
Commissioner of S.T., New Delhi Vs Ansal
Properties and Infrastructures Ltd - 2018 (8)
GSTL 58 (Tri. - Del.)
B.10 In light of the above mentioned facts and provisions of
law along with the description of receipt/income stated above
reveals that none of the receipts/income of the Appellants fall
under the scope of services defined under Section 65(105)(b) of
the Finance Act,1994.
4.3 Regarding service tax liability under 'Reverse Charge
Mechanism', the learned Counsel for the appellant made the
following submissions:
C.1 That the learned adjudicating authority has confirmed the
demand of Service Tax in respect to Service Tax liability for
services received by the appellant under Reverse Charge
Mechanism as per Notification No. 30/2012-ST dated 20.06.2012.
The demand has been confirmed in respect of the following
expenses:
a. Legal charges/fees
b. Manpower supply services
c. Works contract services
C.2 The findings of the learned adjudicating authority
regarding chargeability of Service Tax from the appellant under the
22 ST/60139-60140/2016
ST/60112-60113/2020
ST/60163-60164/2020
Reverse Charge Mechanism are wrong and the appellant is not
liable to pay Service Tax under „RCM‟.
C.3 That Section 68(1) confers liability to pay service tax on
service provider but Section 68(2), which has overriding effect over
section 68(1), confers liability to pay service tax on the receiver of
such taxable service as notified by Central Government. The
Central Government has issued Notification No. 30/2012- ST dated
20.06.2012 which notifies specified services on which provision of
reverse charge is applicable.
C.4 As per the aforesaid Notification, a list of taxable services
and extent of service tax payable thereon by the person who
provides the services and the person who receives the services in
respect of the services listed in Para (I) was prescribed. The
expense heads in respect of which the service tax demand has
been confirmed are being discussed hereunder:
The relevant provisions of the notification are
reproduces below:
"the Central Government hereby notifies the following
taxable services and the extent of service tax payable
thereon by the person liable to pay service tax for the
purposes of the said sub-section, namely:--
I. The taxable services,--
(A) (i) provided or agreed to be provided by an
insurance agent to any person carrying on the
insurance business;
23 ST/60139-60140/2016
ST/60112-60113/2020
ST/60163-60164/2020
...................................................
(iv) provided or agreed to be provided by,-
(A) an arbitral tribunal, or
(B) an individual advocate or a firm of
advocates by way of support services, or
(C) Government or local authority by way of
support services excluding,-
(1) renting of immovable property, and
(2) services specified in sub-clauses (i), (ii) and
(iii) of clause (a) of section 66D of the Finance Act,1994, To any business entity located in the taxable territory;
.............................................................
(v) provided or agreed to be provided by way of renting of a motor vehicle designed to carry passengers to any person who is not in the similar line of business or supply of manpower for any purpose or service portion in execution of works contract by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as body corporate, located in the taxable territory;
C.5 That the department has made the allegations on the appellant that the appellant has not discharged service tax liability on Legal charges, man power supply and works contract services received by the appellant which are liable to be taxed under reverse charge mechanism. It is further submitted that the reverse 24 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 charge mechanism is not applicable on the appellant, the same has been demonstrated in subsequent paragraphs. The appellant is not a business entity C.6 The common condition in respect of all the three services for the applicability of RCM is that such services should have been provided to a ―business entity‖ C.7 In the instant case, the appellant is admittedly a body corporate but it does not qualify for the criteria of business entity nor it is registered as such. It is submitted that Housing Board Haryana, being a statutory body constituted for catering to the need of housing in the State of Haryana cannot be classified as business entity. Hence, the Housing Board Haryana, not being a business entity, cannot be held liable for payment of service tax on reverse charge basis in respect of services referred above. C.8 The term business entity is defined under section 65B(17) of the Act. The relevant provision is reproduced below:
"Business Entity" means any person ordinarily carrying out any activity relating to industry, commerce or any other business or profession.
The term business is not defined under Finance Act, 1994. The Concise Oxford Dictionary defines business as:
"Commercial activity, a commercial organization"
25 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 Further, the as per Black‟s Law Dictionary, the term business means:
"Employment, occupation, professional or commercial activity engaged in for gain or livelihood."
C.9 That the appellant cannot be classified as a business entity, reliance is placed on the decision of Hon‟ble Supreme Court in case of State of A.P. Vs H Abdul Bakhi - AIR 1965 SC 253, wherein the Hon‟ble Supreme has held that to regard an activity as „business activity‟, there must be a course of dealing with profit motive and not for sport or pleasure.
C.10 That business entity means a person carrying out any activity with profit objective. Housing Board Haryana, being a non- profit organization, does not prepare Profit & Loss Account as part of Annual Statement but prepares Income & Expenditure Account. Further, the Annual Statement of Housing Board Haryana does not reflect any profit but surplus of income over expenditure. C.11 That the Constitution Bench of the Hon‟ble Supreme Court in its judgment passed in the case of Shri Ramtanu Co- Operative Housing Society Ltd. Vs. State Of Maharashtra & Others on 5 August, 1970 reported as 1970 AIR 1771 has clearly distinguished between a Business corporation and a Governmental Authority Body Corporate.
26 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 C.12 That on perusal of provisions of Notification No. 30/2012- ST dated 20.06.2012, it can be said that in the case of manpower and works contract, service tax is payable under reverse charge mechanism only when the service receiver is a business entity registered as body corporate.
C.13 That though the Housing Board is a body corporate constituted under Housing Board Act, 1971, but it is not a body corporate registered as such under any Act with any such authority viz. Registrar of Companies, where such registration is required. Since the Housing Board is not registered as a body corporate, it does not come under the purview of the Notification No. 30/2012- ST ibid as the notification stipulates that the service to be provided to „a business entity registered as body corporate‟, hence, the appellant is not liable to pay Service Tax under the Reverse Charge Mechanism for the Work Contract Services or any other services received by them, which are covered under the ambit of above Notification.
C.14 From the above, it is clear that Haryana Housing Board, being (a) a Governmental Authority and (b) being a body corporate constituted under the Housing Board Act of Haryana Government, but not „registered‟ with any Department including Registrar of Companies, is not covered under the Notification No. 30/2012-ST dated 20.06.2012 for payment of service tax under RCM. The term 27 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 body corporate is not defined under the Finance Act, 1994. However, the same is defined under the Companies Act Works Contract services provided by the contractor to the Appellant is otherwise exempted C.15 That the Construction Services provided by Contractors, under Works Contract Mechanism to the Housing Board, a Governmental Authority, are exempt from payment of Service tax as per Sr. No. 12 of Notification No. 25/2012-ST dated 20.06.2012. C.16 That vide Entry 12(a) exempts construction services provided to the Government, a Local Authority or a Governmental Authority provided the works is predominantly for use other than for commerce, industry or any other business or profession, whereas the Flats/houses constructed by the appellant are not meant for business or commerce purposes.
C.17 The term Government Authority is defined under clause 2(s) of the Mega Exemption Notification No. 25/2012-ST. The relevant extract of the Notification is reproduced hereunder for ready reference:
(s) "governmental authority‟‟ means a board, or an authority or any other body
(i). set up by an Act of the Parliament or a State Legislature; or
28 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020
(ii). established by government, with 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution; C.18 That undisputedly the appellant has been constituted by an Act of State legislature i.e. the Housing Board Haryana Act, 1971 and it drives its authority from the same. C.19 That Entry No. 12 of the Notification No. 25/2012-ST dated 20.06.2012 exempts the construction services in relation to a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession.
C.20 That this issue has been considered by the Hon‟ble Punjab and Haryana High Court in the case of Bharat Bhushan Gupta & Company Vs. State of Haryana - 2016 (44) S.T.R. 195 (P&H)) wherein it has been held that Haryana Housing Board is a "Governmental Authority" as defined in the Notification No. 25/2012-ST dated the 20.06.2012 and work contract services provided by the contractors to the Board are exempt under clause 12(a) of the Notification ibid.
4.4 With regards extended period of limitation, the learned Counsel for the appellant submits that the entire demand in the case is barred 29 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 by limitation because the first show cause notice has proposed to demand service tax for the period from 2009-10 to 2012-13 although the show cause notice was issued on 21.10.2014. He further submits that as per the provisions of Section 73 of the Act, the authorities can issue a show cause notice in case duty has not been levied or paid or has been short levied or short paid or erroneously refunded, within eighteen months from the relevant date. He further submits that extended period of limitation i.e. 5 years can be invoked only if there is evasion of tax due to fraud or collusion or wilful miss-statement or suppression of facts or contravention of any of the provisions of the Act or the rules made there under with intent to evade payment of duty. He further submits that the appellant has maintained proper accounts which have been duly audited by the office of the Accountant General and all the receipts of construction and sale of houses, administrative charges and transfer fees etc are duly disclosed in the Financial Statements, which are audited by the office of the Accountant General of the State. He further submits that the non-payment of service tax on the impugned activities has been discovered from the Financial Statements of the appellant, hence, no suppression or fraud with intent to evade tax could be attributed to the appellant. In this regard, he relies on the following case-laws:
CCE Vs. Chemphar Drugs Liniments - 1989 (40) ELT 276 (SC) T.N. Dadha Pharmaceuticals Vs. CCE - 2003 (152) ELT 251 (SC)
30 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 Larsen & Toubro Vs. CCE, Pune -2007 (211) ELT 513 (SC) U.P. State Sugar & Cane Dev. Corpn. Ltd. Vs. CCE, Allahabad - 2009 (242) E.L.T. 260 (Tri. - Del.) Tamil Nadu Housing Board Vs. Collector of Central Excise, Madras - 1994 (74) ELT 9 (SC) 4.5 The learned Counsel further submits that since the demand of service tax is not sustainable, therefore, demands of interest and penalty are also not sustainable.
5.1 On the other hand, as regards 'Construction of Complex Services', the learned AR for the Respondent-Revenue submits that the adjudicating authority has already given the benefit of various notifications providing for abatement and confirmed the demand only on the remaining amount. He also submits that the adjudicating authority has rightly held that the appellant is not a governmental authority. He further submits that the Hon‟ble Delhi High Court in case of Suresh Kumar Bansal Vs UOI - 2016 (43) STR 3 (Del.) whereunder the explanation introduced in Section 65(105)(zzzh) of the Finance Act, 1994 has been set aside as being ultra vires of the Constitution of India; however, he has submitted that the appeal filed by the department against the decision of the High Court is pending before the Hon‟ble Apex Court and further, the said decision is not applicable for the post negative list i.e. after 01.07.2012.
31 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 5.2 As regards 'Real Estate Agent Service', the learned AR submits that the adjudicating authority has rightly held that the charges were on account of transfer of houses/flats from one allottee to another and collected by the Housing Board from their customers to whom houses/flats were transferred in lieu of providing various services for facilitating the transfer of houses/flats and such services are in relation to sale and purchase of real estate only, therefore, demand of service tax is righty confirmed under the „Real Estate Agent Service‟. In this regard, he relies on the decision of the Tribunal in the case of M/s Ajay Enterprises Pvt Ltd vs. CST, Delhi - 2016 (42) STR 471 (Tri. Delhi).
5.3 As regards service tax liability under „Reverse Charge Mechanism', the learned AR submits that in respect of show cause notices dated 21.10.2014 and 20.02.2015 the adjudicating authority has held that the appellant is liable to pay service tax under RCM in respect of various services i.e. legal charges, manpower supply services and works contract services in terms of Notification No. 30/2012-ST dated 20.06.2012. He further submits that in respect of show cause notices dated 19.04.2016 and 17.04.2018 the adjudicating authority has confirmed the demand only in respect of legal charges and dropped the demand in respect of other services viz. works contract services and manpower supply services by holding that the Housing Board is established by the Housing Board Act, 1971 is a business entity and a body corporate by the statute that created it, but cannot be held to be a business entity registered as body 32 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 corporate and does not qualify as a person who is required to pay service tax under RCM and Entry 12 of the Notification No. 30/2012- ST dated 20.06.2012. Against the said dropping of demand, the department has filed the appeals bearing nos. ST/60163/2020 and ST/60164/2020 on the ground that the appellant/assessee is business entity registered as a body corporate. 5.4 The learned AR also justifies the invocation of extended period of limitation on account of the fact that the appellant is not registered under the Service Tax despite the fact that they are providing taxable services.
6. We have carefully considered the submissions made by both the parties and perused material on record; and have also gone through the various decisions relied upon by both the sides. We find that in the present case, there are three issues of demand of service tax involved:
First Issue - Service tax on Construction and sale of Complex/Houses/Flats constructed by the appellant.
Second Issue - Service tax on certain receipts under taxable category of Real Estate Agent service.
Third Issue - Liability to pay service tax under Reverse Charge Mechanism on legal charges, manpower supply and works contract services.
Now, we will take up issue wise each service.
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7. First Issue : Liability of service tax on „Construction of Complex/Houses/Flats Service' 7.1 As regards the first issue of demand of service tax under „Construction of Complex Service', before we give a finding on the liability of the appellant to pay the service tax on „Construction of Complex Services‟, it is necessary for us to examine the nature of the appellant and its constitution and the activities being carried out by the appellant. In this regard, we find that it is pertinent here to reproduce para 14 of the decision of Hon‟ble High Court of Punjab & Haryana in the case of Bharat Bhushan Gupta & Company (supra), which is reproduced herein below:
―14. The Board has been constituted in terms of the provisions of Section 3 of the Act, as was enacted by the State Legislature. It is a body corporate which consists of a Chairman, a Chief Administrator and such other members, as the State Government may, from time to time, appoint by a notification. The Chief Administrator shall be a person from amongst the officers of the rank of Head of the Department or Joint Secretary of the State Government. It is termed to be a local authority for the purposes of Land Acquisition Act, 1894. Section 20 of the Act provides that subject to control of the State Government the Board may incur expenditure on framing and execution of such housing schemes as may be considered necessary from time to time or as may be entrusted to it by the State Government. Every year, the Board is to prepare a budget in advance for the next year and place it before the State Government for its approval. After sanction is granted by the State Government, the same is published in the Official Gazette.
34 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 The Board is authorized to borrow money for implementation of the projects, as approved with prior approval of the State Government. Section 72 of the Act provides that the State Government shall exercise superintendence and control over the Board and its officers.
The aforesaid provisions of the Act clearly show that the Board is a governmental authority, as it is fully under the control of the State Government."
7.2 Further, we find that by virtue of Finance Act, 2010, an explanation was added to Section 65(105)(zzzh) and the same expands the scope of taxable service as envisaged in sub-clause (zzzh) of the Act. By a legal fiction, construction of complex which is intended for sale by a builder or any person authorized by him before, during or after construction is deemed to be a service provided by the builder to the buyer. The only exception contemplated is where no sum is received from the prospective buyer prior to grant of the completion certificate. The grant of completion certificate implies that the project is complete and at that stage all services and goods used for construction are subsumed in the immovable property, thus at that stage sale of a complex or a part thereof to a buyer constitutes an outright sale of immovable property, which admittedly is not chargeable to service tax. 7.3 Further, for the purposes of ascertaining the value of services, the Central Government has made Service Tax (Determination of Value) Rules, 2006. However, none of the rules provides for any machinery for ascertaining the value of services involved in relation 35 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 to construction of a complex. Though the Rule 2A of the Rules ibid provides for mechanism to ascertain the value of services in a composite works contract involving services and goods, but the said Rule does not cater to determination of value of services in case of a composite contract which also involves sale of land. The gross consideration charged by a builder/promoter of a project from a buyer would not only include an element of goods and services but also the value of undivided share of land which would be acquired by the buyer. Though Notification No. 1/2006-ST dated 01.03.2006 (as amended by Notification No. 29/2010-ST dated 22.06.2010) and Notification No 26/2012-ST dated 20.06.2012 provide for abatement to the extent of 75%; but no machinery provision is provided under the Act or the Rules to determine the service value in construction of houses. This issue has been decided against the Revenue by the judgment of Hon‟ble Orissa High Court in the case of Larsen and Toubro Limited Vs State of Orissa and Ors. : (2008) 12 VST 31 (Orissa), wherein the Hon‟ble High Court has held that Circulars or other instructions could not provide the machinery provisions for levy of tax. The charging provisions as well as the machinery for its computation must be provided in the Statute or the Rules framed under the Statute. This decision of the Hon‟ble Orissa High Court has been affirmed by the Hon‟ble Apex Court. The relevant extract from the judgment of the Hon‟ble Orissa High Court is reproduced herein below:
"This Court is of the opinion that if the Act is unworkable in the absence of necessary Rules, as has been held by
36 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 several judgments referred to above, any assessment under the said Act cannot be enforced even if such an assessment order is made by an authority under the Act purportedly in accordance with the provisions of the Act. The inherent infirmity of an assessment order passed on the basis of circulars which have no statutory sanction cannot be cured by an appellate order. In other words, if the assessment order itself is not sustainable on account of unworkability of the provisions under which they are purportedly made, no purpose would be served by filing appeal against the said order and this question cannot be decided by the appellate authority under the Act. In the instant case, both the assessing officer and the appellate authority are bound to follow the instructions contained in the circulars. Therefore, no purpose would be served by filing appeal before the appellate authority. In order to constitute valid basis for taxation, the rate of deduction, specially a flat rate of deduction cannot be applied to calculate the taxable turnover in works contract. So those circulars cannot hold the field. As stated in the judgments referred to above, in the absence of any statutory basis for calculation of taxable turnover, the Act remains unworkable. Such gap in the statute cannot be filled up by the circulars which are purely ad hoc and administrative in nature and specially so when it relates to taxing law.
It is a well-settled principle that in matters of taxation either the statute or the Rules framed under the statute must cover the entire field. Taxation by way of administrative instructions which are not backed by any authority of law is unreasonable and is contrary to Article 37 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 265 of the Constitution of India. Therefore, the impugned circulars are set aside as also the impugned orders of assessment. The assessee‟s liability to pay tax remains but in order to assess that the State has to act in accordance with the statutory prescription by framing Rules under its rule-making power under Section 29 of the Act and the assessing authority can pass fresh orders of assessment on the basis of such statutory Rules." 7.4 Further, we find that this issue has been settled by the Hon‟ble Delhi High Court in the case of Suresh Kumar Bansal vs. UOI (supra), wherein the Hon‟ble High Court has held in para 53 to para 55 as under:
―53. As noticed earlier, in the present case, neither the Act nor the Rules framed therein provide for a machinery provision for excluding all components other than service components for ascertaining the measure of service tax. The abatement to the extent of 75% by a notification or a circular cannot substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract.
54. Insofar as the challenge to the levy of service tax on taxable services as defined under Section 65(105)(zzzzu) is concerned, we do not find any merit in the contention that there is no element of service involved in the preferential location charges levied by a builder. We are unable to accept that such charges relate solely to the location of land. Thus, preferential location charges are charged by the builder based on the preferences of its customers. They are in one sense a measure of additional value that a customer derives from acquiring a particular unit. Such charges may 38 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 be attributable to the preferences of a customer in relation to the directions in which a flat is constructed; the floor on which it is located; the views from the unit; accessibility to other facilities provide in the complex, etc. As stated earlier, service tax is a tax on value addition and charges for preferential location in one sense embody the value of the satisfaction derived by a customer from certain additional attributes of the property developed. Such charges cannot be traced directly to the value of any goods or value of land but are as a result of the development of the complex as a whole and the position of a particular unit in the context of the complex.
55. In view of the above, we negate the challenge to insertion of sub-clause (zzzzu) in Clause (105) of Section 65 of the Act. However, we accept the petitioners contention that no service tax under Section 66 of the Act read with Section 65(105)(zzzh) of the Act could be charged in respect of composite contracts such as the ones entered into by the petitioners with the builder. The impugned explanation to the extent that it seeks to include composite contracts for purchase of units in a complex within the scope of taxable service is set aside."
7.5 We further find that the Revenue has filed an appeal against the above said decision of the Delhi High Court before the Hon‟ble Apex Court, but no stay has been granted in favour the department, therefore, the ratio of the Delhi High Court‟s judgment is binding on the Tribunal unless the same is set aside or stayed.
7.6 Further, we find that the above said decision of the Hon‟ble Delhi High Court has been followed by this Tribunal in the case of 39 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 M/s G S Promoters & Developers Vs CCE & ST, Chandigarh (supra) and in the case of Rajeev Chopra Vs. CE & ST, Shimla (supra).
7.7 In view of our discussion on this issue, we are of the view that service tax is not leviable on „Construction of Complex Services‟.
8. Second Issue : Liability of service tax on „Real Estate Agent Service' 8.1 As regards the second issue of demand of service tax under „Real Estate Agent Service', we find that the appellant is not acting as a real estate agent. It is pertinent to reproduce here the definition of the real estate agent as provided in Section 65(88)&(89) of the Act, is reproduced herein below:
"(88) "real estate agent" means a person who is engaged in rendering any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant;
(89) "real estate consultant" means a person who renders in any manner, either directly or indirectly, advice, consultancy or technical assistance , in Relation to evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate;"
8.2 The analysis of the aforesaid definition reveals that the real estate agent/consultant means a person, who is engaged in rendering 40 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 any service in relation to sale, purchase, leasing or renting of real estate and includes a real estate consultant and a "Real estate Consultant" is one who provides advice, consultancy or technical assistance in relation to evaluation, conception, development, construction, implementation, supervision, maintenance, marketing, acquisition or management of real estate.
8.3 We find that the appellant is not acting as a real estate agent and therefore, the service tax is not chargeable on the amounts/fees received by it in the course of performing of statutory duties. 8.4 It has been consistently held by the Tribunal that charges collected by the builder for authorizing transfer of allotment of property before sale or as part of the sale agreement is on principle to principle basis and no service is provided to any person in relation to sale, purchase, leasing, renting of any real estate and therefore, such charges are not covered under the head of „Real Estate Agent Services‟.
8.5 Further, we find that the Tribunal in the case of Commissioner of Service Tax, New Delhi vs. Ansal Properties and Infrastructures Ltd (supra) has held in para 10 as under:
―10. The Revenue contended that the respondent received certain considerations for change of name of the owners of the flats, by way of substitution of the name by new buyer in place of earlier owner of the flat, was in relation to sale or purchase of such property and accordingly liable to service tax. To levy service tax first of all the provider of service 41 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 should be a real estate agent and second while acting as such agent the person concerned should have provided service in relation to sale, purchase, leasing or renting of real estate. There is nothing in the show cause notice or the relied upon documents to show that the respondent acted in a capacity of "real estate agent" between the earlier owner and the new buyer of the flat. The changes made in the records of the respondent are not causative factors for such sale or purchase. We are in agreement with this observation of the Original Authority. In RIICO - 2017-TIOL-1725-
CESTAT-DEL., the Tribunal held that the transfer charges received by the appellant for permitting the transfer of allotted land from one person to another cannot be taxed as real estate agent service because they were custodians of land and were dealing with the allottee on principal to principal basis, not as an agent of either party. We note that the reliance placed by Revenue on Ajay Enterprises Pvt. Ltd. v. CST, Delhi - 2016 (42) S.T.R. 471 (Tri. - Del.) is not appropriate. In the said case it was admitted that the appellant was a real estate agent registered with the Department. Here in the present case the respondent is a real estate developer selling their constructed flats. They are dealing with the buyers, old or new, on principal to principal basis. Accordingly, we are in agreement with the impugned order that no service tax liability can be confirmed against the respondent under this category."
8.6 In view of our discussion on this issue, we are of the view that none of the receipts/income of the appellant fall under the scope of services defined under Section 65(105)(b) of the Finance Act, 1994; hence, this issue is also decided in favour of the appellant.
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9. Third Issue : Liability of service tax under „Reverse Charge Mechanism' 9.1 As regards the third issue of service tax liability for services received under „Reverse Charge Mechanism', we find that the appellant is not liable to pay service tax on legal charges/fees, on supply of manpower and on execution of work contract, because the appellant is not a business entity. The appellant is admittedly a body corporate but it does not qualify for the criteria of „business entity‟ nor is it registered as such. Therefore, it cannot be held that the appellant Haryana Housing Board is liable for payment of service tax on reverse charge basis in respect of the services mentioned above. 9.2 Further, we find that the Constitution Bench of Hon‟ble Apex Court in its judgment passed in the case of Shri Ramtanu Co- Operative Housing Society Ltd. Vs. State of Maharashtra & Others (supra) has clearly distinguished between a Business Corporation and a Governmental Authority Body Corporate. The relevant extracts from the said judgment from para 18 to para 20 are reproduced herein below:
"18. The Corporation is not a Government company within the meaning of Section 617 of the Companies Act, 1956 not can the Companies Act, 1956 be said to apply to the Corporation because under the provisions contained in Section 616 of the Companies Act that Act will apply to a company governed by any special Act except in so far as the provisions of the Companies Act are inconsistent with the provisions of such special Act. The provisions of the Act in 43 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 the present case in regard toincorporation, functions, powers and dissolution of the Corporation show that the purposes and objects of the Act and the functions and powers of the Corporation are like the wharf and weft of the fabric of development of industries by the State.
19. There are two provisions of the Act which are not to be found in any trading Corporation. In the first place, the sums payable by any person to the Corporation are recoverable by it under this Act as an arrear of land revenue on the application of the Corporation. Secondly, on dissolution of the Corporation the assets vest in and the liabilities become enforceable against the State Government.
20. The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in the State. The construction of buildings, the establishment of industries by letting buildings on hire or sale, the acquisition and transfer of land in relation to establishment of industrial estates or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act aims at building an industrial town and the Corporation carries out the objects of the Act. The hard core of trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transactions may be varied but the real character is buying and selling. The true character of the Corporation in the 44 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas. We are of opinion that the Corporation is not a trading one."
9.3 Further, we find the Ho‟ble High Court of Punjab & Haryana in the case of Bharat Bhushan Gupta & Company (supra) has categorically held that the Haryana Housing Board is a governmental authority as defined in the Notification No. 25/2012-ST dated 20.06.2012 and work contract services provided by the contractors to the Board are exempt under clause 12(a) of the Notification ibid. Relevant extracts from the said judgment from para 14 to para 21 of are reproduced herein below:
―14. The Board has been constituted in terms of the provisions of Section 3 of the Act, as was enacted by the State Legislature. It is a body corporate which consists of a Chairman, a Chief Administrator and such other members, as the State Government may, from time to time, appoint by a notification. The Chief Administrator shall be a person from amongst the officers of the rank of Head of the Department or Joint Secretary of the State Government. It is termed to be a local authority for the purposes of Land Acquisition Act, 1894. Section 20 of the Act provides that subject to control of the State Government the Board may incur expenditure on framing and execution of such housing schemes as may be considered necessary from time to time or as may be entrusted to it by the State Government. Every year, the Board is to prepare a budget in advance for the next year and place it before the State Government for its approval. After sanction is granted by the State 45 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 Government, the same is published in the Official Gazette.
The Board is authorized to borrow money for implementation of the projects, as approved with prior approval of the State Government. Section 72 of the Act provides that the State Government shall exercise superintendence and control over the Board and its officers. The aforesaid provisions of the Act clearly show that the Board is a governmental authority, as it is fully under the control of the State Government.
15. The issue sought to be raised by the petitioners is that they are contractors engaged by the Board for construction of BPL houses from time to time. In all the cases, except two, the contract was entered into after 1-7- 2012. There is no dispute about the period prior thereto as the petitioners in most of the petitions have categorically stated that service tax for that period was paid by them. The period in dispute is from 1-7-2012 onwards.
16. The petitioners approached this court for the reason that the Board deducted the amount of service tax from the running bills of the petitioners from the very beginning opining that service tax was payable. The action was taken, as claimed, on an opinion sought by the Board. The tax deducted from the bills of the petitioners, if leviable, would be liability of the Board in law.
17. The service tax has been levied on various services with amendments made in Finance Act, 1994. The services on which the tax was levied were added from time to time. Section 93 of the Finance Act, 1994 enables the Central Government to exempt any service from payment of tax by issuing a notification. Notification No. 25/2012-S.T., dated 20-6-2012 was issued stating therein that the Government being satisfied exempts the taxable services as enumerated 46 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 in the notification from the whole of the service tax leviable thereon. If Clause 12 of the notification dated 20-6-2012 is analyzed, exemption from taxation to the services is provided to :
(i) Government, a local authority or a governmental authority;
(ii) the kind of service being construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of;
(iii) it is meant predominantly for use other than for commerce, industry, or any other business or profession.
18. "Original works" has been defined in Clause 2(y) of the notification dated 20-6-2012 to mean the meaning as assigned to in Rule 2A of the Service Tax (Determination of Value) Rules, 2000.
19. On a plain reading of the notification dated 20-6- 2012, in our view, the service being provided by the petitioners would clearly fall in the exemption clause, as the Board is a governmental authority having been set up under a State Act, i.e., Haryana Housing Board Act, 1971. It is wholly controlled by the State Government. BPL houses constructed by the petitioners are meant for residential purpose and not for commerce, industry or any other business or profession.
20. Similar issue came up for consideration before a Division Bench of Patna High Court in Shapoorji Paloonji and Company Pvt. Ltd‟s (supra), where the contact was for construction of administrative block in Indian Institute of Technology set up under the Institutes of Technology Act, 1961. Indian Institute of Technology was held to be a governmental authority and the contract for construction 47 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 was opined to be falling in the exemption clause. The notice issued for levy of service tax was quashed.
21. In view of our aforesaid discussion, it can safely be opined that for the kind of contract entered into between the petitioners and the Board, no service tax is leviable, hence, the action of the Board in deducting part of the service tax, though payable in the hands of the Board, if tax is leviable, from the bills of the petitioners is declared to be illegal."
9.4 We also find that the in the above cited case, the department which was also a party before the Hon‟ble High Court of Punjab & Haryana, has accepted the said decision and refunds have been granted to the contractors by the department. 9.5 In view of our discussion on this issue, we hold that the demand of service tax under „Reverse Charge Mechanism‟ is not sustainable.
10.1 As regards extended period of limitation, we find that the appellant, which is a governmental authority constituted under the Housing Board Act, 1971, has provided all the information as required by the department. Moreover, being a statutory authority, the appellant is required to maintain proper accounts, which are duly audited by the office of the Accountant General and the audited accounts accompanied by audit report have been forwarded to the State Government as required by the Act. Further, all the figures have been taken from balance sheets. Therefore, in view of this, 48 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 there is no suppression or fraud with intent to evade the payment of tax.
10.2 This issue has been considered by the Hon‟ble Supreme Court in various cases and it has been consistently held that no suppression or fraud with intent to evade the service tax could be attributed to a government authority as there is no vested interest of the government authority to evade tax.
10.3 In the case of Commissioner vs. Electricity Pole Manufacturing - 2000 ((116) ELT A66 (SC) the Hon‟ble Apex Court has upheld the observations of the Tribunal whereby the Tribunal observed as under:
"On the question of limitation also, we find that there is no suppression with an intention to evade payment of duty. In view of the fact that the unit is funded by the State Government, the intention to get undue benefit of availing duty exemption cannot normally be attributed to the appellants. We, therefore, hold that the demand is hit by limitation and the demand can be enforced only for a period of six months from the date of issue of show cause notice."
10.4 Further, in the case of U.P. State Sugar & Can Dev. Corpn. Ltd. vs. CCE (supra), the Tribunal has observed as under:
"Since the Appellants are public-sector undertaking of the Govt. of U.P., the allegation of mis-statement, or suppression of fact with intent to evade the payment of duty does not make any sense. It is unconceivable that the Sugar Mills owned by a State Govt. owned Corpn. would try to 49 ST/60139-60140/2016 ST/60112-60113/2020 ST/60163-60164/2020 evade the payment of duty by resorting the wilful suppression of facts - more so when the duty paid was to be reimbursed to them by the Govt. In view of these circumstances, we are of the view that the Appellant's sungar mills cannot be accused of suppression of facts and therefore, neither the provisions of Section 11AB nor the provisions of Section 11AC would be attracted."
10.5 Further, in the case of M.P. Water & Power Management Institute vs. CCE - 2009 (15) STR 164 (Tri. Delhi), the Tribunal has observed in para 5 and para 6 as under:
―5. After hearing both sides and on perusal of the records, we find force in the submissions of the learned Advocate on limitation. It is seen that the appellant is a registered society having no profit motive. They were undertaking the job to help the Government bodies. The Commissioner (Appeals) set aside the penalties imposed under Section 80 of the Act considering the facts and circumstances of the case. The demand of tax vide show cause notice dated 22- 11-2005 for extended period cannot be sustainable.
6. In view of the above discussion, we set aside the demand of tax on scientific or technical consultancy and technical testing and analysis as barred by limitation. The appeal is allowed."
10.6 We find that in the present case, the department has failed to establish any of the ingredients which are required to prove in order to invoke extended period of limitation; therefore, we hold that the entire demand is barred by limitation.
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11. In view of our discussions and findings on all the issues cited supra, and by following the ratios of the various decisions cited supra, we are of the considered opinion that the impugned orders are not sustainable in law, accordingly, we set aside the impugned orders by allowing the appeals bearing nos. ST/60139/2016, ST/60140/2016, ST/60112/2020 & ST/60113/2020 filed by the appellant with consequential relief, if any, as per law. Consequently, the appeals bearing nos. ST/60163/2020 & ST/60164/2020 filed by the Revenue against the dropped demand are dismissed. Cross-objections are also disposed of accordingly.
(Order pronounced in the court on 06.08.2024) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) RA_Saifi