Custom, Excise & Service Tax Tribunal
Puneet Gupta vs Commissioner, Central Excise &Amp ... on 10 November, 2021
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Service Tax Appeal No.50786 of 2021 (SM)
CUSTOMS EXCISE & SERVICE TAX APPLELLATE TRIBUNAL
NEW DELHI.
PRINCIPAL BENCH - COURT NO.II
Service Tax Appeal No.50786 of 2021 (SM)
[Arising out of Order-in-Appeal No.Comm.(A)/45/2020-21 dated 31.03.2021 passed by the
Commissioner of Central Goods & Service Tax (Appeals-II), New Delhi]
Shri Puneet Gupta Appellant
(Successor-in-Interest for Smt. Vinod Bala)
E-402, Jhulelal Apartments, Road No.44,
Pitampura,
New Delhi-110 034.
Versus
Commissioner of Central Goods and Respondent
Service Tax, Central Excise and Service Tax Division, Connaught Place, Delhi South, New Delhi.
APPEARANCE:
Shri Puneet Bansal, Advocate for the appellant. Shri Ravi Kapoor, Authorised Representative for the respondent/Department.
CORAM:
HON'BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) FINAL ORDER NO.51934/2021 DATE OF HEARING/DECISION:10.11.2021 ANIL CHOUDHARY:
The issue in this appeal is whether the appellant is entitled to refund of service tax paid for purchase of under-construction flats/floors to the builder(s).
2. The brief facts are that the appellant purchased an independent (under construction) floor bearing no.A-T-FF-86 located on the second floor in Building Topaz having a super area of 1800 SFT. For the said purpose, the appellant entered into home buyer agreement dated 27.09.2011 with M/s.Emaar. The agreement contained a schedule of payment having multiple 2 Service Tax Appeal No.50786 of 2021 (SM) milestones for payment of consideration towards „construction of complex and building services‟ provided by Emaar. In terms of the agreement, this payment was supposed to be made along with Service Tax during different periods. Emaar raised several demand notes upon completion of milestones to recover the payment towards purchase of flats. Emaar also charged service tax applicable thereon, which was paid by appellant.
3. The appellant filed refund claim on the ground that levy of service tax on purchase of the property (under construction) was illegal and improper, as the provisions of Finance Act, 1994 read with Rules framed there under, did not provide for any mechanism for valuation to arrive at taxable value of service in a composite transaction, involving divesting of undivided share in land in purchase of an under construction property. The appellant relied on the judgment of the Hon‟ble High Court, Delhi dated 03.06.2016 in Writ Petition (C) No.2235/2011 and Writ Petition (C) No.2971/2011 in the matter of Shri Suresh Kumar Bansal and Shri Anuj Goyal & Others (hereinafter referred as "petitioners") Vs. Union of India. Appellant accordingly filed its refund claim of Rs.3,53,852/- (Three Lakh Fifty Three Thousand and Eight Hundred Fifty Two only) on 16.01.2019 in Form-R, under Section 11 B of CEA, 1944 read with Section 83 of the Finance Act, 1994, with the office of the Assistant Commissioner of Central Tax, Central Excise & Service Tax, Connaught Place Division, CGST Delhi South Commissionerate. In view of the refund application filed by Mrs. Vanita Bansal, a deficiency memo (DM)18.04.2019 was issued to the party by the then Assistant Commissioner, Connaught Place Division along with opportunity for personal hearing to submit requisite documents for processing of refund claim and clarification as to why the refund application should not be rejected on the following ground:-
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Service Tax Appeal No.50786 of 2021 (SM) "As per Section 129(1) of Finance Act, 2017 [Amendment of Rule 2A of Service Tax (Determination of Value) Rules, 2006, retrospectively], it is evident that after the words "value of transfer of property in goods", the words "or in goods and land or undivided share of land, as the case may be", has been inserted retrospectively, with effect from 01.07.2010. The judgement of High Court on the basis of which you have filed refund claim is passed on 03.06.2016 i.e. prior to the enactment of Finance Act, 2017. Therefore, the service tax charged by the builder from you appears to be genuine and non-refundable."
4. Pursuant to issue of show cause notice, refund claim was rejected vide order-in-original observing that the judgement of the Hon‟ble Delhi High Court in the case of Suresh Kumar Bansal and Others Vs. Union of India - 2016 (43) STR 3 (Delhi) is not applicable as the facts are distinguishable and the judgement is not squarely applicable. It is further observed that Central Government has amended Rule 2 A of Service Tax (Determination of Value) Rules, 2006 vide 2nd Amendment Rules 2012 w.e.f. 6.6.2012. The service tax shall be borne by the buyer, who availed the service provided by M/s. Emaar Limited, appears to be genuine and cannot be refunded. Accordingly, the refund claim was rejected.
5. Being aggrieved, the appellant preferred appeal before the Commissioner (Appeals) urging that the Hon‟ble Delhi High Court had held, directing to examine whether the builder has collected any amount as service tax from the petitioner/assessee (Punjeet Gupta) for taxable services, as defined under Section 65(105)(zzzh) of the Act and has deposited the same with the respondent authority/Government. Any such amount deposited shall be refunded to the petitioner with interest @6% from the date of deposit till the date of refund.
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Service Tax Appeal No.50786 of 2021 (SM)
6. Further, the Hon‟ble High Court held that levy of service tax on the construction of complex and building services is not sustainable in absence of Valuation Mechanism. Further, held that retrospective amendment in Rule 2 A of Service Tax (Determination of Value) Rules, does not apply to the services of the construction of complex and building. Further, held that in such circumstances, the appellant, who has deposited the tax through the builder, is entitled to refund with interest. Reference was also made by the appellant, subsequent to the judgement of Delhi High Court in the case of Suresh Kumar Bansal, that the Revenue had filed a review petition in the case of Ruchi Goyal - 2019 (29) GSTL 392 (Delhi), on the ground that the Ruling of Hon‟ble High Court needs review, in view of the amendment in Rule 2 A of Service Tax (Determination of Value) Rules. The Hon‟ble High Court observed in para 23 of the judgement in the case of Suresh Kumar Bansal (Supra) that, it was noted that Section 65(105)(zzzza) deals with works contract and it is possible to argue that a composite contract for the development of complex and sale of units would fall within its scope. However, the High Court did not propose to examine that issue, since the entire argument revolved around the scope of taxable service as envisaged in Section 65 (105)(zzzh) of the Finance Act, 1994, and is specific to construction of complex and building. However, the ld. Commissioner (Appeals) relying on the order of the Adjudicating Authority was pleased to reject the appeal.
7. Being aggrieved, this appeal before this Tribunal.
8. Heard both the sides.
9. Levy of service tax on composite contract for purchase of under construction complex, as defined under Section 65(105)(zzzh) of the Finance 5 Service Tax Appeal No.50786 of 2021 (SM) Act, 1994, was the subject matter of dispute before the Hon‟ble Delhi High Court. In the case of Suresh Kumar Bansal and Ors. Vs. Union of India, the Hon‟ble Delhi High Court vide judgement dated 03.06.2016 has held that no service tax shall be levied on composite contracts. The relevant paragraph in the said judgement dated 3rd June, 2016 is extracted herein below:-
55. In view of the above, we negate the challenge to insertion of clause (zzzu) in sub-section 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."
10. I further notice that Section 65(105)(zzzh) of the Act reads as under:-
"To any person, by any other person, in relation to construction of complex].
[Explanation: For the purpose 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 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 provider by the builder to the buyer;] 6 Service Tax Appeal No.50786 of 2021 (SM)
11. From a plain reading of the Section 65(105)(zzzh), it is evident that there is no legal mandate to bifurcate the elements of a composite contract as to service component and material component and /or land component and thus, in absence of such mandate, the value of a composite contract cannot be disintegrated for the purpose of service tax levy as held by the Hon‟ble Supreme Court in the case of Commissioner of Central Excise & Customs Vs. Larsen and Toubro Limited - 2015 (39) STR 0913 (SC). 12 Accordingly, I hold that in spite of retrospective amendment in Rule 2 A of the Service Tax (Determination of Value) Rules, 2006, service tax cannot be charged for the services defined under Section 65(105)(zzzh).
13. Accordingly, the impugned order is set aside and the appeal is allowed. Revenue is directed to refund the amount of Rs.3,53,821/- paid through the builder to the Government exchequer within a period of 45 days from the date of receipt/service of copy of this order along with interest @ of 6% from the date of deposit of the tax, till the date of refund.
14. Accordingly, the appeal is allowed.
[Operative part already pronounced in open court] (ANIL CHOUDHARY) MEMBER (JUDICIAL) Ckp.