Custom, Excise & Service Tax Tribunal
Orchid Homes vs Cst Ch on 3 June, 2025
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
COURT HALL - III
Service Tax Appeal No. 41368/2015
(Arising out of Order in Appeal No. 111 to 116/2015 (STA - II) dated 16.4.2014
passed by the Commissioner of Central Excise (Appeals - I), Chennai)
M/s. Orchid Homes Appellant
No. 99, V.M. Street
Mylapore, Chennai - 600 004.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai South Commissionerate MHU Complex, No. 692, Anna Salai Nandanam, Chennai - 600 035.
APPEARANCE:
Ms. S. Vishnu Priya, Advocate for the Appellant Shri Sanjay Kakkar, Authorized Representative for the Respondent CORAM Hon'ble Shri P. Dinesha, Member (Judicial) Hon'ble Shri M. Anjani Kumar, Member (Technical) FINAL ORDER NO. 40570/2025 Date of Hearing: 02.06.2025 Date of Decision:03.06.2025 Per P. Anjani Kumar, Brief facts of the case are that the appellants, M/s. Orchid Homes are engaged in construction of residential complexes. After an audit conducted on the accounts of the appellant, the Revenue came to the conclusion that the appellants undertook the construction of two residential complex projects viz. 'Orchid Chengachery' and 'Orchid Balaganapathy Enclave', each of them consisting of more than 12 apartments and have not discharged service tax during the period 16.6.2005 to 30.9.2008. A Show Cause Notice dated 27.9.2010 was issued demanding service tax of Rs.18,22,530/- along with interest 2 and penalties. The Additional Commissioner of Central Excise, Chennai vide Order in Original dated 29.3.2012 confirmed the demand under proviso to sec. 73(1) of the Finance Act, 1994 along with interest and imposed equal penalty under sec. 78 of the Act. On an appeal, the Commissioner (Appeals), Chennai vide Order in Appeal dated 16.4.2014 has confirmed the demand partially and however set aside the penalty. Hence this appeal.
2. Ms. S. Vishnu Priya, Ld. Advocate for the appellant submits that the issue is no longer res integra and CESTAT has decided the issue, on the basis of Hon'ble Supreme Court's judgment in the case of Larsen & Toubro Ltd. in various cases. This Bench also in the case of Jain Housing & Construction Ltd. vide Final Order No. 40077 to 40079/2023 dated 24.2.2023 decided a case with similar facts in favour of the appellant and the decision has been upheld by the Hon'ble Supreme Court as reported in 2023 (10) CENTAX 171 (SC). She further submits that the Show Cause Notice itself agrees that the work was composite in nature involving service and sale of property and material and has given abatement to an extent of 67%. This is the acknowledgment of the fact that the appellants are engaged in a service under a contract which is composite unvivisectable in nature. She also relies on the decision of M/s. ETA Constructions of India Ltd. Vs. CGST and Central Excise, Chennai reported in 2024 (7) TMI 996 - Tri. Chennai. She further submits that this being a matter involving interpretation of legal provisions, extended period cannot be invoked. Therefore, the demand requires to be set aside both on merits and on limitation.
3. Shri Sanjay Kakkar, Ld. Authorized Representative for the Revenue reiterates the findings of the impugned orders and submits 3 that from the appeal papers itself and the submissions of the appellant, it is evident that the premises constructed by the appellant has some common areas and in view of the definition, the activity undertaken should be under 'Residential Complex Service'. The Ld. AR raises an issue that the appellant has not taken the plea that the service rendered by them is a works contract service and in view of the decision of the Hon'ble Supreme Court in the case of Larsen & Toubro (supra), the appeal needs to be allowed which was not taken any time during the proceedings either at the original authority or the appellate authority or in the grounds of appeal before this Tribunal. Therefore, he submits that this plea may not be entertained.
4. Heard both sides and perused the records of the case.
5. We find that the Show Cause Notice accepts the fact that consideration includes value of land and registration charges. Therefore, the notice hold that duty is payable on 33% of the gross value for consideration. The Show Cause Notice further holds that in para 5 and 7 "5. Orchid Chengacheri" is a single project comprising of 49 w apartments constructed on a piece of land measuring 16,659 Sq. ft., sub divided into 13 plots. "Orchid Balaganapathy Enclave" is also a single project comprising of 20 apartments constructed on a piece of land. measuring 15,064 Sq.ft. sub divided into 5 plots. The Joint Development Agreements in both the cases stipulate the development and construction of apartments of the entire piece of land. In both the cases, the Agreement for Sale entered into between the land owners and the allottees and Sale Deed for sale of undivided share of land by the land owners to the respective allottees also stipulate the development and construction of apartments in the entire piece of land. Also, the builder/Contractor's agreement entered into between the assessees and the respective allottees in both the projects also stipulate the development and construction of apartments over the entire piece of land.
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7. In the case of both the residential complex projects, there is no distinction/demarcation between the plots. All the buildings which constitute the residential complex "Orchid Chengachery" are located 4 within a single continuous compound wall. Similarly, all the buildings which constitute the residential complex "Orchid Balaganapathy Enclave" are also located within a single continuous compound wall. The residents of the both the complexes practically have easement rights over the entire common area within the compound wall. For example, the residents of the complex can park their vehicles in the available space in the entire complex. Hence, the above said residential complexes conform to the definition of "Residential Complex", as stated in Section 65(91a) of the Finance Act, 1994. Hence, it appears that the assessee are liable to pay Service tax on the construction activities of all the apartments in the Residential Complex projects viz. "Orchid Chengachery" in Chromepet and Orchid Balaganapathy Enclave" in Mylapore."
6. On going through the Show Cause Notice, it is clear that the agreement / the work undertaken involves sale of goods also and the consideration is not vivisectable. Therefore, the activity falls under works contract service which has come into effect from 1.6.2007. Ld. Authorized Representative submits that the very presence of common area makes the service of construction liable to service tax under 'Construction of Residential Complexes'. We find that this logic is not acceptable for the reason that even if the plan for complexes shows presence of common areas / common utilities, it will not take away the composite nature of the service. Merely because the description of the services tallies with the definition given under residential complex service, the same cannot be held to fall under 'Construction of Residential Complex Service'. What is required to be seen is whether or not total consideration is a non-vivisectable for a composite contract. The answer is 'yes' because the Show Cause Notice also could not identify the amount of consideration for the pure service and thus holds that they are eligible for abatement covered in terms of Notification No. 18/2005-ST dated 7.6.2005. We find that this Bench in the case of Jain Housing and Construction Ltd. cited supra held as follows:-
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5.1 The Learned Advocate for the appellant would submit at the outset that the issue involved is no more res integra as the same stands settled by the decision of the Hon'ble Apex Court in the case of Commissioner of C.Ex. & Cus., Kerala v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)], which has been followed by the Chennai Bench of the CESTAT in the case of M/s. Real Value Promoters Pvt. Ltd. v. Commissioner of G.S.T. and Central Excise, Chennai & ors. [Final Order Nos. 42436-42438/2018 dated 18-9-
2018 - CESTAT Chennai]. This very Bench, in the case of M/s. Real Value Promoters Pvt. Ltd. (supra), has considered the orders of various Benches of the CESTAT wherein the decision in the case of M/s. Larsen & Toubro Ltd. (supra) of the Hon'ble Apex Court was considered, and has concluded as under:-
"8. In the light of the discussions, findings and conclusions above and in particular, relying on the ratios of the case laws cited supra, we hold as under:-
a. The services provided by the appellant in respect of the projects executed by them for the period prior to 1-6-2007 being in the nature of composite works contract cannot be brought within the fold of commercial or industrial construction service or construction of complex service in the light of the Hon'ble Supreme Court judgment in Larsen & Toubro (supra) upto 1-6-2007 b. For the period after 1-6-2007, service tax liability under category of "commercial or industrial construction service' under section 65(105)(zzzh) ibid, "Construction of Complex Service' under section 65(105)(zzzq) will continue to be attracted only if the activities are in the nature of services' simpliciter.
c. For activities of construction of new building or civil structure or new residential complex etc. involving indivisible composite contract, such services will require to be exigible to service tax liabilities under "Works Contract Service' as defined under section 65(105)(zzzza) ibid.
d. The show cause notices in all these cases prior to 1-6-2007 and subsequent to that date for the periods in dispute, proposing service tax liability on the impugned services involving composite works contract, under 'Commercial or Industrial Construction Service' or 'Construction of Complex' Service, cannot therefore sustain. In respect of any contract which is a composite contract, service tax cannot be demanded under CICS/CCS for the periods also after 1-6-2007 for the periods in dispute in these appeals. For this very reason, the proceedings in all these appeals cannot sustain."
7. In view of the above, we find that the impugned order cannot be sustained and therefore set aside. We are also of the considered opinion that as the issue involves, interpretation of legal provisions, extended period cannot be invoked. We also find that the Ld. AR 6 objects to the reliance by the appellant in the case of Larsen & Toubro (supra) decided by the Hon'ble Supreme Court. We find that the point being legal in nature can be taken at any point of time. The decision of the Hon'ble Supreme Court has now become the law of the land and therefore justice cannot be denied by holding that such a plea was not taken earlier. Such an approach would defeat the very purpose of justice and would amount to annulling the process of law. Therefore, we are of the considered opinion that this objection by the Ld. AR is not acceptable. Even if it is opined that the appellants are required to file a miscellaneous application for raising additional grounds, we find that the same is an empty formality and this Bench condones the same. As a result, the appeal is allowed with consequential relief, if any, as per law.
(Order pronounced in open court on 03.06.2025)
(P. ANJANI KUMAR) (P. DINESHA)
Member (Technical) Member (Judicial)
Rex