1
BRIEF FACTS OF THE CASE –
M/s. RJP Infrastructure Pvt. Ltd., 206, Shefali Centre, Near Paldi Cross Roads, Ellisbridge,
Ahmedabad-380006 (hereinafter referred to as “noticee” or “M/s RJP”) were providing
various taxable services and were registered for the same with Service Tax Commissionerate,
Ahmedabad. The details of the services provided by them are as follows:
Sr.No. Services provided to the clients by service
tax
M/s RJP
registration No.
1
Commercial
or
Industrial AABFR8756PST001 Date of registration
Construction Service
24.01.2004
2
Commercial or Industrial Building
These
services
and Civil Structure
were added in the
registration
3
Renting of immovable property
certificate
on
services
17.2.2008
4
Works Contract services
5
Works Contract Services
AACCR9599JST001 Date
of
registration:
04.08.2008
2.
On the basis of an intelligence that M/s RJP were evading payment of service tax by
short paying service tax on the gross income charged and earned/received by them, enquiry
was initiated against M/s RJP. Letters dated 30.11.2009, 08.12.2009, 05.02.2013 &
27.05.2013, 24.06.2013 and summons dated 25.01.2010, 29.01.2010, 14.02.2012 &
03.04.2012 were issued to M/s RJP asking them to provide documents such as Balance
Sheets/Profit & Loss accounts, Ledger Accounts for income, Bank Statements, Income-Tax
Returns, evidence showing the payment of service tax, copy of S.T.-3 returns.
2.1
M/s RJP vide letters dated 23.12.2009, 04.01.2010, 20.01.2010, 08.02.2010,
24.02.2010, 05.03.2010, 16.12.2010, 21.02.2012, 26.04.2012, 15.02.2013 & 03.07.2013
submitted copy of Profit & Loss Account, Income Ledgers, copy of S.T.-3 returns, Form
3CD, for the period of financial years 2007-08 onwards.
3.
Scrutiny of the documents revealed that M/s RJP had provided construction service to
Ahmedabad Municipal Corporation with regard to two projects and did not discharge service
tax liablilty for the same. The two projects for which no service tax was paid were:
a.
housing project under JnNURM scheme for construction of 2976 houses for
urban poor at various locations in Ahmedabad.
b.
construction of 960 houses for safai kamdar at various locations in
Ahmedabad.
4.
HOUSING PROJECT UNDER JNNURM SCHEME FOR CONSTRUCTION OF
2976 HOUSES FOR URBAN POOR AT VARIOUS LOCATIONS IN AHMEDABAD –
4.1
As Shri Ramendra J. Parikh, Director of the RJP was looking after overall work
related to construction activity, summons were issued to him and a statement was recorded
on 05.05.2011, wherein, Shri Ramendra J. Parikh interalia stated that:
- they are registered with Service Tax department and are having registration
Number AACCR9599JST001 under works contract service.
- from 01.04.2008 M/s. Ramendra J. Parikh was taken over by M/s. RJP
Infrastructure Pvt. Ltd.
2
-
-
-
-
-
M/s. Ramendra J. Parikh was purchased by M/s. Ramendra J. Parikh Contractors
Pvt. Ltd. with its assets and liabilities described in the schedule of the agreement
dated 01.04.2008
the name of the company was changed from M/s. Ramendra J. Parikh Contractors
Pvt. Ltd. to M/s. RJP Infrastructure Pvt. Ltd. w.e.f. 24.04.2008. He also produced
fresh certificate of incorporation consequent upon change of name issued by Asst.
Registrar of Companies, Gujarat, Dadra and Nagar Haveli.
M/s. Ramendra J. Parikh were engaged in the business of Construction and
Infrastructure development and M/s. RJP Infrastructure Pvt. Ltd. is also engaged
in the same business.
they were to construct 2976 houses for urban poor under the Jawaharlal Nehru
National Urban Renewal Mission (JNNURM) Scheme as per Work Order No.
1187 dated 07.08.07 against their tender dated 21.04.07 for the Ahmedabad
Municipal Corporation. He had produced copy of said Work Order and stated that
the material required for said construction activity was purchased by them.
Against the work done as per the terms in the said letter of intent, the Ahmedabad
Municipal Corporation has made payments to them.
Shri Mahendra Sukhadia, Dy. Director, AMC had vide his letter dated 01.04.2011
informed that for the period from 11.05.2007 to 23.02.2009 an amount of Rs.
9,48,28,355/- and for the period from 24.02.2009 to 30.06.2010 an amount of Rs.
22,70,44,430/- was paid to them. (Total Rs. 32,18,72,787/-)
4.1.1 While recording his statement, Shri Parikh was explained that as per Notification No.
28/2010 – ST dated 22.6.2010, the “Construction of Complex” referred in sub clause (zzzh)
of clause (105) of section 65 of the Finance Act, 1994, when provided to Jawaharlal Nehru
National Urban Renewal Mission and Rajiv Awaas Yojana was exempted from the whole of
Service Tax leviable thereon under section 66 of the Finance Act with effect from
01.07.2010. He was also explained that since the said notification came into effect from
01.07.2010, they were liable to pay service tax under “Construction of Residential Complex”
service referred in sub clause (zzzh) of clause (105) of section 65 of the finance Act, when
provided to Jawaharlal Nehru National Urban Renewal Mission for the period prior to
01.07.2010. He was also explained that as they had undertaken work under JnNURM for
Ahmedabad Municipal Corporation and had received payment from Ahmedabad Municipal
Corporation as explained above, they were liable to pay service tax amounting to Rs.
1,15,85,099/- (Inclusive of Edu. Cess and Higher Sec. Edu. Cess). The service tax which
they were required to pay was calculated as below:
Period
11.05.07 to
24.02.09 to
Total
23.02.09.
30.06.10.
Gross Receipt
9,48,28,355
22,70,44,430
32,18,72,787
Abatement @ of 67%
6,35,34,998
15,21,19,768
21,56,54,767
Net Receipt
3,12,93,357
7,49,24,662
10,62,18,202
Rate of S.Tax.
12%
10%
S. Tax Payable
37,55,203
74,92,466
1,12,47,669
Edu. Cess.
75,104
1,49,849
2,24,953
H.S.Edu. Cess.
37,552
74,925
1,12,477
Total Payable
38,67,859
77,17,240
1,15,85,099
*
Abatement of 67% has been considered for arriving at the taxable value on the
grounds that M/s RJP has not taken any Cenvat credit and has also not availed any benefit of
Exemption Notification No.12/2003-ST dated 20.06.2003
3
4.2 However, Shri Parikh stated that they had made application before the Central Board
of Excise and Customs, New Delhi dated 26.08.2010 through Commissioner of Service Tax,
Ahmedabad under section 11C of the Central Excise Act, 1944 made applicable to Service
Tax vide Section 83 of Finance Act 1994 wherein they had submitted that
- an amount of Rs. 38,000/- Crores had been spent so far on the schemes under
JnNURM. That the projects had been implemented all over the country.
- these projects were financed by the Government and are of Infrastructure Nature
for Urban Poor
- no where in the country Service Tax has been demanded and collected in respect
of these projects.
4.3
He further stated that although the Construction of houses for the rural poor may fall
under the service head Construction of complex service, the service tax was not demanded as
the projects were for the rural poor and without any commercial and profit making intention.
He also emphasized that the houses were given to rural poor at 10% of the cost of the house
and the balance cost of 90% was borne by the Government.
4.4
He further stated that as the houses were to be given at 10% of the cost of
construction, it was never the intention of the Government to increase the cost of houses by
adding service tax to the cost of the house. This was the reason why none of the Service Tax
Commissionerates demanded service tax from the contractors who constructed the houses
and other projects under the JnNURM Scheme. He also produced copy of their said
application dated 26.08.2010 and requested to wait till the reply was received for above said
application made with the Central Board of Excise and Customs, New Delhi.
5.
The Construction of complex service, referred to in sub clause (zzzh), when provided
to JnNURM and Rajiv Awas Yojna are fully exempted with effect from 01.07.2010, vide
notification no. 28/2010-ST dated 22.06.2010. Therefore, prior to 01.07.2010 the service tax
is payable on the construction of Complex service (sub clause zzzh) even though projects are
under JnNURM.
5.1
Notification No. 28/2010 – SP dated 22.6.2010 is produced herein below:
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi, the 22nd June, 2010
Notification No. 28/2010 - Service Tax
G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section
93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the
Finance Act), the Central Government, on being satisfied that it is necessary
in the public interest so to do, hereby exempts the taxable service of
construction of complex referred to in sub-clause (zzzh) of clause (105) of
section 65 of the Finance Act, when provided to Jawaharlal Nehru National
Urban Renewal Mission and Rajiv Awaas Yojana, from the whole of the
service tax leviable thereon under section 66 of the Finance Act.
2.
This notification shall come into force on 1st day of July, 2010.
[F. No.334/03/2010 -TRU]
(K.S.V.V.Prasad)
Under Secretary to the Government of India
4
6.
CONSTRUCTION OF 960 HOUSES FOR SAFAI KAMDAR AT VARIOUS
LOCATIONS IN AHMEDABAD During the course of investigation, it was also revealed that M/s RJP was not paying service
tax on construction service provided by them to Ahmedabad Municipal Corporation for
construction of 960 houses for safai kamdar at various locations in Ahmedabad. Accordingly,
summons was issued to Shri Ramendra J. Parikh, Director of the RJP Infrastructure Pvt. Ltd.
for recording his statement.
6.1
Another statement of Shri Ramendra J. Parikh, Director of the RJP was once again
recorded on 30.08.2013. On being asked about the service provided to Ahmedabad
Municipal Corporation for construction of 960 houses for safai kamdar at various locations
in Ahmedabad and not paying the service tax on this service, he stated that the services are
rendered to Ahmedabad Municipal Corporation for construction of 960 houses for safai
kamdar at various locations in Ahmedabad i.e. for non commercial purposes and hence the
same is not taxable as per provisions of the Service Tax Act. Necessary evidence in this
regard, were furnished to Preventive Group I by City Engineer of Ahmedabad Municipal
Corporation vide letter dated 01.02.2010.
6.2
On being asked about the details of income received from Ahmedabad Municipal
Corporation for construction of 960 houses for safai Kamdar at various locations in
Ahmedabad, he provided following the details of income as per table below:Period
2010-11
2011-12
Total
Gross Receipt 2,00,60,794 7,49,19,184 9,49,79,978
6.3
Thus, M/s RJP had provided taxable service to Ahmedabad Municipal Corporation
for construction of 960 houses for safai kamdar at various locations in Ahmedabad, which
appeared taxable under the service of “Construction of Residential Complex” and for which
they had not paid the service tax.
7.
On the basis of information provided by M/s RJP, recorded in statement dated
30.08.2013 and the reconciliation by this department, the service tax liability of M/s RJP was
calculated as below:
Period
2010-11
2011-12
Total
Gross Receipt
2,00,60,794
7,49,19,184
9,49,79,978
Abatement @ of 67%
1,34,40,732
5,01,95,853
6,36,36,585
Net Receipt
66,20,062
2,47,23,331
3,13,43,393
Rate of S.Tax.
10.3%
10.3%
Total Payable
6,81,866
25,46,503
32,28,369
*
Abatement of 67% has been considered for arriving at the taxable value on the
grounds that M/s RJP has not taken any Cenvat credit and has also not availed any benefit of
Exemption Notification No.12/2003-ST dated 20.06.2003
5
8.
Further verification and scrutiny of the ledgers, Balance Sheets, etc. with the ST-3
return filed by M/s RJP revealed that M/s RJP had not ascertained the correct value of
service tax payable in their ST-3 returns. M/s RJP has short paid service tax but has filed
ST-3 return on regular basis. M/s RJP had failed to show the income of Rs 41,68,52,765/(Rs. 32,18,72,787/- + Rs. 9,49,79,978/-), which they had received from Ahmedabad
Municipal Corporation for construction of houses for JnNRUM project and construction of
houses for safai kamdar (discussed in the above para) in their ST-3 returns and also had
failed to pay service tax on Rs 41,68,52,765/-.
9.
M/s RJP was engaged in providing Works Contract service, Construction Service in
respect of Commercial or Industrial Building & Civil Structure and Construction of
Residential Complex and had taken service tax registration under the category of Works
Contract service and Construction Service in respect of Commercial or Industrial Building
and Civil Structure. M/s RJP was asked vide letter dated 10.10.2013 whether they had
taken/utilized the Cenvat Credit and availed any benefit under notification No.12/2003-ST
dated 20.06.2003, they informed vide their letter dated 14.10.2013 that “they have not taken
any input credit as well Cenvat credit and also not availed any benefit as mentioned in the
Exemption Notification No.12/2003-ST dated 20.06.2003”. Accordingly, the abatement @ of
67% was available to them on gross income receipts for the said period.
9.1
The “Construction of Residential Complex” defined under section Section 65(30a) of
the Finance Act, 1994, is a taxable service defined under sub-clause (zzzh) of clause (105) of
Section 65 of the Finance Act, 1994. From the income shown under various heads of
accounts in their books of accounts, it was revealed that M/s RJP had rendered various
services to their service recipients and did not pay any service tax thereon. They had evaded
service tax by not showing the income of Rs 41,68,52,765/- earned by them during the
period from 11.5.2007 to 31.3.2012.
10.
Upon reconciliation of the figures of taxable income reflected in the books of
accounts viz., Balance Sheets, Income Ledgers vis-à-vis taxable value reported in the ST-3
returns filed, service tax liability was worked out and a worksheet was prepared (Annexure A
and Annexure B to the show cause notice). Perusal of the annexures revealed that even
though M/s RJP had received Rs 41,68,52,765/- (Rs. 32,18,72,787/- + Rs. 9,49,79,978/-)
during the F. Y. 2007-08 & 2011-12, they did not pay service tax amounting to Rs.
1,48,13,468/- (including Edu cess and SHE cess) (Rs. 1,15,85,099/- + Rs. 32,28,369/-).
11.
Thus, it appeared that M/s RJP had contravened the following provisions –
1)
Section 67(2) of the Finance Act, 1994 in as much as they had failed to pay
appropriate service tax on the gross value charged by them in respect of the taxable
service “Construction of Residential Complex” provided by them;
2)
Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax
Rules, 1994 in as-much-as they had failed to pay the service tax amounting to Rs.
1,48,13,468/- as mentioned in Table A and Table B for the period from 2007-08(
from Oct, 2007) to 2011-12 to the exchequer within the stipulated time limit;
3)
Sec. 69 of the Finance Act, 1994 as amended in as much as they had failed to
amend their ST-2 Certificate by adding the complex construction services.
4)
Sec. 70(1) of the Finance Act, 1994 as amended read with Rule 7 of the
Service Tax Rules, 1994 in as much as they had failed to self assess the service tax
on the taxable value received by them for the period 2007-08( from Oct, 2007) to
2011-12.
6
12.
It appeared that even though M/s RJP were registered with the Service Tax
department; they had not discharged their Service Tax liability in full. As per the provisions
of the Finance Act, 1994 and Rules made there under, M/s RJP were required to assess
correct value for the services provided & received by them as well as to pay service tax on
the actual amount received/ paid by them for rendering/ receiving services from their clients
within the stipulated time as prescribed and to follow all the procedures laid down in the Act
and Rules. In this case, M/s RJP was filing the ST-3 returns for the Construction Service in
respect of Commercial or Industrial Building & Works Contracts and paying service tax on
it. Though the amount received/ paid to the various parties was shown in their books of
account for the impugned period, they failed to disclose correct taxable value for the said
services in the respective periodical returns. Even though the correct taxable value was in the
knowledge of M/s RJP, they neither disclosed the details/ data as discussed in the foregoing
paras in their ST-3 returns nor did they submit any documents along with the ST-3 returns or
at any other point of time. Furthermore, the liability to pay service tax on short paid service
tax came to the notice of the department only on scrutiny of Financial Books of Accounts.
Therefore, had not the short payment of service tax been detected during the course of
scrutiny of financial records by the department, the same would have gone undetected. Thus,
it appeared that they had deliberately suppressed the correct taxable value and thus not paid
the correct service tax leviable on the taxable value towards providing/ receiving taxable
services with a view to evade payment of service tax. All the above acts of contravention on
the part of M/s RJP appeared to had been committed by way of suppression of facts with an
intent to evade payment of service tax as discussed in the foregoing paras and, therefore, the
said service tax not paid was required to be demanded and recovered along with interest from
them under the proviso to Section 73 (1) of the Finance Act, 1994 by invoking extended
period of five years.
13.
Further, Shri Ramendra J. Parikh, Director of M/s RJP Infrastructure Pvt. Ltd. in his
statement dated 30.08.2013 has stated as under:
“Further, I state that we have regularly filed the ST-3 return since 2007-08 upto 2012-13.
The ST-3 returns have been filed for the period 2007-08 (2nd half), 2008-09 (1st half), 200809 (2nd half), 2009-10 (1st half), 2009-10 (2nd half), 2010-11 (1st half), 2010-11 (2nd half),
2011-12 (1st half) & 2011-12 (2nd half) on 25.10.2008, 31.03.2009, 16.12.2009, 23.12.2009,
16.12.2010, 25.04.2011, 29.06.2011, 08.02.2012 & 08.11.2012 respectively. ”
13.1
In view of the above, since the ST-3 return for the period 2007-08 ( 2nd half) has
been filed on 25.10.2008 the service tax for the period 2007-08 ( 2nd half) onwards is
demandable, invoking extended period of 5 years.
14.
All these acts of contravention, omissions and commissions on the part of M/s RJP
as stated in the foregoing paras appeared that they had willfully suppressed the facts, nature
and value of service provided and received by them with an intent to evade the payment of
service tax for the services provided and received by them, rendering themselves liable for
penalty under provisions of Section 76 and Section 78 of the Finance Act, 1994.
15.
They also appeared liable to pay interest at the appropriate rate for the period from
due date of payment of service tax till the date of actual payment as per the provisions of
section 75 of the Finance Act, 1994.
16.
Therefore, M/s. RJP Infrastructure Pvt. Ltd., situated at 206, Shefali Centre, Near
Paldi Cross Roads, Ellisbridge, Ahmedabad-380006 were issued a show cause notice (SCN)
dated 24.10.2013 from F.No.STC/4-39/O&A/13-14, calling upon them to show cause to the
7
Commissioner, Service Tax, 1st Floor, Central Excise Bhavan, Behind Panjara Pole, Opp..
Govt. Polytechnic, Ambawadi, Ahmedabad - 380 015 as to why:(i)
(ii)
(iii)
(iv)
(v)
(vi)
The amount of Rs. 13,75,61,595 (10,62,18,202 + 3,13,43,393) received by M/s
RJP during the period from 2007-08 to 2011-12 should not be considered as
taxable value after allowing abatement @ 67% on the gross receipt ( Rs.
32,18,72,787 + Rs. 9,49,79,998).
Service Tax amounting Rs. 1,48,13,468/- (including Edu cess and S&HE cess) in
respect of “Construction of Residential Complex Service” not paid by them during
the period from 2007-08 to 2011-12 should not be demanded from them under
proviso to Section 73 (1) of the Finance Act, 1994 by invoking the larger period of
five years.
Interest on the amount of service tax Rs. 1,48,13,468/- at the rate applicable
should not be charged from them under Section 75 of the Finance Act, 1994.
Penalty should not be imposed upon them under Section 76 of the Finance Act,
1994 as amended for the failure to make the payment of service tax payable by
them within stipulated time.
Penalty should not be imposed upon them under Section 77 of the Finance Act,
1994 as amended for the failure to get registered under Construction of Residential
Complex Service/ Commercial & Industrial Construction Service.
Penalty should not be imposed upon them under Section 78 of the Finance Act,
1994 as amended or suppressing the value of taxable services provided by them
before the department with intent to evade payment as shown above.
DEFENCE –
17.
The noticee has filed their defence reply vide letter dated 2.7.2014. The main
points of defence are summarized as follows 17.1
Housing Project under JNNRUM Scheme for construction of 2976 houses
for urban poor at Various Locations in Ahmedabad executed on behalf of Ahmedabad
Municipal Corporation (AMC):17.1.1
The contract for construction of houses for urban poor at various locations at
Ahmedabad had been awarded to them by Ahmedabad Municipal Corporation (AMC). The
said project had been undertaken by AMC and had been funded out of the Grant of Central
Government under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The
object of the said project was to create Ahmedabad slum less city by the year 2012 and for
this adequate housing with adequate infrastructure facilities needed were considered for
housing project to meet the aspirations of EWS. In this regard City Development Plan
prepared by AMC had been approved by Government. The fund of the contract awarded to
them had been granted under JNNRUM scheme of Central Government of India and the
purpose of the scheme and the contract was to provide adequate housing with adequate
infrastructure facilities to urban poor to create Ahmedabad slum less city. A copy of the
“Proactive Disclosure as per RTI Act, 2008” made by AMC in respect of housing project
was enclosed by the noticee for perusal.
17.1.2
The constructions of Houses under JNNRUM were implemented by the
Ministry of Housing and Urban Poverty Alleviation, Government of India in 28 cities in the
country. The aforesaid projects fell under Urban Agglomerations (UA) under sub-mission on
Basic Services to the Urban Poor (BSUP). The project was executed as per the guidelines for
Integrated Housing & Slum Development Programme (IHSDP) issued in December, 2005
8
and guidelines for Bask Services to the Urban Poor (BSUP). As the project was initiated
under JNNRUM of Central Government, it was implemented all over the country. All
projects under this scheme are flagship schemes of the Government of India to provide
shelter for the poor and the disadvantaged.
17.1.3
The noticee submits that JnNURM schemes have been kept out of the ambit of
service tax vide Notification No.28/2010-ST dated 22.6.2010 (effective from 1.7.2010) and
department has also accepted this fact. Therefore, the question for consideration remains
limited to services rendered prior to 1.7.2010 only.
17.1.4
According to noticee, the said contract amount is not subject to service tax
liability in terms of exemption provided under notification no. F.No.B2/8/2004-TRU dated
10th September, 2004 issued by Government of India, Ministry of Finance, Department of
Revenue, (Tax Research Unit), the relevant portion of the which is reproduced below for
reference.
“13.2 The leviability of service tax would depend primarily upon whether the building or
civil structure is ‘used, or to be used’ for commerce or industry. The information about this
has to be gathered from the approved plan of the building or civil construction. Such
constructions which are for the use of organizations or institutions being established solely
for educational, religious, charitable, health, sanitation or philanthropic purposes and not
for the purposes of profit are not taxable, being non-commercial in nature. Generally,
government buildings or civil constructions are used for residential, office purposes or for
providing civic amenities. Thus, normally government constructions would not be taxable.
However, if such constructions are for commercial purposes like local government bodies
getting shops constructed for letting them out, such activity would be commercial and
builders would be subjected to service tax.”
17.1.5
The noticee emphasizes that the objective of AMC under the project was to
create Ahmedabad slum less city by the year 2012 and for this adequate housing with
adequate infrastructure facilities needed were considered for housing project to meet the
aspirations of EWS. AMC intended to develop the plots owned by AMC and Government
and give to the urban poor. Therefore, the objective of AMC was not commercial and scope
of the contract was fully covered within the exemption provided by the notification cited.
Therefore, no liability of paying service would arise on account of the contract.
17.1.6
As per noticee, the project was executed under the JNNRUM scheme of
Central Government and several projects all over India are being executed under this flag
ship scheme of Government of India. Considering the objects of the projects to serve urban
poor and without any commercial and profit making intention, no service tax is being
demanded and collected in respect of these projects.
17.1.7
The noticee adds that considering the technical issue with regard to the
applicability date mentioned in the notification no. 28/2010 dated 22.6.2010, a application
dated 26.8.2010 was forwarded to Central Board of Excise and Customs, New Delhi through
commissioner of service tax, Ahmedabad under section 11C of the Central Excise Act, 1944
made applicable to service tax vide section 83 of the Finance Act, 1994 to remove the
technical hitch and exclude from applicability of service tax on the construction of house for
urban poor under JNNRUM scheme even before 1.7.2010. The said application is pending
disposal.
9
17.1.8
With regard to proposal in the SCN to recover service tax on the amount of
services rendered under the said contract under “Construction of Complex Services”, the
noticee has stated as under 1. The objective of introducing the service tax on the Construction of Complex Service
(including Residential Complex) was clarified by the Department vide circular F.No.
B1/6/2005-TRU, dated 27.7.2005 (Extracts) where under para 13.3 it was made clear
that which type of services would be covered under Construction of Complex Service
(including Residential Complex). Department under para 13.3 made it clear that “this
service would generally cover construction services in relation to residential complexes
developed by builders, promoters or developers” and therefore the intention was to cover
the services of builders, developers, promoters who construct a residential houses to sell
further to prospective buyers. As per noticee, in the present case, their company is
awarded contracts of constructing houses under JNNRUM scheme on behalf of the
AMC, a local government authority, for urban poor. There was no intention of
commercial in nature and also no intention to sell further to prospective buyers. Neither
the contracting parties are termed as builders, developers or promoters. The role and
functions of the builder, developers or promoters are quite different than the contractors.
Type of services rendered by the builder etc. is different from the contractor. Under the
contract our company is a contractor who is awarded contract by AMC. Therefore, in
light of the clarification provided by the department, said contract is not covered under
the services of Construction of Complex Services.
The noticee has further referred to explanation inserted below sub-clause (zzzh) of
section 65(105) by the Finance Act, 2010 i.e. w.e.f. 1.7.2010 – 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 other 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
provided by the builder to the buyer.” The explanation was inserted with a view to
achieve the legislative intent and to bring in parity tax treatment and also to expand the
scope of the existing service. As per this explanation, the key words are construction of
complex intended for sale by builders etc.... and therefore intention of the government
to include those residential complexes which are intended for sale to prospective buyers
and constructed by builders. Under this contract, the object of AMC to construct the
residential houses to provide better living facilities to urban poor and are not intended for
sale and therefore as there was no intention for sale, the question of treating it as
rendering services under Construction of Complex service does not arise. This is evident
from the fact that the construction cost is being funded through JNNRUM scheme of
Government of India as well as by developing the plots owned by AMC and
Government and give to the urban poor. Land will be given free and dwelling units at
subsidized rates along with all infrastructure such as water supply, drainage, sewerage,
paved areas, schools, commercial complex etc. Further, as explained in earlier para, the
company is a contractor and not a builder.
2. Further, Section 65(91a) of the Act defines the term “residential complex” as under :
"residential complex" means any complex comprising of(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
10
(iii) any one or more of facilities or services such as park, lift, parking space, community
hall, common water supply or effluent treatment system,
located within a premises and the layout of such premises is approved by an authority
under any law for the time being in force, but does not include a complex which is
constructed by a person directly engaging any other person for designing or planning of
the layout, and the construction of such complex is intended for personal use as
residence by such person.
Explanation. - For the removal of doubts, it is hereby declared that for the purposes of
this clause, (a) "personal use" includes permitting the complex for use as residence by another
person on rent or without consideration;
(b) "residential unit" means a single house or a single apartment intended for use as a
place of residence;
Considering the terms of the contract, for applying the services under the Construction of
Residential Complex following two tests are failed.
a. “approved by an authority under any law for the time being in force”
Under the definition it is stated that layout of the residential complex under the services
is required to be approved by an authority under any law for the time being in force.
Therefore the services must be in relation to the complex whose layout requires approval
from a competent authority under law for the time being in force. In this case contract is
being awarded by AMC to construct residential houses for urban poor. AMC is the only
local authority who is approving the layout and plan and therefore the contract of
construction of residential house belongs to AMC does not require any approval by any
authority. CBEC in a letter addressed to the Commissioner of Service Tax, New
Delhi (F.No.137/26/2006-CX.4 dated 5.7.2006), clarified that service tax would not be
leviable on construction of complexes under question if their layout does not require
approval by an authority under any law for the time being in force." Therefore in view of
the above clarification the service under the contract is not subjected to service tax
under Construction of Residential Complex services.
17.1.9
Taking into consideration the above clarifications issued by the
Government/respective authorities, it is clear that construction of residential houses for urban
poor under JNNRUM Scheme executed by AMC is out of the purview of the “Construction
of Complex” service.
17.2
Construction of 960 houses for Safai Kamdar at various locations in
Ahmedabad executed on behalf of Ahmedabad Municipal Corporation (AMC) 17.2.1
The services are rendered to Ahmedabad Municipal Corporation (AMC) for
construction of residential houses for Safai Kamdar at various locations in Ahmedabad. All
Safai Kamdar to whom the residential houses are provided are employees of AMC. The
residential houses so constructed by AMC are intended to be given to Safai Kamdar for
personal use as residence at a token value. The funds for the project are being contributed by
Safai Kamdar Vikas Nigam, Subsidy from Gujarat State Government and Subsidy from
AMC. Therefore, the object of the AMC is to provide better living facilities to Safai Kamdar.
The contract is for construction of residential houses which is predominantly for personal use
by Safai Kamdar of AMC.
17.2.2
With regard to proposal in the SCN to recover the service tax on the amount of
services rendered under the said contract under “Construction of Residential Complex”, the
noticee has stated as under -
11
1. The objective of introducing the service tax on the Construction of Complex Service
(including Residential Complex) is being clarified by the Department vide circular F.No.
B1/6/2005-TRU, dated 27.7.2005 (Extracts) where under para 13.3 it is made clear that
which type of services would be covered under Construction of Complex Service
(including Residential Complex). Department under para 13.3 made it clear that “this
service would generally cover construction services in relation to residential complexes
developed by builders, promoters or developers” and therefore the intention is to cover
the services of builders, developers, promoters who construct a residential houses to sell
further to prospective buyers. In the present case, their company was awarded contracts
of constructing residential complex on behalf of the AMC, a local government authority,
for use by Safai Kamdar of AMC. There is no intention of commercial in nature and also
no intention to sell further to prospective buyers. Neither the contracting parties are
termed as builders, developers or promoters. The role and functions of the builder,
developers or promoters are quite different than the contractors. Type of services
rendered by the builder etc. is different from the contractor. Under the contract our
company is a contractor who is awarded contract by AMC. Therefore, in light of the
clarification provided by the department, said contract is not covered under the services
of Construction of Residential Complex.
The noticee referred to explanation inserted below sub-clause (zzzh) of section 65(105)
by the Finance Act, 2010 i.e. w.e.f. 1.7.2010 – 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 other 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 provided by the builder to the buyer.” The
explanation has inserted with a view to achieve the legislative intent and to bring in
parity tax treatment and also to expand the scope of the existing service. As per this
explanation the key words are construction of complex intended for sale by builders
etc.... and therefore intention of the government to include those residential complexes
which are intended for sale to prospective buyers and constructed by builders. Under this
contract the object of AMC to construct the residential houses to provide better living
facilities to Safai Kamdar and are not intended for sale and therefore as there is no
intention for sale the question of treating it as rendering services under Construction of
Residential Complex does not arise. This is evident from the fact that the construction
cost is being contributed by Safai Kamdar Vikas Nigam, Subsidy from Gujarat State
Government and Subsidy from AMC. Further as explained in earlier para, the company
is a contractor and not a builder.
2. Further, Section 65(91a) of the Act defines the term “residential complex” as under :
"residential complex" means any complex comprising of(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space, community
hall, common water supply or effluent treatment system,
located within a premises and the layout of such premises is approved by an authority
under any law for the time being in force, but does not include a complex which is
constructed by a person directly engaging any other person for designing or planning of
the layout, and the construction of such complex is intended for personal use as
residence by such person.
12
Explanation. - For the removal of doubts, it is hereby declared that for the purposes of
this clause, (a) "personal use" includes permitting the complex for use as residence by another
person on rent or without consideration;
(b) "residential unit" means a single house or a single apartment intended for use as a
place of residence;
Considering the terms of the contract, for applying the services under the Construction of
Residential Complex following two tests are failed.
b. “approved by an authority under any law for the time being in force”
Under the definition it is stated that layout of the residential complex under the services
is required to be approved by an authority under any law for the time being in force.
Therefore the services must be in relation to the complex whose layout requires approval
from a competent authority under law for the time being in force. In this case contract is
being awarded by AMC to construct residential houses for Safai Kamdar of AMC. AMC
is the only local authority who is approving the layout and plan and therefore the
contract of construction of residential house belongs to AMC does not require any
approval by any authority. CBEC in a letter addressed to the Commissioner of Service
Tax, New Delhi (F.No.137/26/2006-CX.4 dated 5.7.2006), clarified that service tax
would not be leviable on construction of complexes under question if their layout does
not require approval by an authority under any law for the time being in force."
Therefore in view of the above clarification the service under the contract is not
subjected to service tax under Construction of Residential Complex services.
c. “intended for personal use”
The definition of Residential Complex specifically excludes a complex which is
constructed by a person directly engaging any other person for designing or planning of
the layout, and the construction of such complex is intended for use as residence by such
person. Further, the explanation provides personal use includes permitting complex for
use as residence by another person on rent or without consideration.
As per the terms of the contract, the complex is being constructed by AMC directly
engaging the other person (i.e. our company) and the complex is intended for use as
residence by Safai Kamdar (i.e. another person). Therefore, all criteria of exclusion from
the definition of residential complex are satisfied and hence the services under the
contract cannot be covered under definition of residential complex service.
Further, it is also a view of the Government, as clarified by the letter F.No.332/16/2010TRU dt. 24.05.2010 that construction of residential houses by National Building
Construction Corporation Limited (NBCC) for Central Government officers is not liable
to service tax as the quarters constructed to Government personnel by the Government is
out of the purview of definition of residential complex.
Taking into consideration the above clarifications issued by the Government/respective
authorities, it is clear that construction of residential complex by AMC is out of the
purview of the “Construction of Residential Complex” service.
3. The noticee has further stated that the services are rendered to Ahmedabad Municipal
Corporation (AMC) for construction of residential houses for Safai Kamdar at various
locations in Ahmedabad. All Safai Kamdar to whom the residential houses are provided
are employees of AMC. The residential houses so constructed by AMC are intended to
13
be given to Safai Kamdar for personal use as residence at a token value. The funds for
the project are being contributed by Safai Kamdar Vikas Nigam, Subsidy from Gujarat
State Government and Subsidy from AMC. Therefore, the object of the AMC is to
provide better living facilities to Safai Kamdar. The contract is for construction of
residential houses which is predominantly for personal use by Safai Kamdar of AMC.
Therefore the said contract is for non commercial purpose and services under the said
contract is not subjected to service tax liability in terms of exemption provided under
notification no. F.No.B2/8/2004-TRU dated 10th September, 2004 issued by Government
of India, Ministry of Finance, Department of Revenue, (Tax Research Unit). The
relevant portion of the said notification has been reproduced below for your reference.
“13.2 The leviability of service tax would depend primarily upon whether the building
or civil structure is ‘used, or to be used’ for commerce or industry. The information
about this has to be gathered from the approved plan of the building or civil
construction. Such constructions which are for the use of organizations or institutions
being established solely for educational, religious, charitable, health, sanitation or
philanthropic purposes and not for the purposes of profit are not taxable, being noncommercial in nature. Generally, government buildings or civil constructions are used
for residential, office purposes or for providing civic amenities. Thus, normally
government constructions would not be taxable. However, if such constructions are for
commercial purposes like local government bodies getting shops constructed for letting
them out, such activity would be commercial and builders would be subjected to service
tax.”
4. The noticee further submits that the services under the said contract is also not subjected
to service tax liability in terms of exemption provided under Sr. No. 12(a) of Notification
no. 25/2012-ST dated 20.6.2012. It has been provided that services provided to the local
authority / governmental authority by way of construction, erection, commissioning,
installation, completion, fitting out, repair, maintenance, renovation, or alteration of civil
structure or any other original works meant predominantly for use other than for
commerce, industry, or any other business or profession shall be exempt from whole of
service tax leviable thereon.
Under Sr. No. 12(f) of aforesaid notification, services provided to the local authority /
governmental authority by way of construction, erection, commissioning, installation,
completion, fitting out, repair, maintenance, renovation, or alteration of a residential
complex predominantly meant for self use or use of their employees or other person
specified in the explanation 1 to clause 44 of Section 65B of the said Act shall be exempt
from whole of service tax leviable thereon.
In light of the above notification also, the services under the contract to construct
residential houses for AMC to be used by Safai Kamdar are exempt from service tax as
the same are predominantly for personal use by Safai Kamdar of AMC and are for use
other than for commerce, industry or any other business or profession and are
predominantly meant for use of employees of AMC.
17.2.3
The noticee has submitted that in view of the above submissions supported by
adequate evidence and clear position of law as provided in the above mentioned
clarifications and notifications, the services rendered under both the contracts from
Ahmedabad Municipal Corporation, i.e., Construction of houses under JNNRUM scheme
and for construction of residential houses for Safai Kamdar at various locations in
Ahmedabad were not subjected to service tax liability and therefore no service tax was
14
required to be paid against the same. Since no service tax was payable, consequently interest
and penalty provisions will not be applicable. The noticee has accordingly submitted that –
1. no service tax is leviable on the amount of services provided under both the aforesaid
contracts and therefore there is no question of making service tax payment in respect
thereof;
2. they were under bonafide belief having legal support that the services under the
contract were mainly falling under construction services and not falling under the
Construction of Complex Services and therefore no amendment in ST-2 certificate
was made. Also, non-amending ST-2 certificate has not resulted into non payment of
service tax and it is an administrative issue only.
18.
The noticee has further submitted a letter dated 13.8.2014 as promised by them
during personal hearing held on 8.8.2014, wherein they have relied on following 3 case laws18.1
SANDEEP VILAS KOTNIS V/s COMMISSIONER OF CENTRAL
EXCISE, KOLHAPUR IN THE CESTAT, WEST ZONAL BENCH, MUMBAI
S/Shri Ashok Jindal, Member (J) and P.R. Chandrasekharan, Member (T)
2012 (27) S.T.R. 51 (Tri. - Mumbai)
Stay Order No. S/261/2012-WZB/C-I(CSTB), dated 14-2-2012 in Application No.
ST/Stay/2098/2010 in Appeal No. ST/617/2010
18.1.1
As per noticee, the facts of the referred case are that the applicant, being an
individual, is engaged in the activity of civil construction. During the period September,
2004 to March, 2008 the applicant undertook the activity of construction of civil construction
for BSNL, MHADA and MTDC. It is contended on behalf of the applicant that the services
rendered by them are not in the nature of service rendered to commerce or industry as per the
definition of ‘construction service’ which are liable to be taxed as defined under Section
65(30a) of the Finance Act, 1994. Therefore, the applicant is not liable to pay service tax on
the above service. In the alternate, it is also contended that the services rendered to MHADA
for construction of flats under redevelopment scheme wherein Central and State Government
contributed for rehabilitation of the poor people, that activity does not come under commerce
or industry. Therefore, these activities are not covered under the definition of ‘construction
service’ given in the Act. It was held that with regard to the construction service
rendered to MHADA that it is a construction of buildings under redevelopment scheme
of the State Government wherein funds were shared by Central and State Government
for the welfare of the poor people for their rehabilitation. Therefore, prima facie, this
service does not come under ‘construction service’ as defined under the Finance Act,
1994.
18.1.2
As per noticee, the facts of the contract for constructing houses under
JNNRUM scheme for urban poor are same as the facts of the case referred above. The
services rendered by them under the contract awarded by Ahmedabad Municipal Corporation
to construct houses for urban poor wherein the funds are provided under JNNRUM scheme
of Central Government of India. Therefore, in view of the decisions made by the Mumbai
Tribunal as aforesaid, the services does not come under construction service and
therefore not liable to service tax as the activity does not come under commerce or
industry and is not covered under the definition of Construction Service.
18.1.3
Further, the facts of the contract for constructing houses for Safai Kamdar of
Ahmedabad Municipal Corporation are same as the facts of the case referred above. The
15
services rendered by them under the contract awarded by Ahmedabad Municipal Corporation
to construct houses for Safai Kamdar (who are employees of AMC) wherein the funds are
provided by Safai Kamdar Vikas Nigam, Subsidy from Gujarat State Government and
Subsidy from AMC. Therefore, in view of the decisions made by the Mumbai Tribunal as
aforesaid, the services does not come under construction service and therefore not liable
to service tax as the activity does not come under commerce or industry and is not
covered under the definition of Construction Service.
18.2
KHURANA ENGINEERING LTD. v/s COMMR. OF
AHMEDABAD In the CESTAT, WEST ZONAL BENCH, AHMEDABAD, COURT NO. II
Ms. Archana Wadhwa, Member (J) and Shri B.S.V. Murthy, Member (T)
2011 (21) S.T.R. 115 (Tri. - Ahmd.)
Final Order No. A/1882/2010-WZB/AHD, dated 26-11-2010 in Appeal No.
ST/456/2009
C.
EX.,
18.2.1
As per noticee, the assessee in the case cited was engaged in providing
construction services under the tender floated by CPWD for construction of residential
quarters for Income Tax Department and service tax was demanded on the ground that
appellants is liable to pay service tax treating the construction of residential quarters by the
appellant as ‘Construction of Complex’ service.
18.2.2
It was submitted that the service was provided by the appellant to Govt. of
India for providing the same as residential accommodation for the employees of the Income
Tax department. The attentions was drawn to the definition of the construction of complex
services given under the clause (30a) of Section 65 to submit that personal use, according to
the definition includes permitting the complex for use as residence by another person on rent
or without consideration. In view of the definition of ‘Personal Use’ in the definition of
‘Construction of Complex’ services, the services provided by the appellant is covered by
exclusion, which provides that definition of service does not include the complex which is
constructed by a person directly engaging any other person for designing or planning of the
layout and the construction of such complex. In this case, the Govt. of India provides 80 flats
to Income Tax department on rent and therefore, it is excluded from the definition of
construction services. Reliance is also placed on the Central Board of Customs and Excise to
National Building Construction Corporation Limited (NBCC), vide Letter No. F. No.
332/16/2010-TRU, dated 24-5-2010, in support of this contention. The contention of the
appellant was found correct and observed that residential complex constructed by the
appellant is meant for use by the Income Tax department to provide the same on rent
to the employees and therefore, it is clearly covered by the explanation given for
“Personal use” in the definition and therefore this service cannot be included in the
definition of residential complex services.
18.3
EAST COAST CONSTRUCTIONS & INDUS. LTD. V/s COMMR. OF
S.T., KOLKATA IN THE CESTAT, EASTERN BENCH, KOLKATA
Shri S.K. Gaule, Member (T) and Dr. D.M. Misra, Member (J)
2013 (29) S.T.R. 391 (Tri. - Kolkata)
Stay Order Nos. S-314-315/KOL/2012, dated 9-4-2012 in Stay Petition Nos. SP-224225/2010 in Appeal Nos. ST/84-85/2010
18.3.1
As submitted by the noticee, the applicant in this case was engaged in the
construction of residential quarters for Indian Army and West Bengal Power Devp. Corpn.
16
Ltd. (A West Bengal Govt. Undertaking). The contention of the applicant was that they were
directly engaged for constructing residential complex for Army and West Bengal Power
Devp. Corpn. (WBPDCL). The contention is that Board vide Circular No. 332/16/2010TRU, dated 24-5-2010 clarified that in case the Govt. of India is service recipient and the
service provided is directly to Govt. of India for its personal use, the service tax is not
leviable. The contention is that there is no dispute that they are the only contractor and they
are not sub-contractor or they are not having any sub-contract in between which is clear from
ld. Commr. (Appeals) order wherein he has recorded his finding that the applicant is engaged
by Army Station, Kolkata and WBPDCL for construction of residential complex. The
contention is that this Tribunal in the case of Khurana Engg. Ltd. v. Commr.of C. Ex.,
Ahmedabad - 2011 (21) S.T.R. 115 (Tri.-Ahmd.) has held that service provided to Govt. of
India directly for end use of residential complex by Govt. of India discovered by the
definition of personal use and therefore no Service Tax is leviable on them. The
residential complex are in the personal use of the Indian Army and the WBPDCL, is
not in dispute. In view of Board’s clarification and this Tribunal’s decision in the case
of Khurana Engg. Ltd. (supra), it was found that the applicants had made a prima facie
case in their favour.
18.3.2
According to noticee, the facts of the contract for constructing houses for Safai
Kamdar of Ahmedabad Municipal Corporation are same as the facts of the case referred
above. The services rendered by them under the contract awarded by Ahmedabad Municipal
Corporation to construct houses for Safai Kamdar (who are employees of AMC) wherein the
funds are provided by Safai Kamdar Vikas Nigam, Subsidy from Gujarat State Government
and Subsidy from AMC and such residential houses so constructed are intended to be given
to Safai Kamdar for personal use as residence and therefore the decisions taken in the cases
referred in Sr. No. 2 and 3 both are applicable to the present case and therefore it is clearly
covered by the explanation given for “Personal use” in the definition and therefore this
service cannot be included in the definition of residential complex services.
19.
PERSONAL HEARING – A personal hearing in the case was held on
8.8.2014. The noticee was represented by Shri Mehul S Shah, Chartered Accountant, who
reiterated the submissions made in their reply dated 2.7.2014 to the SCN and requested to
drop the case.
DISCUSSION & FINDINGS 20.
I have gone through the show cause notice (SCN) and documents relied
therein. I have also gone through submissions made by the noticee in their replies dated
2.7.2014 and 13.8.2014. I have also considered their submissions made during personal
hearing.
21.
I observe that the case involves non-payment of service tax by the noticee
on their income from two housing projects executed for Ahmedabad Municipal
Corporation (AMC) under the category of ‘construction of complex service’ falling under
sub-clause (zzzh) of Section 65(105) of the Finance Act, 1994. The following two housing
projects executed by the noticee are under dispute –
 Housing project under JNNURM scheme for construction of 2976 houses for urban
poor at various locations in Ahmedabad.
 Construction of 960 houses for Safai Kamdars at various locations in Ahmedabad.
21.1
The service tax demand of Rs.1,15,85,099/- has been made in the SCN in
17
respect of first housing project (JNNURM scheme) on the gross receipt of Rs.32,18,72,787/during the period from 11.5.2007 to 30.6.2010 and a demand of Rs.32,28,369/- has been
made in respect of second housing project (for Safai Kamdars) for the year 2010-11 and
2011-12 on the gross receipt of Rs.9,49,79,978/- . Thus, the SCN seeks to recover the total
service tax of Rs.1,48,13,468/- (Rs.1,15,85,099/- + Rs.32,28,369/-). Detailed calculations are
shown in para 4.1.1 and para 7 of the SCN.
22.
As a matter of fact, the services of construction of new buildings or civil
structures used for commercial or industrial purposes and repair, alteration or restoration
activities of such buildings and civil structures were brought under the net of service tax
with effect from 10.9.2004 by the Finance Act, 2004. The Finance Act, 2005, with effect
from 16.6.2005, renamed such construction service as ‘commercial or industrial
construction service’ under clause (105)(zzq) of Section 65. The Finance Act, 2005 also
introduced service tax on the services provided in relation to ‘construction of complex’
with effect from 16.6.2005 under clause (105)(zzzh) of Section 65.
22.1
‘Commercial or Industrial Construction’ was defined under Section 65(25b)
of the Finance Act, 1994 as follows(a)
(b)
(c)
(d)
construction of a building or a civil structure or a part thereof; or
…. … ….
….
…
…
….
…
…
which is –
(i) used, or to be used, primarily for; or
(ii) occupied, or to be occupied, primarily with; or
(iii) engaged, or to be engaged, primarily in,
Commerce or industry, or work intended for commerce or industry, but does not include
such services provided in respect of roads, airports, railways, transport terminals,
bridges, tunnels and dams.
Hence, construction of a building or a civil structure, used primarily for the purpose of
commerce or industry became taxable from 10.9.2004 under construction services.
22.2
Taxable service in relation to construction of complex was introduced with
effect from 16.6.2005 as defined under Section 65(105)(zzzh) of the Finance Act, 1994 as
any service provided or to be provided to any person, by any person, in relation to
construction of complex. Further, with effect from 01.07.2010, following explanation
was inserted below the aforesaid sub clause of taxable service 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 authorized 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 authorized 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.
22.2.1
‘Construction of complex’ was defined under Section 65(30a) of the
Finance Act, 1994 as follows-
18
“Construction of complex” means —
(a) construction of a new residential complex or a part thereof; or
(b) completion and finishing services in relation to residential complex such as glazing,
plastering, painting, floor and wall tiling, wall covering and wall papering, wood and
metal joinery and carpentry, fencing and railing, construction of swimming pools,
acoustic applications or fittings and other similar services; or
(c) repair, alteration, renovation or restoration of, or similar services in relation to,
residential complex;
22.2.2
“Residential Complex” was defined under Section 65(91a) of the Finance
Act, 1994 as follows“residential complex” means any complex comprising of—
(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space, community
hall, common water supply or effluent treatment system, located within a premises and
the layout of such premises is approved by an authority under any law for the time being
in force, but does not include a complex which is constructed by a person directly
engaging any other person for designing or planning of the layout, and the construction
of such complex is intended for personal use as residence by such person.
Explanation. — For the removal of doubts, it is hereby declared that for the purposes of
this clause, —
(a) “personal use” includes permitting the complex for use as residence by another
person on rent or without consideration;
(b) “residential unit” means a single house or a single apartment intended for use as a
place of residence;
22.2.3
In view of aforesaid provisions inserted with effect from 16.6.2005,
construction of a new residential building or buildings, having more than 12 residential
units with a common area and any one or more of the facilities or services such as park,
lift, parking space, etc got covered under the taxable category of ‘construction of
complex’ service in terms of sub-clause (105)(zzzh) of Section 65 of the Finance Act,
1994, with an exclusion that the services relating to a complex which is constructed by a
person directly engaging any other person for designing or planning of the layout, and
when the construction of such complex is intended for personal use as residence by such
person, will not be covered under sub-clause (105)(zzzh).
23.
The demand raised in the present SCN is for the services rendered by the
noticee to AMC in respect of two housing projects – viz. construction of 2976 houses
under JNNURM scheme and construction of 960 houses for Safai Kamdars at various
locations in Ahmedabad. The purpose of construction in both the projects was to cater to
the housing needs of the urban poor, it needs no elaboration that the construction was
meant for residential use and not for commerce or industry. The services of construction
provided by the noticee to AMC, therefore, are covered under the category of
‘construction of complex’ service and so is the entire demand of service tax. Further, as
the categorization of services provided has not been disputed by the noticee, the same is
not being discussed any further.
24.
The noticee has contested the tax liability in respect of both the projects for
19
different reasons. I give my views and findings on each of the grounds raised by the
noticee in the succeeding paras. The noticee has defended the case project-wise, therefore,
further discussion is being made project-wise under headings [A] and [B] –
[A]
Housing project under JNNURM scheme for construction of 2976
houses at various locations in Ahmedabad executed on behalf of AMC 24.1
The noticee has submitted that there is no service tax liability in terms of
exemption provided under CBEC’s instruction letter F.No.B2/8/2004-TRU dated
10.9.2004 on the ground that objective of AMC was not commercial. Thus, the noticee has
claimed exemption from payment of service tax on the basis of CBEC’s letter dated
10.9.2004 (which the noticee wrongly refers to as exemption notification).
24.1.1
I find that the CBEC instruction letter dated 10.9.2004 was issued with
regard to changes made in the provisions of service tax by the Finance Bill, 2004. The
Finance Bill, 2004 was enacted on 10.9.2004 and with this enactment, inter-alia, the
construction services (commercial and industrial buildings or civil structures) were
brought under the net of service tax. Para 13 of the said instruction letter quoted by the
noticee explains the scope of newly introduced construction services (commercial and
industrial buildings or civil structures) and obviously the explanations given under this
instruction letter cannot be applied in the matters of ‘construction of complex’ services
which were introduced w.e.f. 16.6.2005. The project executed under JNNURM scheme for
construction of 2976 houses was for residential use and there is no dispute on that and
certainly the explanation given by CBEC in the context of construction of commercial or
industrial buildings cannot be applied in case of other constructions. I find the noticee’s
defence on this count to be totally misdirected.
24.2
One of the noticee’s arguments is that their application dated 26.8.2010
forwarded to CBEC through the Commissioner of Service Tax, Ahmedabad with regard to
applicability of notification no.28/2010-ST was pending for disposal.
24.2.1
I find that Notification No.28/2010-ST dated 22.6.2010 exempted the
taxable service of construction of complex referred to in sub-clause (zzzh) of Section
65(105) of the Finance Act when provided to Jawaharlal Nehru National Urban Renewal
Mission (JNNURM) and Rajiv Awaas Yojna from the whole of service tax leviable under
Section 66 of the Finance Act. This notification came into force from 1.7.2010. In case
noticee’s application to CBEC with regard to applicability of the notification or for that
matter any purpose is pending disposal with CBEC, that cannot a reason to drop the
demand of service tax leviable on the construction activity of the noticee. Hence, this
argument of the noticee is devoid of merit and therefore needs no consideration.
24.3
The noticee has further contested the levy on the ground that construction of
complex service is not applicable to them as they have acted as contractor and not as a
builder. According to noticee, in para 13.3 of CBEC’s letter F.No.B1/6/2005-TRU dated
27.7.2005, it is clarified that the construction of residential complex service would
generally cover construction services in relation to residential complexes developed by
builders, developers, promoters who construct residential houses for sale to prospective
buyers. That in their case, they have acted as contractor and not as a builder. Therefore,
their case is not covered under construction of complex services.
23.3.1
As already mentioned, construction of complex service was introduced with
effect from 16.6.2005 under Finance Act, 2005 and instruction letter F.No.B1/6/2005-TRU
20
was issued by CBEC on 27.7.2005 explaining the changes made by Finance Act, 2005.
Para 13 of this letter deals with construction of residential complexes and para 13.3
mentions that this service would generally cover construction services in respect of
residential complexes developed by builders, promoters or developers and that such
complexes are normally constructed after obtaining approval of the statutory authority for
their layout. Para 13.4 further states that residential complexes constructed by an
individual, which is intended for personal use as residence and is constructed by directly
availing services of a construction service provider, is also not covered under the scope of
the service tax and not taxable.
23.3.2
In the instant case, the noticee has executed the housing project for AMC
and when the construction activity carried out by the noticee fits into the definition of
residential complex, the service tax under the category of construction of residential
complex service is leviable. The noticee cannot take shelter in the selective wordings - this
service would generally cover construction services in respect of residential complexes developed
by builders, promoters or developers - of a para clarifying the scope of taxable service for
denying their liability. The word ‘generally’ has been used in explanatory sense and it
cannot be given a meaning so as to restrict the liability of service tax on builders,
promoters or developers only. If a person other than a builder, promoter or developer has
provided the taxable service, such person cannot get out of the tax bracket automatically in
view of the wordings that this service would generally cover construction services in
respect of residential complexes developed by builders, promoters or developers. This
argument of the noticee is completely illogical and deserves to be rejected. If a service
provider known by whatever name has provided the taxable service of ‘construction of
complex’, the service tax leviable becomes payable by such service provider.
24.4
The noticee has further referred to Explanation inserted below sub-clause
(zzzh) of Section 65(105) of the Finance Act, 1994 to state that construction of complex
intended for sale by builders, etc. … are the key words to show the Govt’s intention to
include those residential complexes which are intended for sale to prospective buyers and
constructed by builders. Since the object of AMC to construct the residential houses was to
provide better living facilities to urban poor and there was no intention of sale, the
question of treating it as rendering services under construction of residential complex does
not arise.
24.4.1
The sub-clause (zzzh) of Section 65(105) and Explanation referred to by the
noticee reads as follows –
Section (65)(105) (zzzh): “taxable service” means any service provided or to be provided 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 authorized 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 authorized 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; ]
24.4.2
The said Explanation was inserted w.e.f. 1.7.2010 to create a legal fiction of
deemed service in case the construction of a complex by a builder was intended for sale,
wholly or partly, before, during or after construction with a exception where entire
consideration from the prospective buyer was received after the grant of completion
21
certificate by the authority competent to issue such certificate under any law for the time
being in force. The present case is not covered under this Explanation as the noticee is
constructing the complex not as a builder but as a contractor for AMC. Thus, the noticee
has provided the service of construction of complex to AMC and such a service is covered
well within the main definition of “taxable service” as given under Section 65(105)(zzzh)
of the Finance Act, 1994. The Explanation cited by the noticee has no applicability here
and consequently, the argument put forth by the noticee is unacceptable.
24.5
The noticee further refers to Section 65(91a) of the Finance Act, 1994 which
defined the term “residential complex” and states that two tests to cover their contract
under the definition are not passed. The noticee’s argument is with reference to definition
of “residential complex” as given under Section 65(91a) of the Finance Act, 1994 to state
that to consider a housing complex a ‘residential complex’ in terms of definition given
under Section 65(91a), the layout of the premises should be approved by an authority
under any law for the time being in force and the construction of the complex should not
be intended for personal use as residence of the service recipient. The noticee has
elaborated with regard to approval of layout plan and I discuss the same in next paragraph.
On the aspect of personal use, there is no elaborative explanation in their reply dated
2.7.2014 and therefore, I am unable to give my findings on the aspect of ‘personal use’.
24.5.1
With regard to approval of the layout of the premises, the noticee has stated
that AMC is the only local authority who is approving the layout plan and construction of
residential houses belonging to AMC does not require any approval by any authority. I do
not find the argument palatable as construction of a housing scheme even belonging to
AMC should be passing through some process of approval, may be by AMC itself. Any
construction within the limits of AMC or for that matter any other local authority cannot
be unregulated and their own constructions should also be taking place on approved plans
only. Since AMC itself is the approving authority, there cannot be any other parallel
authority for approval of such plans. Therefore, saying that the disputed construction did
not require any approval from any authority may be correct in itself but this cannot be
taken to mean that the layouts of their housing complexes were unapproved by any
authority under any law. I therefore find the noticee’s argument unacceptable.
[B]
Construction of 960 houses for Safai Kamdars at various locations in
Ahmedabad, executed on behalf of AMC 25.
The noticee has contested the tax liability in respect of construction of 960
houses for Safai Kamdars on the basis of same arguments as in case of JNNURM scheme.
I discuss each of them in briefly and give my findings in the following paras –
25.1
As per noticee, the construction of complex service is not applicable to them
in view of para 13.3 of CBEC’s letter F.No.B1/6/2005-TRU dated 27.7.2005 as the
construction was non-commercial in nature and they have acted as contractor and not as a
builder. I find it completely wrong that the noticee is claiming exclusion from the coverage
of construction services on the basis of a selective portion of the CBEC’s instruction letter
explaining changes made in the Finance Act, 2005 in the wake of introduction of new
services. The noticee has picked up a part of para 13.3 of CBEC’s instruction letter dated
27.7.2005 to state that taxable services of construction of complex applies to builders,
promoters and developers only and not to contractors like them. The part of the para relied
upon by the noticee reads as follows “This service would generally cover construction services in respect of residential
22
complexes developed by builders, promoters or developers.”
The aforesaid part of the clarification is illustrative in nature and it cannot be taken to
mean that the service providers other than builders, promoters or developers would not be
liable to pay service tax if providing construction of complex services. When any service
provided to any person, by any other person, in relation to construction of complex
became a taxable service in terms of Section 65(105)(zzzh) of the Finance Act, the CBEC
instruction explaining the ‘taxable service’ cannot give a restricted meaning to the term
‘person’ so as to define the ‘person’ as builders, promoters or developers only. It is
completely unreasonable and misleading on part of the noticee to interpret the explanation/
illustration given by the CBEC in its instruction letter in a manner suited to them. The law
needs to be read and interpreted in a harmonious manner. The fact remains that any
person providing construction of complex service became liable to pay service tax in
terms of Section 65(105)(zzzh) of the Finance Act and noticee’s argument that the levy
was not applicable to persons other than builders, promoters and developers is without
substance.
25.2
As per noticee, intention of AMC was not to sell the houses, hence services
rendered by them cannot be treated as construction of residential complex services in view
of Explanation to sub-clause (zzzh) of Section 65(105) of the Finance Act, 1994.
25.2.1
The said Explanation was inserted w.e.f. 1.7.2010 to create a legal fiction of
deemed service in case the construction of a complex by a builder was intended for sale,
wholly or partly, before, during or after construction with a exception where entire
consideration from the prospective buyer was received after the grant of completion
certificate by the authority competent to issue such certificate under any law for the time
being in force. The present case is not covered under this Explanation as the noticee is
constructing the complex not as a builder but as a contractor for AMC. Thus, the noticee
has provided the service of construction of complex to AMC and such a service is covered
well within the main definition of “taxable service” as given under Section 65(105)(zzzh)
of the Finance Act, 1994. The Explanation cited by the noticee has no applicability here
and consequently, the argument put forth by the noticee falls flat.
25.3
As per noticee, their services under the contract were not subject to service
tax under construction of residential complex services as the construction of residential
houses belonged to AMC and did not require any approval by any authority under any law
for the time being in force as envisaged in the definition of “residential complex” given
under Section 65(91a) of the Finance Act, 1994 and that their services are out of the
purview of this definition on the ground of personal use also.
25.3.1
With regard to approval of the layout of the premises, the noticee has stated
that AMC is the only local authority who is approving the layout plan and construction of
residential houses belonging to AMC does not require any approval by any authority. I do
not find the argument palatable as construction of a housing scheme even belonging to
AMC should be passing through some process of approval, may be by AMC itself. Any
construction within the limits of AMC or for that matter any other local authority cannot
be unregulated and their own constructions should also be taking place on approved plans
only. Since AMC itself is the approving authority, there cannot be any other parallel
authority for approval of such plans. Therefore, saying that the disputed construction did
not require any approval from any authority is misleading and this cannot be taken to mean
that the layouts of their housing complexes were unapproved by any authority under any
law. I therefore find the noticee’s argument unacceptable.
23
25.3.2
Another argument of the noticee is that the construction was for personal
use of AMC and hence fell out of the ambit of service tax. From the definition of
“residential complex” given under Section 65(91a), it is clear that the definition does not
include such complex which a person gets constructed for his personal use. It broadly
signifies that if the ownership of the entire complex is to be retained by the person getting
the complex constructed and to be used by him for his own purposes, such construction is
not taxable. Further, as per Explanation to the definition of “residential complex” given
under Section 65(91a), “personal use” includes permitting the complex for use as
residence by another person on rent or without consideration. Considering that housing
scheme developed by AMC is with a view to provide affordable housing to urban poor,
such an objective cannot be termed as personal use in any sense of the term. By noticee’s
own admission, the houses are given to the employees of AMC (Safai Kamdars) at highly
subsidized rates, which means that AMC would be selling the houses to Safai Kamdars,
though at much lower prices than the actual cost of the houses, it cannot be said that the
houses are for personal use of AMC, even in the sense of renting to their own employees
without consideration. The houses got constructed by AMC for Safai Kamdars are neither
for the own use by AMC nor for use as residence by another person under rent or without
consideration and therefore, exclusion provided under the definition of “residential
complex” under Section 65(91a) of the Finance Act, 1994 is not applicable to the present
case.
25.4
The noticee further refers to Sr.No.12(a) and 12(f) of Exemption
Notification No.12/2012-ST dated 20.6.2012 and states that the services provided to AMC
for construction of residential houses for Safai Kamdars are exempted from service tax as
they are predominantly for personal use by Safai Kamdars and are for use other than for
commerce of industry. I note that Notification No.25/2012-ST dated 20.6.2012, also
known as mega exemption notification, provides for exemption to various services from
the whole of service tax leviable and under Sr.No.12 of this notification, exemption has
granted to the services provided to the Government, a local authority or a governmental
authority by way of construction, erection, commissioning, installation, completion, fitting
out, repair, maintenance, renovation, or alteration of (a) a civil structure or any other original works meant predominantly for use other than for
commerce, industry, or any other business or profession:
(b) .. ..
…
…
(f) a residential complex predominately meant for self use or the use of their employees or other
personal specified in the Explanation 1 to clause 44 of Section 65B of the said Act;
So, obviously, the noticee is trying to cover their case under Sr.No. 12(a) and 12(f) of the
said notification. The fact of the matter, however, is that the said notification is effective
from 1.7.2012 and the period covered in the SCN is only upto March-2012. Therefore,
without going into the details of applicability of the notification to the noticee, I find that
in any case exemption granted under said notification is not available to them for the
period prior to 1.7.2012 and any further discussion on this count would be unnecessary.
25.5
The noticee, in their further submissions dated 13.8.2014, has relied on
following three case laws in support of their defence –
24
(i) Sandeep Vilas Kotnis vs Commissioner of Central Excsie, Kolhapur –
cited as 2012(27) STR 51(Trib.-Mumbai).
(ii) Khurana Engg Ltd vs Commissioner of Central Excise, Ahmedabad –
cited as 2011(11) STR 115 (TRib.-Ahmd.)
(iii) East Coast Constructions & Industries LTd vs Commssioner of Service Tax, Kolkata
–
cited as 2013(29) STR 391 (Tri.-Kolkata)
25.5.1
In the first case, the show cause notice was for recovery of service tax under
the category of ‘construction service’ in respect of services rendered to MHADA for
construction of flats under redevelopment scheme, civil construction for MTDC and for
BSNL. Hon’ble Tribunal was of the view that construction of buildings under
redevelopment scheme of the state government wherein funds were shared by central
government and state government for the welfare of the poor people for their rehabilitation
were, prima-facie, not covered under ‘construction service’ as defined under the Finance
Act, 1994. In case of construction for MTDC and BSNL, the prima-facie view was that the
constructions were covered under the category of ‘construction of service’. I find that the
Tribunal’s order cited by the noticee is only a stay order wherein Hon’ble Tribunal has
expressed its prima-facie views in the matter and decision of the Tribunal is not available.
25.5.2
Further, in case of MHADA only, the prima facie view of the tribunal was
that it was not construction services in terms of Section 65(30a) as the activity does not
come under commerce or industry. The case on hand is different in the sense that the
demand raised here is not under industrial or commercial construction but under the
category of ‘construction of complex’ service. Here, the nature of construction is not under
dispute. The present case is based on the premise that the constructions are for residential
purposes and therefore views expressed by Hon’ble Tribunal in the context of commercial
or industrial construction are irrelevant here and so is the noticee’s argument.
25.5.3
Second and third case laws cited by the noticee are in the context of
‘personal use’. In case of Khurana Engg Ltd, residential complex constructed and meant
for use by Income Tax department to provide the same on rent to the employees was under
dispute and in case of East Coast Constructions & Indus. Ltd, the applicant was engaged in
construction of residential quarters for Indian Army and West Bengal Power Development
Corpn Ltd (A West Bengal Govt Undertaking). Hon’ble Tribunal in case of Khurana Engg
Ltd held that the service cannot be covered in the definition of residential complex and
decision cited in case of East Coast Constructions & Inds. Ltd is only a stay order based on
the decision in case of Khurana Engg Ltd. The aspect of ‘personal use’ in the present case
has been discussed earlier and it has become clear that ‘personal use’ is not involved in
case of both the schemes, i.e., construction under JNNURM scheme and construction for
Safai Kamadars. Construction under both the schemes are for AMC who is not using the
housing complexes for renting out to the employees of AMC so as to draw similarities
between the cases cited and the case on hand. Since the aspect of ‘personal use’ is not at
all involved in the present matter, the case laws cited by the noticee in the context of
personal use have no applicability.
25.6
I, therefore, find that the services provided by the noticee to AMC for
construction of 2976 houses under JNNURM scheme and construction of 960 houses for
Safai Kamdars at various locations in Ahmedabad fall under the taxable service of
‘construction of complex’ in terms of Section 65(105)(zzzh) of the Finance Act, 1994 and
service tax of Rs.1,48,13,468/- was payable by the noticee on the total income of
Rs.41,68,52,765/- received under these two schemes as detailed in the SCN. As the noticee
has failed to pay up the amount of service tax due to them, the same is liable to be
25
recovered under Section 73(1) of the Finance Act, 1994.
25.7
Further, it is a fact that though the noticee was registered with the Service
Tax department, they failed to discharge their service tax liability in full. As per the
provisions of the Finance Act, 1994 and Rules made there-under, the noticee was required
to assess correct value for the services provided by them and pay service tax on the actual
amount received by them for rendering services within the stipulated time as prescribed
and to follow all the procedures laid down in the Act and Rules. Here, though the noticee
was filing ST-3 returns for the construction services in respect of Commercial or Industrial
Building & Works Contracts and paying service tax on it and though the amount received/
paid to the various parties was being shown in their books of accounts for the impugned
period, they failed to disclose correct taxable value for the said services in the respective
periodical returns. Even though the correct taxable value was in the knowledge of the
noticee, they failed to disclose full and correct details in their ST-3 returns. The
department could notice the non-payment of service tax only on scrutiny of financial
books of accounts. I therefore find that the noticee has indulged in suppression of facts
regarding taxable value and service tax liability in respect of taxable services provided by
them with a view to evade payment of service tax. Therefore, the service tax of
Rs.1,48,13,468/- not paid is liable to be recovered from them under proviso to Section 73
(1) of the Finance Act, 1994 by invoking extended period of five years. Further, the
service tax amount is liable to be recovered along-with interest in terms of Section 75 of
the Finance Act, 1994 which provides for liability to pay interest in case of delayed
payment of service tax. The noticee’s failure to pay the service tax of Rs.1,48,13,468/- for
the period 2007-08 to 2011-12 has resulted into apparent delay and therefore interest in
terms of Section 75 is liable to be paid by them along-with service tax amount of
Rs.1,48,13,468/-.
PENALTY UNDER SECTION 76, 77 AND 78 –
25.8
With regard to penalty proposed under Section 78 of the Finance Act, 1994, I
find that Section 78 lays down the provision of imposing penalty where any service provider
fails to levy or pay any service tax or short levies or short pays or gets erroneous refund by
reason of fraud, collusion, wilful mis-statement, suppression of facts or contravention of any
of the provisions with intent to evade payment of service tax. The noticee, as discussed in
earlier paragraphs, has failed to discharge the service tax liability of Rs.1,48,13,468/- by way
of suppression of facts with intent to evade payment of service tax. The penal provisions of
Section 78 therefore get attracted in the present case and the penalty prescribed in Section 78
is liable to be imposed on the noticee.
25.9
With regard to penalty under Section 76 of the Finance Act, 1994, I find that
the Section 76 provides for imposition of penalty in case of failure to pay the service tax
leviable in stipulated manner. As the noticee has failed to pay the service tax of
Rs.1,48,13,468/- in the manner prescribed under Section 68 of the Finance Act, 1994 read
with Rule 6 of the Service Tax Rules, 1994, I therefore find the noticee liable to penalty as
provided in Section 76 ibid. However, in view of proviso to Section 78 that where penalty
under Section 78 is payable, provisions of Section 76 shall not apply, I limit the penalty
under Section 76 to the period till 9.5.2008 only and not from 10.5.2008, the date from which
this proviso became operative.
25.10
The SCN further seeks to impose penalty under Section 77 of the Finance Act,
1994 for the noticee’s failure to get registered under ‘construction of complex’ service.
Again, it is a matter of fact that the noticee was not registered for ‘construction of complex’
26
service. The noticee was having registration for some other services, but not for ‘construction
of complex’ services. They should have applied for amendment in their ST-2 certificate for
addition of ‘construction of complex’ service which they have not. I therefore find the
noticee liable to penalty under Section 77(1)(a) of the Finance Act, 1994 for failing to take
registration in accordance with the provisions of Section 69 of the Finance Act, 1994.
I view of foregoing discussion and findings, I pass the following order –
26.
ORDER
(i)
I consider the amount of Rs.13,75,61,595/- (=10,62,18,202 + 3,13,43,393)
received by the noticee during the period from 2007-08 to 2011-12 as taxable
value after allowing abatement @ 67% on the gross receipt of Rs.41,68,52,765/(= Rs. 32,18,72,787 + Rs. 9,49,79,978).
(ii)
I order to recover the service tax of Rs.1,48,13,468/- (including Edu cess and
S&HE cess) from the noticee under proviso to Section 73 (1) of the Finance Act,
1994.
(iii)
I order to recover interest from the noticee on the service tax amount of
Rs.1,48,13,468/- at the rate and in the manner prescribed under Section 75 of the
Finance Act, 1994.
(iv)
I impose upon the noticee a penalty of Rs.200/- (Rupees Two Hundred Only) per
day or at the rate of 2% of the service tax amount per month, whichever is higher,
under section 76 of the Finance Act, 1994. As the actual amount of penalty would
depend on actual date of payment of service tax, as per Section 76 of the Finance
Act, 1994, penalty amount will not exceed the amount of service tax payable in
terms of this order. The penalty amount is to be calculated for the tax liability
arising upto 9.5.2008 only.
(v)
I impose upon the noticee a penalty of Rs.5000/- or Rs.200/- per day for the period
of failure, whichever is higher, under Section 77(1)(a) of the Finance Act, 1994 for
failure to obtain service tax registration under the category of ‘construction of
complex’ service.
(vi)
I impose upon the noticee a penalty of Rs.1,48,13,468/- under section 78 of the
Finance Act, 1994. As per proviso to section 78, however, if the service tax and
interest payable under this order are paid within 30 days from the date of
communication of this order, the penalty amount shall be reduced to 25% of
Rs.1,48,13,468/-, provided penalty amount is also paid within the period of 30
days from the date of communication of this order.
(Tejasvini P. Kumar)
Commissioner, Service Tax,
Ahmedabad
F. No.STC/04-39/O&A/13-14
Date:- 27.8.2014
27
By Regd. Post A. D.
To,
M/s. RJP Infrastructure Pvt. Ltd.
206, Shefali Centre,
Near Paldi Cross Roads,
Ellisbridge, Ahmedabad-380006
Copy to :
(1)
(2)
(3)
(4)
(5)
The Chief Commissioner, Central Excise, Ahmedabad Zone, Ahmedabad.
The Deputy Commissioner (Prev.), Service Tax, Ahmedabad
The Deputy Commissioner, Service Tax, Division-II, Ahmedabad
The Superintendent, Service Tax, Range-VI, Division-II, Ahmedabad.
Guard File.