CESTAT-Allahabad : Where assessee had constructed individual residential flats/units/houses on a large plot of land, said service would not fall under category of ‘construction of complex service’

CESTAT, Allahabad Bench

Beriwal Constructions Co. Vs. Commissioner of Central Excise & Service tax, Agra

Section : 65(30a), 65(91a) and 65(105)(zzzh),

Anil Choudhary, Judicial Member And Anil G. Shakkarwar, Technical Member

Final Order No. ST/A/70747/2017-CU(DB)

Appeal No. ST/70894/2016 CU(DB)

July  27, 2017

Notification No. 25/2012 – ST, dated 20-6-2012

ORDER

Anil Choudhary, Judicial Member – The issue in this Appeal filed by the appellant – Beriwal Constructions Co. is whether under the admitted fact that they have Constructed individual residential flats/units/houses whether they are liable to pay service tax under the provisions of Finance Act read with the Rules under the period in dispute 2010-11 and 2014-15.

2. As per the show cause notice dated 21 October, 2015, it appeared to Revenue that for the period prior to 1 July, 2012, under Section 65(30a) of the Act construction of complex, the construction of a new residential complex or a part thereof or completion and finishing, etc. in relation to residential complex 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. Further as per Section 65(91a) “residential complex” means any complex comprising of building or buildings, having more than 12 residential units, a common area, and any one or more facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system. It further appeared that in terms of explanation to Section 605(105)(zzzh) of the Act, it is clear that service of construction of a complex, which is intended for sale, wholly or partly by a builder or any person authorised by the builder before, during or after construction (except in cases for which no service is received from or on behalf of 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 and such service will be taxable. According to Revenue it is evident that such service is not taxable, only in the condition where sum is received from or on behalf of the prospective buyer by the builder or a person authorised by the builder after the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force. According to the statement of Shri Ashok Beriwal, Partner of the appellant firm dated 22 September, 2015, wherein he stated that authority competent for the purpose of Section 65(105)(zzzh), includes besides any Government Authority, an Architect registered with Council of Architecture Constituted under the Architects Act, 1972, who is authorised under law for time being in force to issue a completion certificate in respect of a registered complex, as a pre-condition for its occupation. It further appeared that the competent authority under the facts of the present case is – Mathura-Vrindavan Development Authority. It further appeared to Revenue that the appellant firm has provided service in respect of units of villas/flats which are more than 12 in the premises and have been sold out, without obtaining the completion certificate from the competent authority which under the Clause IV of Annexure-2 of Uttar Pradesh Nagar Yojana evam Vikas Adhiniyam-1973 is the Upadhyaksh (Vice-President) of the Development Authority or any person designated by him. Accordingly, show cause notice dated 21 October, 2015 was issued invoking the extended period of limitation demanding service tax of Rs. 96,91,579/- for the period 2010-11 to 2014-15. The SCN was confirmed vide Order-in-Original No. AGA-EXCUS-000-COM-0006-16-17, dated 8 June, 2016 by the learned Commissioner, Customs, Central Excise & Service Tax, Agra and further penalty under Sections 77 and 78 of the Act was imposed.

3. Being aggrieved the appellant-assessee is before this Tribunal. The learned-counsel for the appellant urges on following 4 points:—

(i) Individual units or row houses do not fall in the definition of residential complex.

(ii) Units have been sold only after obtaining completion certificate from Architects.

(iii) No tax can be demanded on sale of unmovable properties.

(iv) Demand is barred by limitation.

4. Heard the parties.

5. As the period under dispute lies before 1 July, 2012 in part and also after l July, 2012 in part when there were major changes in the scheme of service tax. We first take notice of the relevant provisions, which are as follows :—

prior to 1 July, 2012 :—

I. Section 65(30a) – “Construction of Complex”

“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 application or fittings and other similar services; or

(c) Repair, alteration, renovation or restoration of, or simila services in relation to, residential complex;

II. Residential Complex – Section 65(91a)

‘Residential Complex’ means any complex comprising of —

(i) A building or buildings, having more that 12 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 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 the clause,

(a) “Personal use” includes permitting the complex for the use a 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;

III. Taxable Services – Section 65(105)(zzzh)

Section 65(105)(zzzh) “Taxable Services” means any service provided or to be provided to any person, by any other person, in relation to Construction of complex.

Explanation.—For the purpose of this sub-clause, Construction of a complex which is intended for sale, wholly, or partly, by a builder or any person authorized by the builder before, during or after construction (except in case 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.

With Effect From 1 July, 2012 :—

IV. Service – Section 65B(44)

“Service” w.e.f. 1 July, 2012 means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—

(a) An activity which constitutes merely, —

(i) A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or

(ii) Such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of Clause (29A) of Article 366 of the Constitution; or

(iii) A transaction in money or actionable claim;

(b) A provision of service by an employee to the employer in the course of or in relation to his employment;

(c) Fees taken in any Court or Tribunal established under any law for the time being in force.

Explanation 1. . . . . . . . . . .

Explanation 2. . . . . . . . . . .

Explanation 3. . . . . . . . . . .

Explanation 4. . . . . . . . . . .

V. Section 66E – Declared Services

The following shall constitute declared service, namely:—

(a) Renting of immovable property

(b) Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-certificate by the competent authority.

Explanation.—For the purpose of this clause,

(I) The expression “competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non- requirement of such certificate from such authority, from any of the following, namely :—

(A) Architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or

(B) Chartered engineer registered with the Institution of Engineers (India); or

(C) Licensed surveyor of the respective local body of the city or town or village or development or planning authority;

(II) The expression “construction” includes addition, alterations, replacements or remodelling of any existing civil structure.

VI. Mega Exemption – Notification No. 25/2012-S.T., dated 20-6-2012

Clause 14(b) Services by way of construction, erection, commissioning or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex. Clause 2(zc) More than one residential unit, in a complex.

6. Having considered the rival contentions and the admitted facts that the appellant have constructed individual units or row houses we find that it is evident from the aforementioned provisions both for the period prior to 1 July, 2012 and subsequent to that date, that construction of residential complex having not more than 12 residential units per building or block prior to 1 July, 2012 and two or more units after 1 July, 2012 is not sought to be taxed under the provisions of the Finance Act/Service Tax provisions. For the levy, it should be registered complex comprising more than 12 units prior to 1 July, 2012 and more than one residential unit in a complex from 1 July, 2012. Admittedly in the present case, the appellant constructed individual residential houses, each block, being a residential unit which is an admitted fact. In any case, it appears that the legislature did not want to tax construction of individual residential units to the levy of service tax. We find that the learned Commissioner have erred in considering the approved plan for construction of more than 12 individual units on a large plot of land as a residential complex which we find is wrong and misconceived. Accordingly, we find that the show cause notice is not maintainable. Accordingly, we allow this appeal and set aside the impugned order. The appellant shall be entitled for consequential benefits in accordance with law.

[Citation : 2017-Taxcaselaw-65-CESTAT-Allahabad-GST]