ST - Construction Service - Revenue cannot be allowed to receive service tax twice in respect of same construction activities, once from contractor and second time from person who has collected same: CESTAT
By TIOL News Service
NEW DELHI, APR 22, 2014: THE appellants are engaged in the business of real estate development and had undertaken the construction of flats known as Jaipuria Sun Rise Flats and Commercial complex known as Jaipuria Sun Rise Plaza at Indirapuram, Ghaziabad. They were getting the said flats constructed from various contractors who were executing the various jobs of constructions of flats and commercial space. The said projects were launched in the year 2004, when there was no Service tax on the construction activities. However, when such flats/commercial spaces was in the process of being constructed, Service tax was introduced on construction of commercial complex with effect from 10.9.04 and on residential premises with effect from 16.6.05. When the said flats/commercial space were given possession to the buyers, which started with effect from 10.9.04 and residential premises with effect from 16.6.05. When the said flats/commercial space were given possession to the buyers, which started with effect from 1.4.07, the appellant also collected service tax from their buyers by representing the same as "reimbursement of Service Tax".
Revenue by entertaining a view that in terms of provisions of section 73A of the Finance Act, 1994, any person who has collected any amount, which is required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of Central government, initiated proceedings against the appellant by way of issuance of show cause notice dated 1.4.08.
The adjudicating authorities observed that the appellant was required to prove that individual service tax amounts as collected by them, has not been paid by themselves to the Government and the deposit of the same through the contractor was not in accordance with the law. He accordingly, confirmed the service tax demand of Rs. 3,24,81,023 along with confirmation of interest and imposition of identical amount of penalty in terms of section 78 of the Finance Act, 1994 and of Rs. 1,000/- in terms of provisions of section 77 of the said Act.
Hence the present appeal.
The Tribunal observed,
If a person collects any amount from another person representing the same as service tax, is required to pay the same to the credit of the Central Government. Admittedly, 'Jaipuria Sunrise Greens' and commercial complex known as Jaipuria Sunrise Plaza are being developed by the appellant, though the same are not being constructed by them directly and the appellant has appointed various contractors to execute the job of residential complex and commercial complex. As per the appellant, the agreement with the contractor for providing various construction activities are exclusively of Service tax, inasmuch as when the said agreements were entered into, there was no liability to pay the service tax. After the introduction of service tax liability, the contractors are admittedly liable to pay the service tax which is being collected by them from the present appellant. Appellants in turn at the time of possession of flats to the ultimate consumers collected the service tax from them, reimbursed the same to the contractor, who deposited the same with the service tax department.
The only reason adopted by the adjudicating authority for confirmation of demand is that the appellants have himself not deposited the amount of service tax with the Government.
Revenue's contention is that the appellant, who has collected the amount, was required to deposit the same himself with the Revenue. We find no justification for the above stand of the department. Admittedly, the appellant is the owner of the flats, who is selling the same to its customers. The value of said flat is being recovered by the appellant from the buyer and all the taxes payable to the Government are to be collected by him from their buyers along with the cost of the flats. Whether such Service tax collected by them from the buyers is deposited directly with the department by themselves or is deposited with the Revenue by the contractor being the job worker for the appellant is immaterial as long as Service tax so collected is deposited. The Revenue cannot be allowed to receive service tax twice in respect of same construction activities, once from the contractor and the second time from the person who has collected the same.
Tribunal found that the appellants have taken a categorical stand that the service tax received by them was to the tune of Rs. 3.24 crores approximately whereas the service tax paid from various contractors is to the tune of Rs. 3.48 crores. For the above proposition they have placed reliance on the Chartered Accountants' certificate and has also placed various documentary evidence before the adjudicating authority. Tribunal still wanted Revenue to examine and verify said facts. If the entire amount collected by the appellant stand paid to the department through contractor, no demand would stand against them and no penalty would be imposable on them.
(See 2014-TIOL-609-CESTAT-DEL)
