ST - Haryana Housing Board is a 'governmental authority', as it is fully under control of State Govt. and, therefore, service being provided of construction of BPL houses would clearly fall in exemption clause: High Court
By TIOL News Service
CHANDIGARH, AUG 19, 2016: THE petitioners are aggrieved against the action of Haryana Housing Board (created under Haryana Housing Board Act, 1971) whereby service tax which, according to the Board, was payable in its hands, is sought to be deducted from the bills of the petitioners.
Petitioner submits that they were awarded contract for construction of flats for BPL category vide letter dated 26.8.2013 and as per notification No. 25/2012-S.T. dated 20.6.2012, the service of construction etc. provided to the Government, a local authority or a governmental authority is exempted from payment of service tax.
It was further submitted that clauses 12 (a), (c) and (f) of the notification 25/2012-ST were omitted vide notification 6/2015-ST w.e.f. 1.4.2015, however, vide Section 102 of the Finance Act, 2016 the exemption was restored with retrospective effect from 1.4.2015 till 29.2.2016.
Moreover, entry 12A was inserted w.e.f. 1.3.2016 by notification 9/2016-ST extending the exemption from payment of service tax akin to that available earlier upto 31.3.2020.
The respondent Haryana Housing Board submitted that although according to them the contract awarded by the Board for construction of houses for BPL category to the petitioner is not a taxable transaction under the provisions of the Finance Act, 1994, r/w notification 25/2012-ST but the same stand taken before the department in pursuance to the show cause notice was not accepted.
It is further submitted that on account of the above the Board had deducted the tax component from the running bill of the petitioners. It is also informed that since the project was not sanctioned by the competent authority the exemption under clause 14 of the notfn. 25/2012-ST is not available.
The Counsel for the Customs & Excise department (respondent) submitted that clause 12 of the notification provides for exemption from payment of tax if it is a non-commercial transaction;that in the case in hand, there was no material produced by the Haryana Housing Board before the adjudicating authority to suggest that exemption, as envisaged in clause 12 of the notification dated 20.6.2012, was available to the Board; that the department has already passed order in the case of the Board, which is under appeal.
The High Court crystallised the issues that arose for consideration & made its observations as below -
(i) Whether service tax is chargeable on construction of BPL houses constructed by the petitioners for the Board?
After extracting the provisions of s.93 of FA, 1994, Notification 25/2012-ST, clause 12, definition of "governmental authority", "original works", amending notification 2/2014-ST substituting the definition of "governmental authority", notification 6/2015-ST, section 102 of the Finance Act, 2016, notification 9/2016-ST inserting clause 12A in notification 25/2012-ST, the High Court observed that in view of the provisions of section 3, 20, 72 of the Haryana Housing Board Act, 1971, it was clear that the Board is a governmental authority, as it is fully under the control of the State Government.
It is further observed -
"19. On a plain reading of the notification dated 20.6.2012, in our view, the service being provided by the petitioners would clearly fall in the exemption clause, as the Board is a governmental authority having been set up under a State Act, i.e., Haryana Housing Board Act, 1971. It is wholly controlled by the State Government. BPL houses constructed by the petitioners are meant for residential purpose and not for commerce, industry or any other business or profession.
21. … it can safely be opined that for the kind of contract entered into between the petitioners and the Board, no service tax is leviable, hence, the action of the Board in deducting part of the service tax, though payable in the hands of the Board, if tax is leviable, from the bills of the petitioners is declared to be illegal."
(ii) Whether in terms of condition No. 3 in the tender conditions, the petitioners would be liable to discharge the liability of service tax, if payable, by the Board as per the provisions of the Finance Act, 1994, the Rules and the notifications issued thereunder?
The High Court observed -
+ Though in view of our aforesaid findings, the issue has lost significance, however, as the argument was raised, we will touch upon the same.
+ Condition No. 3 reads - "3. Royalty, Sales Tax, Excise Duty, Octroi, Service Tax or any other tax or levy, shall be paid by the contractor direct to the respective department in accordance with their rules and regulations enforce from time to time, without any liability to the Housing Board Haryana."
+ The stand of the petitioners was that as per the aforesaid contract, the petitioners could not shift their liability of any kind of tax on the Board. Where any liability, as per law, is on the Board, that cannot be shifted on the contractors by way of the aforesaid clause.
+ As per the provisions of Finance Act, 1994, as amended upto date read with notification No. 30/2012-S.T. Dated 20.6.2012 on the works contracts the liability is 50% on the contractor, whereas 50% is on the contractee, i.e., service provider and the service recipient.
+ The stand of the petitioners was that for any alleged levy on the petitioners, namely, the contractors/service provider, the department never issued any notice seeking to levy the tax. Notice was issued to the Board.
+ From the running bills of the petitioners, the Board had deducted the amount of tax, which is to be paid by the Board, in case the tax is leviable, which was totally uncalled for.
+ A perusal of the aforesaid clause shows that the contractor is liable to pay various taxes, as mentioned in the clause, directly to the department in accordance with the Rules and the Regulations in force from time to time.
+ The case of neither of the parties is that the liability, which may be put on the contractor/service provider, if tax is leviable, is being passed on to the Board, as the scheme of the Act provides for levy of tax 50:50 on service provider and the service recipient.
+ Hence, the action of the Board, even if it is assumed that tax is leviable, to pass on their share of burden as per the provisions of the Act on the contractors is not envisaged in the clause.
Conclusion:
(i) On the contract for construction of BPL houses, as awarded by the Board to the petitioners, no service tax is leviable w.e.f. 1.7.2012; and
(ii) The Board is not entitled to pass on the burden of service tax payable on its part, if the tax is leviable, upon the contractors.
The Writ petitions were disposed of.
(See 2016-TIOL-1775-HC-P&H-ST)
