Ganpati Mega Builders (India) (P) Ltd. v. Commissioner, Customs, Central Excise & Service Tax, CESTAT, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

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Case Number

Service Tax Appeal No. 70671 of 2016

Advocates

Ms. Rinki Arora (Advocate) & Shri Aalok Arora (Advocate)
Shri Rajeev Ranjan, Authorized Representative

Judges

Anil Choudhary, Member (Judicial)
P. Anjani Kumar, Member (Technical)

Acts

UTTAR PRADESH KRISHI UTPADAN MANDI ADHINIYAM 1964
Rule 2A (ii) of Service Tax Determination of Value Rules, 2006.
provisions as Clause (d) of Section 66(D)
SECTION 66 FINANCE ACT

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Smart Summary

Factual and Procedural Background

The appeal arises from a demand of service tax on an appellant engaged in works contract services who had constructed houses for rehabilitation of poor persons under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). The appellant was registered with the Department.

In February 2014 the Department received financial data from a third party naming the appellant. The Department requested verification documents and, in response, the appellant submitted balance sheets, income tax returns and copies of contracts/agreements for the period 2009-10 to 2012-13, together with project-wise details and claims of exemption under various notifications.

The Revenue contended that exemptions were wrongly availed for certain periods (notably pre-01 July 2010 for JNNURM works and for certain works for Krishi Utpadan Mandi Parishad in 2013-14) and alleged undisclosed taxable receipts for work for M/s Uncle Builders for 2009-10 & 2010-11. The Department adopted values from Form 26AS and, applying the works contract composition scheme and Rule 2A(ii) of the Service Tax Determination of Value Rules, 2006, computed a tax liability (including cess) of Rs. 1,73,08,890/- and proposed penalties. A Show Cause Notice (SCN) dated 21 October 2014 invoked the extended period of limitation under the proviso to Section 73(1) for 2009-10 to 2013-14. The Commissioner adjudicated the SCN and framed four issues which were contested before the Tribunal.

Legal Issues Presented

Whether exemption from payment of service tax in respect of services provided to Agra Development Authority (ADA) under JNNURM for construction of houses for the weaker sections is available for the period 2009-10 to 2010-11 (i.e., before Notification No. 28/2010-ST, effective 01.07.2010).
Whether exemption is available for construction services provided to Rajya Krishi Utpadan Mandi Parishad (Mandi Parishad) during 2013-14 under entry No. 12(a) of Notification No. 25/2012-ST dated 20.06.2012.
Taxability of services provided to M/s Uncle Builders during 2009-10 & 2010-11.
Issues relating to demand of interest and penal action against the noticee (including invocation of extended limitation).

Arguments of the Parties

Appellant's Arguments

The appellant contended that services for JNNURM and Rajiv Awaas Yojana, although advance moneys may have been received before July 2010, were performed after July 2010 and therefore are exempt under Notification No. 30/2010 dated 28.06.2010 (as argued in the appeal).
The appellant argued that JNNURM works were executed for the State Government (Uttar Pradesh) to provide shelter at nominal rent and thus fall within construction for the personal use of a government or governmental authority (and hence exempt).
The appellant asserted entitlement to exemption for construction works done for Mandi Parishad as these are statutory bodies constituted under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964; reliance was placed on Tribunal decisions (including Krishi Upaj Mandi Samiti) and on the Board's Education Guide and Circular clarifying that APMCs/Boards are covered in the negative list for services directly related to agricultural produce.
The appellant noted payment of service tax (with interest) for works performed for Uncle Builders prior to issuance of the SCN.

Revenue's Arguments

The Revenue alleged that the appellant wrongly availed exemption for JNNURM works for the years 2009-10 and 2010-11 because Notification No. 28/2010-ST became effective from 01.07.2010 and therefore did not apply to services provided before that date.
Revenue maintained that exemption under Serial No.12(a) of Notification No.25/2012-ST would not apply to Mandi Parishad works for 2013-14 because the Mandi Parishad were not government authorities in the sense required (not established with 90% equity/control by Government and operating on a commercial basis by collecting rent/fees).
The Revenue observed that gross receipts for various contracts were not individually reflected in the appellant's balance sheets and therefore adopted values from Form 26AS to compute taxable value; Revenue found appellant failed to produce records to determine value of goods involved in works contracts and thus applied the works contract composition scheme and Rule 2A(ii) for value determination.
Revenue alleged suppression of material facts and contravention of the Act and Rules to evade service tax, invoked extended limitation under proviso to Section 73(1), and proposed penalties under Sections 77 and 78.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
CCE & ST, Allahabad v. Ganesh Yadav (reported 2017 (6) G.S.T.L. 428 (Tri. All))	Held that construction activity which was not taxable prior to 01.06.2007 under commercial/industrial construction continues to be non‑taxable under the works contract category from 01.06.2007.	The Tribunal referred to this decision to support the contention that certain JNNURM housing activities might not attract service tax; the opinion notes the appellant relied on Ganesh Yadav in arguing non-taxability of JNNURM constructions.
M/s Lanco Infratech Ltd. v. CC, CE & ST (2015) 38 S.T.R. 709 (Tri.-LB)	Larger Bench ruling relied upon for the broader principle that activities not taxable prior to 01.06.2007 remain non‑taxable after introduction of works contract taxation.	The Tribunal (as referred to in the opinion) cited the Larger Bench in Lanco as authoritative support for the reasoning in Ganesh Yadav; the appellant relied on this chain of authority.
M/s Jethanand Arjundas & Sons v. CCE & ST, Indore (Final Order No.53288/2018 dated 11.09.2018)	Applied the principle in Ganesh Yadav/Lanco to hold that construction of houses for slum dwellers under JNNURM & similar schemes is not taxable.	The appellant cited this Tribunal order as an allied authority supporting non‑taxability of JNNURM/related social housing projects; the opinion records reliance on it by the appellant.
M/s Krishi Upaj Mandi Samiti v. CCE & ST, Jaipur-I & II (2017 (4) GSTL 346)	Interpreted the negative list and Section 66(D) to hold that services by Agricultural Produce Marketing Committees/Boards are excluded from tax liability where services are directly related to agriculture/agricultural produce; clarified that bodies set up under state law for regulating marketing of agricultural produce fall within this negative list for certain services.	The Tribunal relied on this decision (and the Education Guide dated 20.06.2012) to support the conclusion that construction works carried out for Mandi Parishad are not liable to service tax under Notification No.25/2012-ST and related clarifications.

Court's Reasoning and Analysis

The Tribunal examined each of the issues framed by the Commissioner and analysed them with reference to statutory notifications, departmental guidance and judicial precedents cited by the parties.

On the JNNURM exemption for services to ADA prior to 01.07.2010, the Commissioner's view (as recorded) was that Notification No. 28/2010-ST grants exemption effective from 01.07.2010 only and therefore services provided before 30.06.2010 would not be covered. The Commissioner also considered the requirement of "personal use" (i.e., construction for personal use by a person) and concluded that personal use condition was not met because ADA leased houses to ultimate beneficiaries at nominal rent; the Commissioner treated the personal use of the appellant (contractor) as immaterial and emphasized the actual use by ADA/ultimate beneficiaries.

The appellant contended that works were carried out after July 2010 and relied on Tribunal precedents (Ganesh Yadav and the Larger Bench in Lanco) and subsequent orders (Jethanand Arjundas) to argue non‑taxability of JNNURM constructions. The opinion records these contentions and the authorities relied upon.

On the Mandi Parishad issue, the Commissioner had held that these bodies were not Government Authorities for the purpose of the exemption because they were not established with requisite Government equity/control and operated on a commercial footing. The Tribunal analysed competing contentions, referred to the Board's Education Guide dated 20.06.2012 and Circular No.89/7/2006 dated 18.12.2006, and accepted the position reflected in the Tribunal's prior decisions (including Krishi Upaj Mandi Samiti) that APMCs/Boards constituted under state law perform regulatory and support functions for marketing agricultural produce and certain services to them are covered by the negative list or mega exemption notifications. On that basis the Tribunal concluded that various construction works carried out for Mandi Parishad were not liable to service tax and are exempt in view of the Education Guide, the Circular and Mega Exemption Notification No.25/2012-ST.

Regarding services to M/s Uncle Builders (2009-10 & 2010-11), the Tribunal noted that the appellant had already paid tax with interest on 04.06.2006 before issuance of the SCN; the Tribunal described the issue as interpretational and observed that, on the facts, there was no tax liability in respect of various construction works done for government/statutory authorities (JNNURM, canal works, Mandi Samiti, etc.).

On limitation and valuation methodology, the Tribunal held that the extended period of limitation was not available to Revenue on the facts because the appellant had maintained books of account and filed regular returns. The Tribunal found Revenue erred in adopting Form 26AS to determine gross receipts because Form 26AS is not a prescribed document under service tax rules for ascertaining an assessee's gross turnover. The Tribunal emphasised that tax must be assessed on facts and related documentary records such as bills, invoices and bank statements, none of which had been rejected by Revenue.

Holding and Implications

FINAL HOLDING: The impugned order was set aside and the appeal was allowed.

Consequences and immediate implications (as stated in the opinion):

The appellant succeeds in the appeal and is entitled to consequential benefits in accordance with law.
The Tribunal held that various construction works carried out for Mandi Parishad are exempt from service tax in view of the Education Guide (20.06.2012), Circular No.89/7/2006 (18.12.2006) and Notification No.25/2012-ST.
The Tribunal found no tax liability (on the facts) for construction works done for government/statutory authorities under JNNURM, canal work for Water Resources Division, and for Mandi Samiti as considered in the appeal; it also noted that tax for Uncle Builders had been paid with interest before the SCN.
The extended period of limitation invoked by Revenue was held not to be available in the facts and circumstances of the case because books and returns had been maintained and filed.
The Revenue was held to be in error in adopting Form 26AS for calculating the assessee's taxable turnover since Form 26AS is not a prescribed document for service tax valuation; tax is to be assessed on the basis of proper documentary records (bills, invoices, bank statements, etc.).

The opinion does not purport to lay down a novel legal precedent beyond its decision on the facts; it resolves the departmental demand against the appellant and grants consequential relief in accordance with law.

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Ganpati Mega Builders (India) (P) Ltd. v. Commissioner, Customs, Central Excise & Service Tax

DATE OF HEARING: 02 August, 2021 DATE OF PRONOUNCEMENT : 05 August, 2021 ANIL CHOUDHARY: The issue in the appeal is whether the service tax have been rightly demanded on the appellant who has constructed houses for rehabilitation of poor people under JNNURM.

2. The appellant is engaged in providing works contract services and is registered with the Department.

3. The facts in brief are that in the month of February, 2014 the Department received some financial data from third party source wherein the name of the appellant appeared. Thereafter the appellant was requested to submit documents for verification HONBLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) HONBLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) Service Tax Appeal No.70671 of 2016 of discharge of service tax liability. In response, the appellant by letter dated 08 May, 2014 submitted copies of their balance sheet along with income tax returns, copy of contracts/agreements entered for the period 2009-10 to 2012-

13. The details submitted are as follows :- Financi al Year Turnover Achieved Work Retates to Remarks

1. 2009- Rs.20,20,14,266.7 JNNURM Yojna under Agra Development Authority Exempt from Service Tax Vide Notification No. 28/2010 dated 22.06.2010

2. 2010- 18,39,15,805.94 JNNURM Yojna under Agra Development Authority Exempt from Service Tax Vide Notification No. 28/2010 dated 22.06.2010

3. 2011- 6,42,44,503.21 JNNURM Yojna under Agra Development Authority Exempt from Service Tax Vide Notification No. 28/2010 dated 22.06.2010

4. 2012- 1.JNNURN yojna Work Amount to 1,42,35,508.37 JNNURM Yojna under Agra Development Authority Exempt from Service Tax Vide clause no. 13(b) Notification no. 25/2012 dated 20.06.2012 2.M/s Sintex limited work amount to Rs.2,40,33,232.75 M/s Sintex Industries Ltd. Luckow Service Tax of Rs. 9,60,643/- is paid on 7th May 2014 vide Challan No. 02622

4. Further, the appellant by their letter dated 16 May, 2014 also gave project wise details of ongoing construction works which are as under:- Nature of Contract Tender Authority Remarks

1. Construction of Residential Houses for Weaker Section Under JNNURM Exempt from Service Tax Vide clause no. 13(b) of Notification no. Service Tax Appeal No.70671 of 2016 25/2012

2. Canal Work Under Water Resources Division-

2 Kesli, Sagar, M.P. Exempt from Service Tax Vide clause no. 12(b) Notification no. 25/2012

3. Construction of government public building under Bundelkhand package Rajya Krishi Utpadan Mandi Parishad, U.P., Orai Construction Service provided to Government; Exempt from Service Tax Vide clause no. 12(a) of Notification no. 25/2012

4. Construction of Government Forest Trading School Director, Forest Training School, Amarkantak, Anooppur, M.P. Construction Service provided to Government; Exempt from Service Tax Vide clause no. 12(a) of Notification no. 25/2012

5. Thereafter the Range Superintend requested the appellant to provide contract wise detail of all the contract works done during the last five financial years. In response, the appellant submitted a copy of Form 26AS (downloaded from the website of Income tax) for the financial year 2009-10 till 2013-14. Further, they claimed that their entire work, except the work order of M/s Sintex Industries Ltd. is exempted under different notifications. It is also specified that they had discharged service tax for the work done for M/s Sintex Industries Ltd..

6. It appeared to the Revenue that appellant had wrongly availed exemption in respect of Jawaharlal Nehru Urban Renewal Mission (JNNURM) during the Financial year 2009-10 to 2010-11 as the construction services provided under JNNURM were exempted vide Notification No. 28/2010ST which came into force on 01 July, 2010. It further, appeared that appellant had wrongly claimed exemption in respect of construction works done for Krishi Utpadan Mandi Parishad (for short Mandi Parishad) during the financial year 2013-14 as under Serial No.12(a) of Notification No.25/2012-ST exemption is available for construction services provided to a government authority which is meant predominantly for use other than Service Tax Appeal No.70671 of 2016 commercial/industrial. It further appeared that appellant had not discharged service tax on construction services provided to M/s Uncle Builders during the financial year 2009-10 & 2010-11.

7. It further appeared to Revenue that the gross receipts for various contracts executed by the appellant are not individually reflected in their balance sheets and thus Revenue adopted the value as per Form 26AS. It was further observed that appellant failed to submit any documents/records so as to arrive at the value of goods involved in works contract. Accordingly, tax liability was calculated under works contract composition scheme, as amended, and for the period starting from 01 July, 2012 the service tax liability was calculated in terms of Rule 2A

(ii) of Service Tax Determination of Value Rules, 2006. Accordingly, tax liability including cess was calculated of Rs.1,73,08,890/-

8. It was further alleged in the SCN dated 21 October, 2014, that the appellant have failed to disclose true material facts and have contravened the provisions of the Act and Rules, to evade payment of service tax. Accordingly, extended period of limitation was invoked under proviso of 73(1) of the Act for raising demand for the period 2009-10 to 2013-14. The amount of Rs.26,55,67,195/- was proposed to be treated as the value of taxable service provided during the afore mentioned period and tax on the same was demanded of Rs.1,73,08,890/- including cess, with a proposal to impose penalty under Section 78 & 77 of the Act. The SCN was adjudicated on contest by the Commissioner who framed the following issue.

(i) Whether the exemption from payment of Service Tax in respect of services provided by the notice to Agra Development Authority (in short ADA) under Jawaharlal Nehru Renewal Mission (in short JNNURM) for construction of houses for weaker section of society would be available for the period from 2009-10 to 2010-11(up to 30.06.2010) before issuance of Notification No. 28/2010- ST dated 22.06.2010 (w.e.f. 01.07.2018).

(ii) Whether the exemption from payment of Service Tax in respect of services provided by the noticee to Rajya Krishi Utpadan Mandi Parishad (in short Mandi Parishad) during 2013-14, for construction work under Works Contract Service Tax Appeal No.70671 of 2016 would be available, under Sl. No. 12(a) of Notification No. 25/2012-ST dated 20.06.2012.

(iii) Taxability of services provided to M/s Uncle Builders during 2009-10 & 2010-11.

(iv) Issue relating to demand of interest and penal action against Noticee.

9. As regards the exemption claimed for services to ADA, JNNRUM during the financial year 2009-10 to 2010-11 (up to 30 June, 2010) i.e. before issuance of Notification No.28/2010-ST, the learned Commissioner observed that exemption is available under this Notification dated 22 June, 2010 with effect from 01 July, 2010 only. Whereas the appellants have provided the specific services for the period before 30 June, 2010. Further, the plea of the appellant that such houses are constructed for personal use of ADA, the learned Commissioner further observed that works contract is normally taxable for residential complex, but when the construction of such complex is for personal use, by such person, then the exemption is available. It is ADA who gets planning and designing done and thereafter gave drawings to appellant to provide the work contract services. The first exclusion clause is not fulfilled by the appellant.

10. It was further observed that in fact, ADA has leased out such houses to ultimate beneficiary on nominal rent and thus condition for personal use is not fulfilled. It is further observed that personal use of appellant is material and not of ADA.

11 The learned counsel assailed the findings of the Commissioner stated that for the advance amount received before July, 2010 for construction of residential houses under JNNURM & Rajiv Awaas Yojana, the work was done after July, 2010 and exempted as per Notification No. 30/2010 dated 28 June, 2010. Further, for the work relating to JNNURM have been executed for the Uttar Pradesh Government, which is providing shelter and home to the poor people at nominal rental basis and thus falls under the definition of construction for personal use of the Government or government authority. Further, this nowhere falls under commercial purpose as held by this Tribunal in the case of CCE & ST, Allahabad V/s Ganesh Yadav reported in 2017 Service Tax Appeal No.70671 of 2016 (6) G.S.T.L. 428 (Tri.All.) wherein this Tribunal referring to Larger Bench ruling in the case of M/s Lanco Infratech Ltd. V/s CC. CE & ST (2015) 38 S.T.R. 709 (Tri.-LB) have held that such activity which was not taxable prior to 01 June, 2007 under the category of commercial and industrial construction, continues to be non taxable under the works contract category from 01 June, 2007, when works contract was introduced as taxable head in the Finance Act. Reliance is also placed on another Division Bench ruling of this Tribunal being Final Order No.53288/2018 dated 11 September, 2018 in the case of M/s Jethanand Arjundas & Sons V/s CCE & ST, Indore wherein also similar construction of houses for slum dwellers under JNNURM & Valmiki Ambedkar Awas Yojna, Awasiya Vishwavidyalaya for MP Laghu Udyog. This Tribunal held that the same is not taxable following the ruling of Ganesh Yadav (supra).

12. As regards the second issue relating tax liability for construction for Mandi Parishad, learned Commissioner observed that these Mandi Parishad are formed under the Act of State Legislature Uttar Pradesh Krishi Utpadan Mandi Adhiniyam 1964, but not for carrying out any municipal function which are provided under Article 243W of the Constitution of India. Further, it is not established by Government with 90% of the equity or control with Government. Further, observing that this Mandi Parishad are running on commercial basis, having perpetually, it is collecting rent from various shops located in the market and collecting fees from traders . Further, observing that Mandi Samiti is not a Government Authority, thus the benefit of Notification No.25/2012-ST is not available for such works contract done for Mandi Samiti.

13. Assailing the findings of the learned Commissioner, the learned Counsel for the appellant urges that admittedly appellant have constructed toilets, roads, drainage, outer sewage, underground water storage tank reservoir, drinking water supply, S.T.P. (Sewage Treatment Plant)Labour shed etc. for the Mandi Samiti. The order of learned Commissioner is self contradictory as in the same paragraph (25.2) of the impugned Service Tax Appeal No.70671 of 2016 order, the learned Commissioner observes that Mandi Parishad are formed under the State Act and in the same breath observed that Mandi Parishad is not a Government Authority. Admittedly, Mandi Parishad is a statutory body created under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964. Thus as per Entry No.12 & 13 of Mega Exemption Notification No.25/2012, the appellant have rightly claimed exemption for providing construction services to the Statutory Authority, and the same is not commercial in nature as has been clarified by the Board vide Circular dated 18 December, 2006. Further, reliance is placed on the ruling of the Tribunal in the case of M/s Krishi Upaj Mandi Samiti V/s CCE & ST, Jaipur-I & II-2017 (4) GSTL 346. In Para

10 of the judgement reference to negative list under Section 66 of the Finance Act w.e.f. 01 July 2012, which also covers services relating to agriculture produce and services by Agricultural Produce Marketing Committee/Board. Further this Tribunal in Para 11 of the judgement have held that Agricultural Produce Marketing Committee is excluded from tax liability under the service tax provisions as Clause (d) of Section 66(D) provides exemption for services provided to agriculture or agricultural produce by way of agricultural operations directly related to production of any agricultural produce, supply of farm labour, processes carried out at an agricultural farm, renting or leasing of agro machinery or vacant land, with or without structure, loading, unloading, packing, storage or warehousing of agricultural produce, agricultural extension services, services by any Agricultural Produce Marketing Committee or Board. Reference was also made by this Tribunal to the Education Guide dated 20 June, 2012 wherein Para 4.4.9 of the guide, read with Para 4.4.11-that APMCs or Boards are set up under the State Law for the purpose of regulating the marketing of agricultural produce. Such marketing committees or Board have been set up in most of the States which provide a variety of support services for facilitating the marketing of agricultural produce through various activities and facilities like sheds, water, light, electricity, grading facilities etc. These Boards also take measures to ensure Service Tax Appeal No.70671 of 2016 fair price to the farmers and they collect market fee, license fee, rent etc. for these services by such APMCs or Boards and are covered in the negative list. Further, clarifying that other services provided by such body which is not directly related to agriculture or agricultural produce, will be liable to tax. This Tribunal held that the appellant APMC or Krishi Utpadan Mandi Samiti is not liable to Service Tax on renting of immovable property used for storage of agricultural produce in the market area.

14. Having considered the rival contentions on this issue, we hold that the various construction works carried out for Mandi Parishad are not liable to service tax and are exempted in view of the Education Guide dated 20 June, 2012 by the Board, read with Circular No.89/7/2006 dated 18 December, 2006, read with the Mega Exemption Notification No.25/2012-ST.

15. As regards the third issue i.e. tax liability for work done for Uncle Builders (from 2009-10 to 2010-11), admittedly the appellant have paid tax on 04 June, 2006 along with interest before the issuance of SCN (issued on 31 March, 2016). We, further, find that the issue is wholly interpretational as per the findings of the Tribunal. There is no tax liability on the appellant in respect of various construction works done for government/statutory authority under JNNURM, canal work for water resources division, for construction done for Mandi Samiti etc.

16. Accordingly, we hold that extended period of limitation is not available to Revenue in these facts and circumstances. Admittedly, appellant have maintained books of account and filed regular returns. We further find that Revenue have erred in adopting Form 26AS for calculating tax liability, which is patently wrong, as Form 26AS is not a prescribed document in the service tax rules for ascertaining the gross turnover of the assessee. Further, neither the books of account nor the returns filed have been rejected. Service Tax Appeal No.70671 of 2016

17. That tax has to be assessed or calculated as per the facts on record and related documents like bills, invoices, bank statements etc.

18. Thus, the impugned order is set aside and the appeal is allowed. The appellant is entitled for consequential benefit in accordance with law. (Order Pronounced in the open Court on 05 August, 2021) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (P. ANJANI KUMAR) Member (Technical) Nihal

Ganpati Mega Builders (India) (P) Ltd. v. Commissioner, Customs, Central Excise & Service Tax

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant's Arguments

Revenue's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Ganpati Mega Builders (India) (P) Ltd. v. Commissioner, Customs, Central Excise & Service Tax

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