P. Anjani Kumar ORDER
Sulekha Beevi C.S., Member (J)
1. The above appeal is filed by the department, aggrieved by the order passed by the Commissioner who set aside the demand, interest and penalties proposed in the show cause notice. The brief facts of the case are that the respondents filed VCES declaration under section 107 of the Finance Act 2013 as amended. They paid service tax declared by them under Construction of Residential Complex services and department issued discharge certificate dt. 11.04.2014. Later show cause notice dt. 29.02.2014 was issued proposing to reclassify the services for which the respondent had filed declaration as Works Contact Services. After due process of law, the original authority set aside the demand proposed under WCS holding that services for which the respondent has paid service tax would fall under Construction of Residential Complex services. Aggrieved by such order, department is now before the Tribunal.
2. On behalf of the department, learned AR, Shri P. Sudhakar Reddy appeared and argued the matter. He adverted to the show cause notice and submitted that the respondent had declared the services under Construction of Residential Complex services and had paid only Rs. 34,53,740/- towards service tax. In fact, the respondents had owned land to the extent of 7.02 acres and they had taken another 1.07 acres for development from another land owner. For filing declaration, the respondents had considered the services rendered in the land taken from another land owner only. The respondents had carried out construction services in the land belonging to them also. The construction services provided by the respondents in their own land also ought to have been taken into consideration for computation as the services fall under WCS. If such construction services are also included the demand as per show cause notice would be Rs. 3,66,07,501/-. The Commissioner has erred in holding that the services rendered would fall under Construction of Residential Complex services only. Since the activity involves both use of goods as well as services, they fall under works contract service. The department rightly issued show cause notice since the declaration made by the assessee was found to be false and incorrect. He prayed that the proceedings initiated against the assessee may be restored.
3. Learned counsel, Shri R. Muralidhar appeared and argued on behalf of the respondent/assessee. He submitted that respondent filed VCES declaration and discharge certificate was issued by department on 11.04.2014. The discharge certificate is issued after completely satisfying that the declaration made by the respondent is proper. Thereafter, the show cause notice has been issued on 29.12.2014. He relied upon the decision of the Tribunal in Ashok Kumar Kesharwani Vs CCE & ST, Kanpur [MANU/CN/0050/2019 : 2019 (24) GSTL 648 (Tri-Allahabad)] to support his argument that after issuing the discharge certificate the department cannot reopen any proceedings against the assessee pertaining to the declaration made.
4. It is further explained that respondent had constructed residential buildings in 7.02 acres belonging to him and also constructed residential buildings in another 1.07 acres which was taken for development from another land owner. As per circular issued by the revenue which was prevailing at that period, the assessee is required to pay service tax only on the construction activities done in the land taken for development from another. The construction of residential buildings done in the land owned by the assessee was considered as self service and exempted from service tax. The respondent had correctly disclosed the value of taxable service for construction activities done in 1.07 acres. Thus the allegation that respondent made false declaration is incorrect. There is no ground for reopening the proceedings. He also relied upon the decision in the case of Sravanthi Contractors and Developers vide final order No. 30700 & 30701/2019 dt. 19.06.2019 to argue that the VCES cannot be reopened alleging wrong classification which is of interpretational nature.
5. Heard both sides.
6. On perusal of records and after considering the submissions made by both sides, we find that discharge certificate is issued by the department on 11.04.2014 and the show cause notice is subsequently issued on 29.12.2014. The Tribunal in the case of Ashok Kumar Kesharwani (supra) had occasion to analyse similar situation wherein the Tribunal held that after acceptance of the declaration and issuance of discharge certificate the department cannot reopen the proceedings in respect of the declarations made. It would result in deviation from the immunity provided under section 108 of the Finance Act 2013 and would render the scheme redundant and meaningless.
7. Moreover, in the present case, the respondent had declared the services rendered by them as per the circular issued by the Board. During the relevant period Board had clarified that the construction of residential complex service rendered in one's own land cannot be subject to levy of service tax since it would be self service. In the present case, 7.02 acres of land undisputedly belonged to the respondent. The respondent did not include the construction services done in such land while making the declaration. The declaration was made in respect of residential complex service rendered in 1.07 acres and paid up the tax liability. After issuing discharge certificate, the department as an afterthought has issued the SCN proposing to classify the services under WCS, so as to bring the construction of residential complexes done in 7.02 acres also within the ambit of levy of service tax. This is only an issue of interpretation. When the declaration is filed, the department gets sufficient time to enquire and satisfy as to the category of service and value declared. On entertaining a different view the department cannot allege misdeclaration. There should be substantial and conscious misdeclaration for reopening a matter for which discharge certificate is issued. There is no evidence to show that there is any conscious and substantial misdeclaration on the part of the respondent. The Tribunal in the case of Sravanthi Contractors and Developers vide F.O. No. 30700-30701/2019 dt. 19.06.2019 had followed the decision in the case of Frontline Builders & Developers reported in MANU/CB/0231/2017 : 2018 (10) GSTL 545 (Tri-Bang.) to hold that unless there is substantial misdeclaration, the VCES assessment cannot be reopened.
8. Following the decisions as well as perusal of records, we are of the considered view that impugned order does not call for any interference. Appeal filed by the department is dismissed.
(Dictated and pronounced in open court)
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