Rachna Gupta ORDER
Rachna Gupta, Member (J)
1. Appellant has filed this impugned appeal being aggrieved by Order-in-Appeal No. 011/2019-20.
2. Relevant factual matrix is as follows:
The appellant, M/s. Shubh Labh Reality Private Limited, is engaged in providing construction of residential complex services. During the course of audit of the records, for the period 2012-2013 to 2015-2016, the Department noticed that the appellant has failed to pay the interest liability of Rs. 88,754/- on the delayed payment of service tax as required under Section 75 of the Finance Act, 1994 alleging that the service tax liability arise on the date of the sale deed of the constructed property. Department also observed that the appellant is providing said taxable services but without payment of service tax despite that the constructed property were sold after obtaining completion certificate from the Architect. It is alleged that the certificate was to be obtained from the competent authority which was Indore Municipal Corporation (IMC), Indore instead of Gram Panchayat Chota Bangarda. Based on these observations that a Show Cause Notice bearing No. 2819 dated 24.10.2017 served upon the appellant proposing the recovery of service tax of Rs. 3641231/- and the recovery of interest of Rs. 88,754/- being not paid by the appellant along with the interest at proportionate rate and the appropriate penalties. The said proposal was initially got confirmed vide the Order-in-Original No. 49/2018-19 dated 15.1.2019 has been rejected by Commissioner (Appeals) vide the order under challenge.
3. I have heard Ms. Priyanka Goel, learned Counsel for the appellant and Shri Pradeep Juneja, learned Departmental Representative for the Department.
4. It is submitted on behalf of the appellant that the appellant started constructing residential complex in the year 2010 with the permission dated 15.1.2011 as was received from Gram Panchayat, Chota Bangarda. After constructing the same completion certificate was also obtained from the said Gram Panchayat on 22.2.2013, it is submitted that the Department has issued the Show Cause Notice on the wrong ground that the area where appellant has constructed the residential complex, falls under IMC and not under the limits of said Gram Panchayat. It is impressed upon that though there was a notification dated 5.2.2013 issued by the Government of Madhya Pradesh declaring the impugned area to fall under IMC, but the said notification has been quashed by the High Court Madhya Pradesh vide an order dated 3.2.2014 announced in TIOL-5196 of 2013. It is impressed upon that since notification stands quashed the property continues to fall under the jurisdiction of Gram Panchayat and the completion certificate of 22.2.2013 stands valid. Accordingly, there is no evasion of service tax on part of the appellant as is alleged by the Department thus the demand the thereof has wrongly been confirmed by the adjudicating authority below.
5. With respect to the demand of interest, it is submitted that the service tax was paid by the appellant as and when appellant used to receive the installment of the sale consideration. Date of sale deed/Registry of the property has wrongly been taken as the point of taxation. No question arises of any interest liability on the appellant. Otherwise also the amount of Rs. 88,754/- has wrongly been calculated the calculation given at page No. 116 is impressed upon. Finally, it is submitted that there is no mis-representation or suppression of facts on part of the appellant, as is alleged by the Department. The appellant had obtained the completion certificate from the same authority which had issued the permission to construct the said complex. Hence there was bona fide belief for Gram Panchayat, Chota Bangarda to be the competent authority in terms of Section 66E(b) of Finance Act, 1994. The Department has wrongly invoked the extended period of limitation. With these submissions, appellant has prayed for the order under challenge to be set aside and the appeal in hand had to be allowed.
6. While rebutting these arguments, learned Departmental Representative has impressed upon the justifications given by Commissioner (Appeals) in the order in appeal while confirming liability of the appellant. Para 8.2 and 8.5 of the order under challenge are being impressed upon and the appeal in hand is accordingly, prayed to be dismissed.
7. After hearing the parties and after perusing the record, I observe and hold as follows. Following three issues need to be settled for adjudication of the present appeal:
(1) Whether the completion certificate dated 5.2.2013 received in favour of the residential complex constructed by the appellant from Gram Panchayat, Chota Bangarda is valid certificate or not;
(2) Whether the appellant is liable to pay the interest of Rs. 88,754/- on account of late payment of service tax;
(3) Whether the Show Cause Notice is barred by time.
The appellant had also obtained certificate from the concerned Architect being under bonafide belief that the completion certificate issued by Chartered Engineer/Architect is permissible in addition to the certificate from Gram Panchayat was obtained under the bona fide belief of said Gram Panchayat to be the competent authority in terms of Section 66E(b) of Finance Act. I am of the opinion that benefit cannot be denied to the appellant who has been under bona fide belief and has been obtaining requisite permissions or certificates from the competent authorities.
8. Issue wise findings are as follows;
Issue No. 1
9. I observe that there is no dispute about the fact that the permission to construct the residential complex was obtained from Gram Panchayat Chota Bangarda, Indore in favour of the appellant. All other requisite permissions for the said construction required were also obtained from the said Gram Panchayat. It is an admission that prior notification M.P. Government dated 5.2.2013 the area of impugned constructed residential complex used to fall under jurisdiction of Gram Panchayat, Chota Bangarda. Post said notification the jurisdiction of the land changed to that of the Municipal Corporation. Admittedly, the said notification got quashed by High Court of Madhya Pradesh within one year of the notification being published. Admittedly, the appellant started construction in the year 2011.
10. I also observe that Section 66E(b) of Finance Act is attracted for the service tax liability with reference to Construction of Residential Complex. The Section reads as follows:
"66E. Declared Services.
The following shall constitute declared services, 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 purposes 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; or
(B) chartered engineer registered with the Institution of Engineers (in 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 additions, alterations, replacements or remodeling of any existing civil structure;
From the above definition, it is clear that 'construction of complex' is a taxable service except where the entire consideration is received after issuance of 'Completion Certificate' from the Competent Authority. I also find that the definition of 'competent authority' in Section 65(zzq) & (zzzh) ceased to exist after omission of Section 65 of Finance Act, 1994 w.e.f. 1.7.2012. So the definition of "competent authority" as prescribed in Section 66E of Finance Act, 1994 has to be followed."
11. Once the above admissions are read along with the aforesaid section it becomes clear that though on the date when completion certificate was issued in favour of the appellant by the Gram Panchayat, Chotta Bangarda, the impugned area, the jurisdiction thereof got vested with IMC, Indore. But once the said notification got quashed in February, 2014 the jurisdiction stands revested in Gram Panchayat itself. Thus the Show Cause Notice of October, 2017 should not have been issued. Except for 17 days i.e. with effect from 5.2.2013 to 22.2.2013 Gram Panchayat, Chota Bangarda was not the competent authority in terms of Section 66E (b) of the Finance Act. Rather the said Gram Panchayat was the, competent authority when it issued the permission to construct the said residential complex. The competence of said Gram panchayat got retained from the order of High Court of February, 2014. Hence at the time of issuance of Show Cause Notice it should not have been said that due to the time gap of 17 days the Gram Panchayat was not the competent authority to issue the construction certificate. As a result, I am of the opinion that the completion certificate dated 22.2.2017 as was issued by Gram Panchayat was absolutely valid, at the time the Show Cause Notice was issued to the appellant. Resultantly, the Show Cause Notice itself is void.
Issue No. 2
12. The Department has confirmed the interest liability based on the fact that service tax liability arise on the date of sale deed only and as such any amount received subsequently the interest is payable. The relevant provision for adjudicating the same is Rule 3 of Taxation Rules, 2011 which talks about determination about point of taxation. It reads as follows:
"3. Determination of point of taxation.- For the purposes of these rules, unless otherwise provided, 'point of taxation' shall be,-
(a) the time when the invoice for the service provided or agreed to be provided is issued:
Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994, the point of taxation shall be the date of completion of provision of the service.
(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment. Provided that for the purposes of clauses (a) and (b),-
(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;
(ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).
Explanation.- For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance."
13. Perusal of this provision, make it abundantly clear that the point of taxation will either be the:
(a) The time when the invoices issued; or
(b) When invoices not received, the date of completion of provision of service; or
(c) If advance is received then the date when such advance amount is received.
It is observed that the appellant herein has issued the receipt of installment as and when the installment was received no invoice was ever issued by the appellant. The sale deed is a legal documents of the title of property hence cannot be termed as invoice. Also the date of completion of service will be the date when possession of the property is given to the purchaser which shall only be after receipt of sale consideration and the date of receiving final installment, therefore, later will be the relevant date for determination of point of taxation. The calculation placed on record reveals that the service tax liability has been discharged as and when the payment of requisite installment has been received by the appellant. Above all, there is no evidence produced by the Department to the contrary. The burden to prove the allegations was upon the Department. Accordingly, I am of the opinion that there is no late payment of service tax by the appellant as is alleged by the Department. Imposition of interest on the ground of late payment is not sustainable.
Issue No. 3
14. It is on record that the appellant was discharging the service tax liability as and when the installment toward the sale consideration of the property used to be received by the appellant. No mala fide intent can be attributed to such an assessee who otherwise has been regularly discharging the tax liability. Mere evasion of tax does not invite penalties unless and until there is the evidence of some positive act on part of the appellant to show his intend to not to pay the tax. The said evidence is miserably missing in the present case. The proviso to Section 73 of Finance Act could not have been invoked by the Department in the present case. This Tribunal in the case of CCE Vs. Renee Telepoint -MANU/CE/8369/2007 : 2008 (10) STR 414 has held that when non-payment of tax is not due to fraud, collusion, willful misstatement or suppression of facts penalty cannot be imposed under Section 78 of the Finance Act. Nor the Department could invoke the extended period of limitation. In present case, Show Cause Notice of the year 2017 raising the demand from the year 2012 onwards is, therefore held barred by time.
15. Based upon the entire above discussion, I hold that three of the issues as framed herein stand decided in favour of the appellant. The adjudicating authority below has been held to be wrong while considering the decision of Madhya Pradesh High Court quashing the notification as prospective. The moment notification was held to be quashed the consequence goes to the date of publication of the notification as if, the notification was never in existence. Accordingly, the findings of the Commissioner (Appeals) are hereby set aside. As a result, the appeal in hand hereby stands allowed.
(Pronounced in Court on 30.06.2021.)
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