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Jagdish Pala vs. Commissioner of Central Excise & ST, Rajkot - (Customs, Excise and Service Tax Appellate Tribunal) (12 Apr 2022)

Construction of statutory phrase, placed by a circular issued by the Central Board of Excise and Customs is binding on the Revenue till the same is withdrawn


Service Tax

The brief fact of the case is that based on intelligence that Appellant was not paying Service tax on the Construction activities carried out by him, a detailed inquiry was carried out and statements of Shri Jagdish Pala were recorded. Investigation revealed that, the Appellant had constructed residential and commercial complexes and received booking amounts as well as instalments amount from his buyer but had not obtained service tax registration and also did not pay Service Tax. After completing the investigation a Show Cause Notice was issued to the Appellant demanding Service tax under Section 73(1) of the Finance Act, 1994 along with interest under Section 75 of the Act and proposing penalty under Section 76, Section 77 and Section 78 of the Act.

The Adjudicating Authority adjudicated the case and dropped the proceedings initiated against the Appellant. Aggrieved by the said order, Department filed appeal before the Commissioner (Appeals), and Learned Commissioner (A) has allowed the department’s appeal by way of remand for quantification of demand. Hence, the present appeal.

The Appellant are engaged in the construction of Residential and Commercial Complexes and received the booking amount as well as instilment amount from his buyers. Revenue proceeded against them on the ground that they have evaded payment of Service Tax on the services rendered by them to their customers in the category of "Commercial or industrial Construction Services" during the period 2004- 2005 to 2008-09.

The Board issued clarification on the construction service vide Circular No. 151/2/2012-S.T., dated 10th February, 2012 which provides that, prior to 1st July, 2010, builders/developers are not liable to pay service tax for the Construction Service and in the present case, the period involved is from 2004-2005 to 2008-09. Consequently, the impugned order is not sustainable in law.

In Collector of Central Excise, Meerut vs. Maruti Foam P. Ltd., the Apex Court held that, the construction of statutory phrase, placed by a circular issued by the Central Board of Excise and Customs, although different from the one placed by the Supreme Court, was binding on the Revenue till the same was withdrawn.

The circular, is binding on the Department and this circular makes it more than abundantly clear that construction service provided by the builder/developer will not be taxable for the period prior to 1st July, 2010. In the circumstances, the impugned order is set aside. The appeal is allowed.


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