WEXCO HOMES PVT LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) In all these writ petitions, the petitioners, who are engaged in the construction of buildings, both residential complexes as well as commercial complexes for subsequent sale to clients/customers, have impugned the show cause notices issued to them by the respondents under the Finance Act, 1994, as amended, governing the levy of service tax. The challenge in the writ petitions is essentially against the proposals in the show cause notices that contemplate a levy of service tax as applicable to commercial and industrial construction services/construction of residential complexes, on works undertaken by the petitioners on behalf of various customers. The contention of the petitioners is that, while they had taken out registration, in accordance with the provisions of the Finance Act, 1994, as amended, as service providers under the head of 'commercial and industrial construction service'/'construction of residential complexes services', with effect from 1-6-2007, when the legislature had introduced a new head of service, namely, 'works contract service', they had found that the service hitherto rendered by them would merit classification under works contract services, and, therefore, requested for a change in classification from the erstwhile classification adopted by them for the purposes of registration, to the new head of service, namely 'works contract services'. In the show cause notices served on the petitioners, the respondents proposed to proceed against the petitioners for a differential tax, on the ground that the petitioners had not discharged the appropriate amount of tax on the services which they had declared as applicable to them at the time of availing the registration. The petitioners contend that the nature of the service provided by them has to be determined by reference to the agreements entered into with the various prospective buyers and only then can a classification of services be effected for the purposes of taxation. The petitioners also rely on a recent judgment of Supreme Court in Commissioner, Central Excise & Customs, Kerala v. Larsen & Toubro Ltd., 2015 84 VST 403 (SC) , wherein, the Supreme Court has clarified that, for the period prior to 1-6-2007, when the service of works contract was introduced in the Finance Act, 1994 for the first time, there was no scope for the respondent authorities to split up the composite contract that was entered into by the petitioners, for the purposes of taxing only a portion thereof under the heads of 'commercial and industrial construction services'/'construction of residential complex services'. In W.P(C). No. 6050/2009, the petitioner impugns Ext. P4 order that has been passed confirming demand of service tax on the basis that the services rendered by the petitioner would merit classification under 'commercial and industrial construction services'/'construction of residential complex services', and further that it was not open to the petitioner to contend that the services are correctly classifiable under the 'works contract services'. The said order is impugned in the writ petition on the ground that it is against the principles laid down by the Supreme Court in the decision cited above.

(2.) I have heard the learned senior counsel Sri Mohammedkutty, duly instructed by Shri K.J. Abraham for the petitioners in all these writ petitions as also Shri Tojan Vathikulam and Shri Thomas Mathew Nellimootil on behalf of the respondents.

(3.) On a consideration of the facts and circumstances of the case and the submissions made across the Bar, I find that the show cause notices issued to the petitioners, which are impugned in these writ petitions, cover the period from January, 2006 to June, 2010. During the said period, there were amendments to the Finance Act, 1994 with regard to the levy of service tax and, apart from the heads of 'commercial and industrial construction services'/'construction of residential complex services' that were recognised for the purposes levy of service tax, there was a new head of tax namely, 'works contract service', which was introduced in the statute with effect from 1-6-2007. The issue of classification of composite services for the purposes of levy of service tax has been clarified by the Supreme Court in the decision referred to above, and the Supreme Court has made it clear that for period prior to 1-6-2007, in the case of composite works contract services, there was no enabling provision in the Finance Act, 1994, which enabled the authorities administrating the levy of service tax under the Act, to artificially split up the components in a composite contract into such portions as would merit classification under the heads of 'commercial and industrial construction services'/'construction of residential complex services', for the purposes of levying a tax on those portions alone. The said decision is significant in the matter of classification of composite services because, one would have to now ascertain the nature of the service in question and then proceed to determine whether it is a composite service or not. If it is a composite service, then the question of classification of the service would also have to be gone into. It would be incumbent upon the adjudicating authorities under the Act to consider these aspects before confirming any demand based on the proposals communicated to the petitioners. Inasmuch as the show cause notices themselves have been challenged in these writ petitions, I am of the view that the interests of justice would be served by relegating the petitioners to the remedy of filing replies to the show cause notices, so as to get an adjudication of the dispute done by the authorities under the Finance Act, 1994. In the said adjudication proceedings, it would be open to the petitioners to produce all relevant materials to substantiate their contention with regard to the services rendered by them meriting classification under any particular head of tax. It would also be open to them to establish whether they come within the ambit of the specific circulars issued by the Central Board of Excise and Customs in the matter of classification of services. The adjudicating authorities would also have to consider the impact of the decision of the Supreme Court in Commissioner, Central Excise & Customs, Kerala v. Larsen & Toubro Ltd., 2015 84 VST 403 (SC) ]. Thus, without prejudice to the rights of the petitioners to approach the adjudicating authorities under the Finance Act, 1994 for an adjudication of the disputes, I dismiss the writ petitions, in their challenge against the impugned show cause notices.