HIGH COURT
1. Service tax payable on construction service provided by developer to land owner (Southern Properties & Promoters 2015 (30) S.T.R. 892 (Mad.)
- Background: Service provider constructing flats under JV with land owner out of which few flats granted to land owner. No service tax paid on flats handed over to land owner citing that no consideration received from land owner. Tribunal ordered for pre-deposit.
- Issue: Whether developer is liable to pay service tax on construction service provided to land owner?
- Decision: Construction of flats for land owner is classifiable under the category of construction of complex service. In the absence of monetary consideration, section 67 read with Service Tax (determination of value) Rules, 2006 provides for various method of valuation. Value to be arrived at as per these methods by Tribunal during hearing.
Comment: There could be different options for charging service tax as follows:
- Market or guideline value of land: at the time of entering into JV
- Construction cost plus gross profit
- First sale price of similar service: could be flat booked on Bhoomijooja day
- Value of similar flats to buyer at the time of delivery of landowner flat
Advance Ruling
2. Consideration paid to employee of another company working under employment arrangement of assessee is not liable to service tax (M/s North American Coal Corporation India Pvt Ltd 2015-TIOL-08-ARA-ST)
- Background: Assessee employed one employee on permanent roll from his holding company. His salaries to be paid by assessee but social security interests taken care of by holding company as per tripartite agreement between assessee, holding company and employee. Assessee applied for advanced ruling.
- Issue: Whether arrangement between employee and assessee is in the nature of employer-employee arrangement so as to be out of definition of service?
- Decision: The agreement suggests that so long as employee is working in India, it shall be considered as employee of the assessee notwithstanding that the social security is taken care of by holding company. The nature of arrangement is employer-employee covered by exclusion clause of definition of service. No liability of service tax.
Comment: Though the judgment is binding on the assessee only (being judgment of advance ruling), yet it could give planning opportunities in case of group companies where deputation of employee is regular feature.
TRIBUNAL
- Assessee not liable to pay interest and penalty for fraud by consultant in tax and interest payment (Hemangi Enterprises 2015 (40) S.T.R. 945 (Tri.- Mumbai)
- Background: Assessee appointed consultant for discharging service tax liability. Paid cash towards service tax to consultant who instead of paying to department pocketed himself. Consultant admited fraud. Penalty demanded from assessee on ground that assessee was aware about the fraud of consultant.
- Issue: Whether assessee is responsible for payment of penalty for the fraudulent act on the part of consultant?
- Decision: There is clear evidence that assessee had withdrawn cash from bank and had been paying same for tax payment to consultant who instead of depositing same with exchequer, pocketed it. Assessee not aware of fraud of consultant and not liable for penalty.