Clipped from: https://www.taxscan.in/cestat-quashes-service-tax-demand-wrongly-confirmed-under-banking-and-financial-services-when-service-rendered-was-under-construction-of-complexes-read-order/106284/
The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), Delhi Bench said that Service Tax demand wrongly confirmed under “Banking and Financial Services” when service rendered was under “Construction of Complexes”.
The appellant, M/s. Rajasthan Housing Board is engaged in construction of residential houses from loan sanctioned by HUDCO and other financial institutes and allotting these houses on hire purchase sale and outride sale basis to the consumers against collection of the amounts namely Ancillary service charges to meet out additional overheads levied by HUDCO and other financial institutes, Hire purchase deposits from its consumers Purchasing houses/flats on hire purchase, Interest for flats/houses allotted on hire purchase, and Administrative charges on registration of transfer of hire purchase lease.
The department alleged that activity of collection of charges is covered under definition of Banking and other Financial Services as mentioned under Section 65 (12) of the Finance Act, 1994.
It is submitted on behalf of the appellant that RHB has been constituted by Government of Rajasthan under Rajasthan Housing Board Act, 1970 as an instrumentality of State Government to cater to the housing needs of different sectors of society in the state of Rajasthan. The focus of RHB is on affordable housing with special emphasis towards economically weaker sections of the society in Cities of Rajasthan. It is further submitted that the principal business of appellant is that of construction and sale of residential accommodation to the public at large.
The ancillary service charges (ASC) as have been alleged to be taxable under “Banking and other Financial Services”, are mentioned to have been received by the appellant being transferred to ASC fund for being used for the construction of Government Primary School, Dispensary, Police Chowki, Fire Station etc. as would be required for overall development of public facilities in the Township to be created by the appellant in the cities of the Rajasthan. It is submitted that the said fund is not at all the income of the appellant. The Income Tax assessments for appellant for the relevant years also support that these are not the incomes of the Board, rather are in the nature of liability or deposit. Hence, cannot be held to be liable to service tax, for it not being considered at all for any of the services.
The coram of Raju and Rachna Gupta opined that the Adjudicating Authority has confirmed the demand by merely presuming the appellant to be a body corporate, rendering no other taxable service than “Banking and other Financial Service”. The said finding is apparently wrong in view of the discussion above. The demand is, therefore, held to have been wrongly confirmed under “Banking and Financial Services” when otherwise the service rendered by the appellant is that of “Construction of Complexes”.To Read the full text of the Order CLICK HERE