CASE STUDY
                                       
Prepared By: Prateeksha Jain                                                                                                                
    
 
Introduction: The compendious of the case is that, M/s ASHAPURNA BUILDCON LTD., (hereinafter referred to as the appellant) is engaged in providing taxable services namely “Construction of Residential Complex Service” as defined under section 65(30a) of the Finance Act, 1994.
 
A show cause notice no. C.No. V(ST)Adj./JDR/130/2015/650 dated 22-09-2015 was issued to the appellant alleging that they have short paid service tax amounting to Rs. 6,75,597/- on providing service under the category of “Provision of preferential location or external or internal development of complex” and hence are liable to pay service tax totalling to Rs. 6,75,597/- along with interest under section 75 and penalty under section 76, 77 & 78 of the Finance Act, 1994.
 
The appellant filed reply to the show cause notice vide letter having reference as PJ/SCN/A-101/15-16/403 dated 04.11.2015.However, the submissions made by the appellant in their reply to the show cause notice and during the course of personal hearing were not adhered to by the learned adjudicating authority and impugned order in original no. 111/ST/JDR/2016-ADDITIONAL COMMISSIONER dated 20.09.2016 was passed thereby confirming the demand of Rs. 6,75,597/- under the category of “Provision of Preferential Location or external or internal development of complex services”. Interest under section 75 has also been confirmed with penalty of Rs. 10,000/- under section 77 and penalty of Rs. 6,75,597/- under section 78 of the Finance Act, 1994.
 
Aggrieved by the impugned Order-In-Original the applicant filed an appeal before Commissioner Appeals. Thus, vide the Order-In-Appeal it was held that the service of internal electrification and water system development is incidental to the provision of the main service “Construction of Residential Complex Service”. Further the contract also indicates provision of single service and does not bifurcate the amount collected with respect to internal electrification and water system development.
Consequently, the appellant has correctly discharged their service tax liability on Internal electrification and water system development service under the category of “Construction of Residential Complex Service.” The appeal was decided in favour of the Appellant.
 
Relevant Legal Provisions:

• Section 66F of the Finance Act, 1994.
• Section 77 and 78 of the Finance Act, 1994.
• Section 11AC (1)(c) of the Central Excise Act, 1944.
• section 65(105)(zzzzu) of the Finance Act, 1994
• Section 11A of Central Excise Act, 1944

Issue Involved: The issue involved in this case is whether or not service tax is payable on amount collected for “ Internal electrification & sub-station charges and internal water system development charges “ from the buyers of residential villas/flats/plots.
 
Brief Facts:M/s ASHAPURNA BUILDCON LTD., (hereinafter referred to as the appellant) is engaged in providing taxable services namely “Construction of Residential Complex Service” as defined under section 65(30a) of the Finance Act, 1994. It was observed that the assessee has short paid service tax on some of the charges (electrification and water system development charges) inbuilt in the sale price of the flats on the contention that service tax on such charges was payable under the category of “Provision of Preferential Location or external or internal development of complex services” while the appellant discharged service tax on said charges under the category of “Construction of Residential Complex Services” after claiming abatement. 
 
Show Cause Notice No. V(ST) Adj./JDR/130/2015/650 dated 22.09.2015 was issued to the appellant wherein it was alleged that the appellant have short paid service tax amounting to Rs. 6,75,597/- on providing service under the category of “Provision of preferential location or external or internal development of complex” and hence are liable to pay service tax totalling to Rs. 6,75,597/- along with interest under section 75 and penalty under section 76, 77 & 78 of the Finance Act, 1994.
 
The appellant filed the reply to impugned show cause notice vide their letter having reference as PJ/SCN/A-101/15-16/403 dated 04.11.2015,
 
Thereafter, details of service tax paid on internal electrification and water system development charges under the category of ‘Construction of Residential Complex Service’ were furnished vide letter having reference as PJ/SCN/A-101/16-17/2541 dated 20.09.2016.
 
However, the Adjudicating Officer did not consider the submissions made by the appellant and passed the impugned order in original No. 111/ST/JDR/2016-ADDITIONAL COMMISSIONER dated 20.09.2016 confirming the demand of Rs. 6,75,597/- under the category of “Provision of Preferential Location or external or internal development of complex services”. Interest under section 75 has also been confirmed with penalty of Rs. 10,000/- under section 77 and penalty of Rs. 6,75,597/- under section 78 of the Finance Act, 1994.
 
Aggrieved by the impugned order in original confirming the demand of service tax along with interest and penalty, the appellant prefer to file the appeal.
Assessee’s Contention:
 
The appellant submit that the impugned Order-in-Original passed by the learned Assistant Commissioner is wholly and totally erroneous in confirming the demand of service tax along with interest and penalty and the same is liable to be quashed.
 
The impugned order has held that the appellant is collecting certain amount on account of Internal Electrification & substation charges and internal water system development charges and has paid service tax by clubbing the same with the consideration received on account of bungalow/plots and paid service tax after availing abatement but the appellant was required to pay service tax on the whole amount so collected. It has also been alleged that the appellant have separately charged from the buyers on account of Internal Electrification & sub-station charges and internal water system development charges which do not form part of taxable value for charging tax on construction of residential complex services but the appellant have paid service tax on the abated value by making it part of taxable value for paying service tax on construction and so have short paid the service tax by not paying the service tax on the entire value recovered/collected from the buyer on account of such internal development. In this respect, they submit that they have correctly paid service tax on such charges by classifying it under construction services as electrification and water system development are integral part of any building. They submit that the charges collected by them are not for making the residing more enjoyable rather, these are basic facilities that every builder is required to provide in the complex and hence are integral to the construction of complex.
 
They also submit that the services of internal electrification and internal water system development provided by them is rightly covered under the service of “Construction of complex service” because no builder can provide a complex without including basic facilities of electricity and water. Furthermore, whether the said charges have been collected separately or collectively by the service provider does not alter the fact that such charges are part of the service of construction of complex provided by the service provider. Therefore, such charges are correctly covered under the service of “Construction of Complex Service” and there is no short payment of service tax in this respect. Therefore, the impugned order in original is liable to be set aside. Moreover, it was categorically mentioned in the reply that no amount has been collected by the buyer of the flat separately in the name of water and electrification charges and a specimen copy of the agreement was also enclosed. It is submitted that such charges are leviable to service tax at full rate if and only if such charges are collected separately by the service provider from the purchaser of flats. However, in the present case the appellant has submitted earlier also several times that no separate amount is being collected by them on account of internal electrification and water system development and they are part and parcel of the sale price of the flats itself as it is integral facility to be provided in case of any flat. Furthermore, the said charges have been entered separately in the books of accounts only for accounting purpose but this cannot lead to conclusion that the said charges are collected over and above the price charged from the customers for sale of flats because the specimen copy of the agreement clearly reflects that no amount has been separately collected from the buyers of the flats in the name of “internal electrification or water system development charges”.  As such, the service tax paid by them by classifying the same under the category of “Construction of Residential Complex Services” is correct and proper. However, the impugned order in original has been passed by simply ignoring the submissions made by them and as such, the same is not tenable and deserves to be quashed.
In continuation to above it is submitted that if a lumpsum amount is being received by the builders for providing residential complex on lock and key terms, electrification and water system development are integral to the provision of construction of residential complex service and cannot be levied to service tax separately under another category of service. In other words, where the consideration received by the builders was a lumpsum amount and a lot of other services along with pure construction services were being provided against this amount, the entire consideration was leviable to service tax. Further, providing the electrification work and substation charges is not a new phenomenon and many of the builders were already paying the service tax if the amount charged by them for flats/villas on lock and key basis included the amount of these services. Thus, at many instances, there were overlapping in the two categories of service. Even the government was aware of this fact as in positive list regime, the definition of taxable service of Preferential location as given in section 65(105)(zzzzu) of the Finance Act, 1994 specifically excluded the services taxable under sub clauses (zzg), (zzq) and (zzzh). The sole reason to provide this exclusion clause was to avoid the litigation in the situations where the builders were not separately charging for these services. If the contention of the impugned order is accepted for the sake of argument purpose only, then the charges recovered for internal electrification, substation charges, internal water system charges will always be covered in the definition of Preferential location services which is absolutely erroneous. Hence, the impugned order should be quashed ad the appeal should be allowed.
 
In the negative list era, the concept of bundled services has been introduced which is governed by the provisions of section 66F of the Finance Act, 1994 as follows:-
Section 66F Principles of interpretation of specified descriptions of services or bundled services:-

1. Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service.
2. Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.
3. Subject to the provisions of sub-section (2), the taxability of bundled service shall be determined in the following manner, namely:-
4. If various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of single service which gives such bundle its essential character.
5. If various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.

Explanation:- For the purposes of sub-section (3), the expression “bundled service” means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.
On analysing the above produced provision, it can be concluded that the present case falls under clause (3)(a) and so the appellant have correctly discharged their service tax liability by classifying the water and electrification charges under the category of ‘Construction of Residential Complex Service’. The said clause states that if various elements of a service are naturally bundled in the ordinary course of business, it shall be treated as provision of single service which gives such bundle its essential character. Thus, the concept of bundled services is applicable where a couple of services are combined to form a package to be given to the service recipient. In such cases, where a number of services are provided to the service receiver, the taxability of the bundle is determined by that service which gives the colour to the bundle. In the present case, the appellant are providing the construction services on lock and key basis. All the work right from the beginning, i.e., designing, construction, electricity and water connection, finishing services, etc. is undertaken by them and they hand over a completed house to the service recipient. Even though a number of allied services are also provided with the construction services, yet since it is the case of bundled services and it is the construction service which gives essential character to the bundle, all of these services will be classifiable under the construction services and service tax would be paid accordingly.
In order to better understand when the services are to be treated as bundled in the ordinary course of business, reference is made to para 9.2.4 of the Education Guide for service tax released by the CBEC. The relevant extracts are produced for the sake of convenient reference as follows:-
9.2.4 Manner of determining if the services are bundled in the ordinary course of business
 
Whether services are bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the area of business to which services relate. Such normal and frequent practices adopted in a business can be ascertained from several indicators some of which are listed below –
 

• The perception of the consumer or the service receiver. If large number of service receivers of such bundle of services reasonably expect such services to be provided as a package then such a package could be treated as naturally bundled in the ordinary course of business.

• Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle of catering on board and transport by air is a bundle offered by a majority of airlines.

• The nature of the various services in a bundle of services will also help in determining whether the services are bundled in the ordinary course of business. If the nature of services is such that one of the services is the main service and the other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main service. For example service of stay in a hotel is often combined with a service or laundering of 3-4 items of clothing free of cost per day. Such service is an ancillary service to the provision of hotel accommodation and the resultant package would be treated as services naturally bundled in the ordinary course of business.

 
From the clarification given by the Education Guide also it is clear that the test to determine whether particular services are naturally bundled in the ordinary course of business or not is that whether customer expects provision of such services with the main service and whether the majority of the service providers in that business provide similar set of services or not. It is submitted that the answer to both the questions in the present case is in affirmative as the electrification and water system development services are provided by every builder of residential complex and the buyers of the flats also expect electrification and water system development of the flats purchased by them. As such, the said services are naturally bundled with the main service of the “Construction of Residential Complex Service” and the impugned order in original confirming the service tax demand on said services at full rate without even specifying the category of service is totally erroneous and deserves to be quashed.
 
It is further submitted that a specimen copy of agreement entered by the appellant with the buyer of the flats constructed by them was also provided but the same has been simply ignored while passing the impugned order in original. It is submitted that if the Annexure-‘C’ of the Agreement is pursued, it is found that no separate charges have been collected for internal electrification and water system development of the flat which means that the said facilities are included in the price charged for the flat on which appropriate service tax has already been paid by them under the category of ‘Construction of Residential Complex Service’. It is submitted that the total charges for the flat is being bifurcated into Bungalow price, Society Charges and Club Membership Charges. Furthermore, the said charges have been entered separately in the books of accounts only for accounting purpose but this cannot lead to conclusion that the said charges are collected over and above the price charged from the customers for sale of flats because the specimen copy of the agreement clearly reflects that no amount has been separately collected from the buyers of the flats in the name of “internal electrification or water system development charges”. Hence, the consideration of internal electrification and water system development charges are integral part of the Bungalow price quoted by the appellant and they have correctly discharged service tax by including it under the category of ‘Construction of Residential Complex Service’. In order to appreciate the concept of bundled services, reliance is also placed on the recent judgement given by the Hon’ble Delhi Tribunal in the case of Jubilant Life Sciences Ltd. Vs CCE, Noida [2013 (29) S.T.R. 529 (Tri.-Del)] wherein it was held that:-
Underwriting Service - Whether incidental to the activity undertaken as Lead Manager - HELD : Service of underwriting need not be necessarily provided by the merchant banker - Nature of the Underwriting service and Lead Manager service being totally different, Underwriting service is not incidental to the services rendered as a Lead Manager to the issue. [para 13]
Bundled services- Classification of - When services distinct in nature are rendered under one contract - A contract including various services need not be considered as a whole and classified considering it as a single service when the services rendered under the contract are distinct in nature and the contract lays down the services as distinct services with separate remuneration fixed for the services - Section 66F of Finance Act, 1994. [para 13]
In light of the above cited decision, it is clear that for two services to be bundled, it is required that one service is ancillary or incidental in the provision of another service. Moreover, the contract of service should also consider the said services as one and consideration should not be separately reflected in the contract. It is submitted that the requirements laid by the above decision for a service to be bundled with another service are fulfilled by the appellant as the service of internal electrification and water system development is incidental to the provision of main service of ‘Construction of Residential Complex Service’. Furthermore, the contract also indicates provision of single service and does not bifurcate the amount collected with respect to internal electrification and water system development services. As such, the impugned order in original rejecting the contention of provision of bundled services is totally erroneous and should be quashed.
 
It is also submitted that the impugned order has also confirmed service tax demand at the full rate inspite of clear finding that the appellant have already paid service tax on the abated value by classifying the electrification and water system development charges under the category of “Construction of Residential Complex Service’. As such, the order in original has ignored the service tax already paid by the appellant even when the same was evidenced with the help of ledger accounts and service tax challans. Hence, confirmation of service tax demand on the electrification and water system development charges at the rate of 12.36% is clearly against the principles of law. It is submitted that excess demand has been confirmed against the appellant without even considering the service tax already paid by them. Such an order ignoring the submissions of the appellant turns out to be a non-speaking and a non-reasoned order which has no relevance in the eyes of law and deserves to be set aside. From the details enclosed, it is clear that the service tax already deposited by classifying the internal electrification and water system development charges under the category of construction of residential complex service for different projects is as follows:-
 

 
 
Therefore, the impugned order in original ignoring the above amount of service tax already deposited by the appellant to the extent of Rs. 1,68,880/- and confirming service tax at full rate is not sustainable and should be quashed.
 
The impugned order in original has also confirmed penalties under section 77 and 78 of the Finance Act, 1994 on the contention that the plea of bonafide belief is not acceptable because service tax demand on the even issue for earlier period has been confirmed by the revenue department and therefore, the appellant has failed to assess the service tax liability properly. In this regard, the appellant submits that merely because service tax demand has been confirmed for the prior period, the same cannot be ground to levy penalty on them. The appellant has already challenged the service tax demand for prior periods before appellate forum. As such, mere confirmation of demand for the earlier period cannot lead to conclusion that the stand of the appellant is wrong. As such, no penalty is leviable in the present case. It is further submitted that penalty under section 78 is for non-payment of service tax by reason of fraud, collusion, wilful misstatement or suppression of facts with intention to evade payment of tax. However, in the present case, none of the ingredients are present for imposition of penalty under section 78 and rather the appellant had already paid service tax on the electrification and water system development charges by classifying them under the main service of “Construction of Residential Complex Service’ and as such, there is no short payment of tax on their part. The appellant submit that when there is no short payment of service tax, no penalty can be imposed under section 78 of the Finance Act, 1994. Moreover, as regards penalty under section 77 is concerned, it is alleged that the same is imposable as the appellant has not shown said ‘internal electrification and sub-station charges’ and ‘internal water system development charges’ in ST-3 returns filed by them. In this regard, the appellant submit that there is no legal requirement to disclose such information in ST-3 return and they cannot be penalised for non-submission of information which is not required to be submitted as per law. In this regard, it is submitted that there is no provision in the Finance Act, 1994 or rules framed thereunder which says that they are required to submit details of charges collected by them in the ST-3 return filed by them. Where there is no legal requirement to disclose any such information to department, its non disclosure does not amount to suppression. It has been decided in the following cases:-

• APEX ELECTRICALS PVT. LTD. VS UNION OF INDIA [1992 (61) E.L.T. 413 (GUJ.)]:-
• PROLITE ENGINEERING CO. VS UNION OF INDIA [1995 (75) ELT 257 (GUJ.)]:-

An analysis of both of these decisions given by hon’ble High Courts makes it clear that the information not required to be submitted under law does not amount to suppression. In the case of appellant also, they were not required to submit the details of internal electrification charges, therefore, for non supply of this information, they cannot be penalised under section 77 of the Finance Act, 1994. Hence, impugned order is not sustainable and is liable to be set aside.
 
 
In continuation to the above, it is submitted that the appellant have paid service tax by treating electrification and water system development facilities as integral part of the construction of complex services provided by them.  Moreover, the issue is more of classification of service and the same is a matter of interpretation of statutory provisions for which penalty should not be imposed. As such, service tax has been deposited for the said electrification and water system development charges by classifying them under the category of ‘Construction of Residential Complex Service’ and there is no malafide on the part of appellant. Furthermore, reliance was placed on the decision given by the Hon’ble Delhi Tribunal in the case of JUBLIANT LIFE SCIENCES LTD. VS CCE, NOIDA [2013 (29) S.T.R. 529 (TRI.-DEL)]  wherein it was held that a contract mentioning different services with lumpsum consideration is to be considered as bundled services. In the present case also, as the consideration received from sale of flat was composite and there was no bifurcation of internal electrification charges, service tax was paid by considering the contract as that of bundled services. The appellant submits that even the highest court of India – Hon’ble Supreme Court has held in the case of COMMISSIONER OF CENTRAL EXCISE, TRICHY VERSUS GRASIM INDUSTRIES LTD. [2005 (183) E.L.T. 123 (S.C.)] that where the act of assessee is based on the interpretation taken by the Tribunal, penalty cannot be imposed as the act is based on bonafide belief. The verdicts of Apex Court are produced as follows:-
 
“Penalty - Bona fide belief caused by Tribunal’s decision - Tribunal in a number of cases giving an interpretation as understood by assessee - Penalty not imposable - Rule 173Q of erstwhile Central Excise Rules, 1944 - Rule 25 of Central Excise Rules, 2002. [para 20]”
The analysis of above decision makes it clear that since there was bonafide belief no penalty can be imposed on the appellant. Therefore, the benefit of above decision of Hon’ble Supreme Court should be extended and the penalties imposed on them should be set aside.
In continuation it is submitted that the issue involved herein is that of interpretation of legal provisions and where interpretation of legal provisions is involved penalty cannot be imposed on the assessee. This contention has been upheld in the case of UNIFLEX CABLES LTD V/S COMMISSIONER OF CENTRAL EXCISE, SURAT-II [2011-TIOL-85-SC-CX] wherein it was held as under:
Central Excise – No penalty in a case of interpretational nature: The Commissioner, himself in his order-in-original has stated that the issue involved in the case is of interpretational nature, Keeping in mind the said factor, the Commissioner thought it fit not to impose harsh penalty and a penalty of an amount of Rs. 5 lakhs was imposed on the appellant while confirming the demand of the duty. Therefore, in the facts and circumstances of the present case, penalty should not have been imposed upon the appellant.
Thus, hon’ble Supreme Court has held that penalty is not imposable in the issues involving the interpretation of legal provisions. The benefit of this decision is equally applicable in the present case and the impugned order in original imposing penalties on the appellant is liable to be quashed. Further, penalty is not imposable without proving the presence of guilty mind or malafide intention as held in the case of HINDUSTAN STEEL V. STATE OF ORISSA [1978 2 ELT J 159 (SUPREME COURT)]. In this case it was held that an order imposing penalty for failure to meet statutory obligation is a result of proceedings which are quasi judicial in nature and penalty should not ordinarily be imposed unless the person acted deliberately in defiance of law or was guilty of misconduct or dishonest or acted in conscious disregard of his obligation. In the given case, the short payment of service tax was due to genuine reasons and interpretation of statutory provisions as already explained in the forgoing paras. Therefore, there was no malafide intent to evade payment of taxes. Thus, the benefit of this judgment of Supreme Court is extendable in the present case and the impugned order in original is liable to be set aside.
 
The appellant wishes to point that most of the submissions made by the appellant have not been considered while passing the impugned order in original. Some of the submissions have been made in the preceding paragraphs while the remaining submissions that have not been considered are re-produced below and form part of the grounds to the present appeal as follows:-
 

• The appellant wish to point out that the impugned show cause notice has been erroneously drafted. Firstly, the allegation of the impugned show cause notice that they have not paid service tax on the internal electrification and water system development charges is totally wrong because they have paid service tax on the said charges by including these charges under the category of ‘Construction of Residential Complex Service’. As such, the allegation that we have not paid service tax is totally absurd. Rather, the allegation of the impugned show cause notice should have been that they have short paid the service tax on the said charges. Secondly, the entire show cause notice alleges that they have not paid service tax but it does not even whisper about the category of service under which the service tax is payable by the appellant. The impugned show cause notice merely states that as the said charges are not covered under the negative list tax regime or the mega exemption notification, service tax is payable by them at the entire charges received by them. They submit that although the concept of negative list tax regime has been introduced but this has not done away the requirement of classification of service. They submit that even in the era of negative list regime, assessee pays service tax under a particular category of service and if it is not possible to classify service then, there is option of classifying the service under the head “Other Taxable Services-other than the 119 listed”. They submit that on perusal of the entire show cause notice, it is found that there is no category of service under which service tax was required to be paid by them for the said internal electrification and water system development charges. As such, the impugned show cause notice not even mentioning the category of service under which the service tax was required to be paid by them is not at all tenable. They submit that non-mention of the category of service under which service tax is leviable indicates the careless drafting of the show cause notice. Furthermore, even the order in original does not specify the category of service under which service tax is payable. Therefore, the impugned show cause notice and the resultant order is liable to be quashed at the outset. 
• In order to appreciate the concept of bundled services, reliance is also placed on the recent judgement given by the Hon’ble Delhi Tribunal in the case of JUBILANT LIFE SCIENCES LTD. VS CCE, NOIDA [2013 (29) S.T.R. 529 (TRI.-DEL)] wherein it was held that:-

Underwriting Service - Whether incidental to the activity undertaken as Lead Manager - HELD : Service of underwriting need not be necessarily provided by the merchant banker - Nature of the Underwriting service and Lead Manager service being totally different, Underwriting service is not incidental to the services rendered as a Lead Manager to the issue. [para 13]
Bundled services- Classification of - When services distinct in nature are rendered under one contract - A contract including various services need not be considered as a whole and classified considering it as a single service when the services rendered under the contract are distinct in nature and the contract lays down the services as distinct services with separate remuneration fixed for the services - Section 66F of Finance Act, 1994. [para 13]
In light of the above cited decision, it is clear that for two services to be bundled, it is required that one service is ancillary or incidental in the provision of another service. Moreover, the contract of service should also consider the said services as one and consideration should not be separately reflected in the contract. It is submitted that the requirements laid by the above decision for a service to be bundled with another service are fulfilled by them as the service of internal electrification and water system development is incidental to the provision of main service of ‘Construction of Residential Complex Service’. Furthermore, the contract also indicates provision of single service and does not bifurcates the amount collected with respect to internal electrification and water system development services. As such, the impugned show cause notice ignoring the concept of bundled services is totally erroneous and should be quashed.

• Aligning with above, it is submitted that after July, 2012 their case is the case of bundled services and it is the construction service which gives essential colour to the bundle; therefore all the charges recovered from the buyers to whom the construction and its allied services are provided; will be classified as construction service only and would be taxed accordingly. They have also paid the service tax in accordance to these provisions and have correctly assessed and paid their liability by including the same in the value of construction services. Therefore, the contention of the impugned show cause notice that they were supposed to pay the service tax at full rates on such charges is not justified as these services cannot be seen in isolation as these are the parts and parcels of the bundle offered by them. They submit that the charges collected by them are not for making the residing more enjoyable rather, these are basic facilities that every builder is required to provide in the complex and hence are integral to the construction of complex. Therefore, the classification of these charges with the construction services is correct and in order. Hence the allegations of the impugned show cause notice are devoid of merits and are liable to be set aside.
• The appellant also wish to place reliance on the recent clarification issued by the CBEC vide Circular no. 186/5/2015-ST dated 05.10.2015 wherein it was clarified that at times, Goods Transport Agency (GTA) provides various ancillary services during the course of transportation of goods by road like loading/unloading, packing/unpacking, transhipment, temporary storage etc. and issues a consignment note/invoice for the entire composite services. In such cases, it is clarified that the abatement of 70% as available to GTA would also be applicable for such ancillary services. In this regard, the extracts from the circular are reproduced for the sake of convenient reference as follows:-

A single composite service need not be broken into its components and considered as constituting separate services, if it is provided as such in the ordinary course of business. Thus, a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service.   While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The interpretation of specified descriptions of services in such cases shall be based on the principle of interpretation enumerated in section 66 F of the Finance Act, 1994. Thus, if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA, and not by any other person, such services would form part of GTA service and, therefore, the abatement of 70%, presently applicable to GTA service, would be available on it.
They submit that the ratio of the above cited clarification is also applicable in the present case. They submit that they are service providers engaged in construction of residential flats and it is beyond doubt that electrification and water system development charges are part and parcel of the flat sold by them. Therefore, they have correctly classified the said charges into the main service of ‘Construction of Residential Complex Service’ and the impugned show cause notice proposing to segregate the composite service into individual services is not at all tenable and is liable to be quashed.
Furthermore, the circulars issued by the Board are binding on the departmental authorities and they are bound to follow the same. It has been held in the case of Collector of Central Excise, Bombay v/s Kores (India) Limited [2002-TIOL-414-SC-CX] =[1997 (89) E.L.T. 441 (S.C.)] that the board circulars are binding on the department and the department cannot take a stand contrary to the same. Since the board circulars/instructions are binding on the department, we should be extended the benefit of above clarification and the impugned show cause notice should be set aside.

• Without prejudice to above submissions, they submit that it is clear from the agreement submitted by them that as they do not collect any separate charges in the name of electrification or water system development charges, and such charges have been correctly treated as an integral part of the value of residential complex services provided by them. They submit that as electrification and water system development are basic and integral to the construction of any residential complex, they have discharged the service tax by including the value of such charges in the total value of taxable services by claiming the benefit of abatement notification no. 26/2012-ST dated 20.06.2012. They submit that in their view, they have correctly discharged the service tax liability on such electrification and water system development charges on at the rate of 3.09% (being service tax on the 25% of the value of taxable service). As such, there is no liability on their part with respect to said electrification and water system development charges. However, even if it is accepted for the sake of argument only that they are liable to discharge service tax on the entire value of electrification and water system development charges without claiming the benefit of the abatement notification, the service tax demand is payable only on the 75% of the value as 25% has already been paid by them. However, the impugned show cause notice has raised service tax demand on the entire value of electrification and water system development charges without even considering the service tax already paid by them in this respect.

They submit that the show cause notice no. V (ST) Adj.-II/JPR-II/438/12/611 dated 06.02.2013 that was issued for the prior period from the financial year 2008-09 to 2011-12 also raised only the differential service tax demand on the 75% of the value of internal electrification and water system development charges. Moreover, the said show cause notice has already been adjudicated which means that the learned Additional Commissioner himself confirms the fact that they can be made only liable to pay 75% of the value of electrification and water system development charges because 25% has already been paid by them. Accordingly, the show cause notice ought to have raised service tax demand for the differential amount of service tax only but on the contrary, the impugned show cause notice has not even acknowledged the payment of service tax on the 25% of the value. Hence, the impugned show cause notice raising service tax at the full rate is totally erroneous and deserves to be set aside.

• They further submit that this is the third show cause notice on this issue. They have been issued show cause notice having no. as V(ST) ADJ-II/JPR-II/438/12/611 DATED 06.02.2013; 14/DSCN/ST/JDR/2014/2569 DATED 22.05.2014 and V(ST) SCN/90/JDR/2013/8984 DATED 20.09.2013. It is worth mentioning that all these show cause notices have been adjudicated against them and are pending at the Commissioner Appeals. They submit that as the show cause notices have already been adjudicated against them on the same issue, it cannot be said that there was any suppression of facts on their part so as to invoke the extended period of limitation. In this respect, reliance is also placed on the following cases:-

GUJARAT AMBUJA EXPORTERS LTD VERSUS UNION OF INDIA[2012 (26) S.T.R. 165 (Guj.)]
Demand - Limitation - Suppression - Facts stated in earlier show cause notices as well as allegations made therein and in present show cause notices are more or less similar - Only difference is that in impugned show cause notices there is a reference to intelligence gathered by Central Excise authorities and statements recorded - Though there is a reference of visit by Central Excise officers to factory of petitioner the date of such visit has not been mentioned -Impugned show cause notices were issued after most of the statements were recorded and as such, the reference to intelligence in the impugned show cause notices is of no consequence, since all the said facts were already before Central Excise authorities at the time when earlier show cause notices came to be issued - Impugned show cause notices not based on new or different facts than earlier ones - Extended period of limitation cannot be invoked in respect of earlier periods by issuing impugned show cause notices- Section 11A of Central Excise Act, 1944.
NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, A.P.[ 2006 (197) E.L.T. 465 (S.C.)]-
Demand - Limitation - Suppression of facts - All relevant facts in knowledge of authorities when first show cause notice issued - While issuing second and third show cause notices,same/similar facts could not be taken as suppression of facts on part of assessee as these facts already in knowledge of authorities - No suppression of facts on part of assessee/appellant - Demands andpenalty dropped - Sections 11A and 11AC of Central Excise Act, 1944.[paras 9, 10]
HYDERABAD POLYMERS (P) LTD. VERSUS COMMISSIONER OF C. EX., HYDERABAD [2004 (166) E.L.T. 151 (S.C.)]-
Demand - Limitation - Suppression of fact - Earlier show cause notice raising demand on similar issue and for identical amount dropped, subsequent show cause notice cannot allege suppression of fact or material - Extended period of limitation under Section 11A of Central Excise Act, 1944 not available - Department’s contention that earlier show cause notice was for subsequent period and it was not known when show cause notice was dropped, such plea rejected as it was for the department to prove that earlier show cause notice was not relevant or was not applicable. [paras 6]
ECE INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, NEW DELHI [2004 (164) ELT 236 (SC)]
 
Demand and penalty - Limitation - Extended period of limitation not invocable in subsequent proceedings when earlier proceedings on same subject matter pending/decided - Suppression or misstatement - Second show cause notice alleging suppression - Earlier show cause notice for demand of duty and imposition of penalty for wrong availment of Modvat and its non-reversal adjudicated - Extended period of limitation not invocable for wilful suppression or misstatement in the second show cause notice - No penalty imposable.
In the above cases, it is held by the Apex Court that the subsequent show cause notice cannot allege the suppression of facts on parts of the assessee as the facts are already in knowledge of the department from the time when the first show cause notice was issued. Thus, all the facts are well within the knowledge of the department from the date of first show cause notice. Thus, now in this subsequent show cause notice, the allegation of suppression is not sustainable and so the demand is barred by the clause of limitation. They further submit that when the demand is barred by limitation and extended period cannot be invoked, the question of imposing penalty under section 78 of the Finance Act, 1994 does not arise at all.
 
With reference to the submissions produced in paragraph no. 10, it is submitted that as most of the contentions made by the appellant have been ignored, the impugned order in original has turned out to be a non-speaking and a non-reasoned order which has no relevance in the eyes of law in light of the following decisions:-

• State of Himachal Pradesh Vs Sardara Singh [2008-TIOL-160-SC-NDPS]:-

 
Even High Courts are required to pass speaking reasoned orders - The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance. The manner in which appeal against acquittal has been dealt with by the High Court leaves much to be desired. Reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of its mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has rendered the High Court order not sustainable. The requirement of indicating reasons in such cases has been judicially recognized as imperative. Judicial discipline to abide by declaration of law by this Court, cannot be forsaken, under any pretext by any authority or Court, be it even the Highest Court in a State, oblivious to Article 141 of the Constitution of India. Reasons are live links between the mind of the decision taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance: SUPREME COURT.

• Commissioner of Central Excise, Bangalore versus Srikumar Agencies [2008 (232) E.L.T. 577 (S.C.)]:-

“Appellate Tribunal’s order - Non-speaking order - Facts not analysed in detail in impugned order by Tribunal - Disposal of appeals by mere reference to decisions not proper way to deal with appeals - Applicability of decision cited by Revenue not considered - Appeals involving different goods - CESTAT ought to have examined cases individually and articles involved - Manner of disposal not proper - Impugned order set aside - Question referred to Larger Bench of Supreme Court not answered as matter remitted to CESTAT for fresh decision by appropriate Bench - Section 35C of Central Excise Act, 1944. - By clubbing all the cases together and without analyzing the special features of each case disposing of the appeals in the manner done was not proper. [para 6]”
In view of above judgments, the impugned order in original is a non speaking order as it has failed to discuss and distinguish the submissions and the decisions cited by the appellant, therefore, the impugned order is not tenable in the eyes of law and is liable to be quashed and the appeal should be allowed.
 
Reasoning adopted by the adjudicating authority: -It was held that, the appellant have already service tax after abatement on the “Internal Clarification & Sub-station Charges and Internal Water Systems Development Charges” under category “Construction of Residential Complex Service”. The revenue case is that since the appellant has shown these charges in their books of accounts separately therefore they were liable to pay service tax.
The appellant produced some sample copies of agreement along with appeal memorandum. On perusal of agreement had with their customers it is found that they have not collected any separate charges in the name of electrification or water system development charges and such charges have been correctly treated as an integral part of the value of residential complex service provided by them. It was further held that the value of residential complex electrification and water system development are basic and integral to the construction of any residential complex, therefore they have discharged the service tax by including the value of such charges in the total value of taxable services by claiming the benefit of abatement Notification No. 26/2012-ST dated 20.06.2012. CBEC vide Circular No. 186/5/2015-ST dated 05.102015 has been clarified as under:
A single composite service need not to be broken into its components and considered as substituting services, if it is provided as such in the ordinary course of business. Thus, a composite service, even if it consists of more than one service, should be treated as a single service based on the main or principal service. While taking a view, both the form and substance of the transaction are to be taken into account. The guiding principle is to identify the essential features of the transaction. The interpretation of specified descriptions of services in such cases shall be based on the principle of interpretation enumerated in Section 66F of the Finance Act, 1994 . Thus , if ancillary services are provided in the course of transportation of goods by road and the charges for such services are included in the invoice issued by the GTA and not by any person, such services would form part of GTA Service and therefore the abatement of 70% presently applicable to GTA service would be available on it .
The above clarification is applicable on the instant case.
Section 66F of the Finance Act 1994 reads as under:
Principles of Interpretation of specified description of services or bundled services:
66F. (1) Unless otherwise specified, reference to a service (herein referred to as main service) shall not include reference to a service which is used for providing main service.
(2) Where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description.
      (3) Subject to the provisions of sub-section (2), the taxability of a bundled service shall be determined in the following manner, namely:–
           (a) if various elements of such service are naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which gives such bundle its essential character;
           (b) if various elements of such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax.
               Explanation.- For the purposes of sub-section (3), the expression “bundled service” means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.]
In view of the above the service of internal electrification and water system development is incidental to the provision of the main service “Construction of Residential Complex Service”. Further the contract also indicates provision of single service and does not bifurcate the amount collected with respect to internal electrification and water system development service. The Appellate Authority held that the appellant has correctly discharged the service tax liability on internal electrification and water system development service under the category of “Construction Of Residential Complex Service”. Thus the impugned order is set aside and allowed the appeal of the appellant.
Conclusion:- On the basis of above pretentions it can be concluded that, whenever the services of internal electrification and water system development is provided and it is incidental to the provision of main service of “ Construction of Residential Complex Service” .If, the amount charged for such service is not separately billed to the service recipient then such service would be classified as a bundled service and would fall under the category of Construction of Residential Complex Service”. Thus the service provider would not be required to separately discharge the service tax liability on such services.