a. Assessee purchased flat in a residential complex. The builder, in addition to the consideration for the flats, also recovered service tax from the assessee.
b. Assessee challenged levy of service tax on ground that composite contract (inclusive of value of land) could not be charged to service tax. It was argued that the agreement with the builder was a composite contract for purchase of immovable property and in absence of specific provisions for ascertaining the service component in the said agreement, the levy would be beyond the legislative competence of the Parliament.
The Delhi High Court held as under:
1. The legislative competence of the Parliament to tax the element of service involved in constructing the complex could not be disputed. But the levy itself would fail, if it did not provide for a mechanism to ascertain the value of the services component which was the subject of the levy.
2. The service tax could not be levied on the value of undivided share of land acquired by a buyer of a dwelling unit. There is no machinery provision for ascertaining the service element involved in the composite contract.
3. The abatement to the extent of 75% by a notification or a circular could not substitute the lack of statutory machinery provisions to ascertain the value of services involved in a composite contract. Therefore, service tax is not leviable in absence of specific provisions for ascertaining the service component in respect of composite contracts. - [2016] 70 taxmann.com 55 (Delhi)
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