Page 157 - GSTL_2nd April 2020_Vol 35_Part 1

2020 ] VASUDHA BOMMIREDDY v. ASSISTANT COMMR. OF S.T., HYDERABAD 59
28. No doubt, the Service Tax (Determination of Value) Rules, 2006
were notified vide Notification No. 12/06-S.T., dated 19-4-2006 and were amend-
ed vide Notification No. 11/2014-S.T., dated 11-7-2014 w.e.f. 1-10-2014. The said
Rules were framed in exercise of power conferred on the Central Government by
clause AA of sub-section (2) of Section 94 of the Act.
29. Rule 2A of the Service Tax (Determination of Value) Rules, 2006
deals with determination of value of service portion in the execution of a works
contract mentioned only in clause (h) of Section 66E of the Act.
30. The petitioners claim that there is no rule framed by the Central
Government in the above Rules to determine the value of service component in a
composite contract for sale of immovable property and goods including a service
component mentioned in Clause (b) of Section 66E, it is the plea of the respond-
ents that Rule 2A would apply to the situation as well.
31. We are of the opinion that Rule 2A of 2006 Rules deals only with de-
termination of the value of the service portion in execution of a works contract
referred to clause (h) of Section 66E of the Act; and even as of date, no rule has
been enacted by the Central Government dealing with determination of value of
service portion in a composite contract of sale involving not only a service com-
ponent but also sale of built up area along with undivided share of land involv-
ing also sale of goods included in the total consideration paid for their purchase
falling in clause (b) of Section 66E, as in the instant case.
32. This aspect has been dealt with by the Delhi High Court in Suresh
Kumar Bansal’s case (supra) and it explained that the contract between a buyer
and the builder/promoter/developer in development and sale of a complex is of
a composite one; that arrangement between the buyer and the developer is not
for procurement of services simplicitor, that agreement between a flat buyer and a
builder/developer of a complex, who is developing the complex for sale is, es-
sentially, one of purchase and sale of developed property; that the arrangement
between the buyer and the builder is a composite one which involves not only the
element of services but also goods and immovable property; while the legislative com-
petence of the Parliament to tax the element of service involved cannot be dis-
puted but the levy itself would fail, if it does not provide for a mechanism to ascertain
the value of the services component which is the subject of the levy. The Delhi High
Court was of the view that the service tax cannot be levied on the value of undi-
vided share of land acquired by a buyer of a dwelling unit or on the value of
goods which are incorporated in the project by a developer and that levying a tax
on the constituent goods or the land would clearly intrude into the legislative
field reserved for the States under List II of the Seventh Schedule of the Constitu-
tion of India. The Bench observed that there is no machinery provision for ascertain-
ing the service element involved in the composite contract and in order to sustain the levy
of service tax from the services, it is essential that the machinery provisions provide a
mechanism for ascertaining the measure of tax, i.e., the value of services which are
charged to service tax. It referred to the Service Tax (Determination of Value)
Rules, 2006 and observed that none of the rules provides for any machinery for ascer-
taining the value of services involved in relation to construction of a complex. Referring
to Rule 2A, Division Bench stated that it provides for mechanism to ascertain the
value of services in a composite works contract involving services and goods, but
it does not cater to determination of value of services in case of a composite con-
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