"1BEFORE THE COMMISSIONER OF SERVICE TAX COMMISSIONERATEMOST RESPECTFULLY SHEWETHM/s KK ltd (hereinafter referred to as “the Noticee”) by the aforesaid Show Cause Notice(“SCN”) has been called upon to show cause to the Ld. Commissioner of Service Tax, Delhiasto why:(i) The Service tax amounting to Rs. 92,78,209/- (including Cess) should not berecovered from them under proviso to Section 73(1) of the Finance Act 1994 (“theAct”) by invoking the extended period of limitation provided therein;(ii) Interest at appropriate rate should not be charged and recovered under Section 75 ofAct for delay in payment of the Service Tax on taxable service;(iii) Penalty under Section 76 of the Act should not be imposed for failure to pay tax inaccordance with the provision of Section 68 read with Rule 6 of Service Tax Rules,1994 and Point of Taxation Rules,2011.(iv) Penalty should not be imposed under the provision of Section 77 of the Act for notfiling the periodical ST-3 returns in proper manner (v) Penalty should not be imposed under Section 78 of the Act for deliberatelysuppressing facts with an intention to evade the due Service Tax liability; andCopy of SCN is enclosed as Annexure- A.STATEMENT OF FACTS1.1 The Noticeeis a private limited company incorporated under the provisions oferstwhile Companies Act 1956, having its registered office E-24, Second Floor,Connaught Circus, Connaught Place, New Delhi-110001.21.2 The Noticee is engaged in providing the Construction services as well as providing theother services amounting to preferential location and development charges(PLC).Suchcharges may be attributable to the preferences of a customer in relation to directionsin which flat is constructed, the floor on which it is located, the views from the unit,accessibility to other facilities provided in the complex etc.1.3 On the scrutiny of the sample copy of invoices/ demand letter issued by the assesseeto the buyers and the Letter of intent and Statement of accounts issued by the StateDepartment to the assessee, it was observed that the assessee has charged amountsfrom his customers over and above the EDC /IDC charges liable to be paid to the StateDepartment. The demand letters issued by the assessee to the Customers requirethem to pay EDC/IDC charges as per Apartment Buyer Agreement. However, suchamount of EDC/IDC charged from the customers was in excess of the actual amount ofEDC/IDC payable/ paid to licensing authority for the respective projects. The assesseevide office letter of even no. 28 dated 25.08.2015 and the further letter of even no. 46dated 01.09.2015 was asked to clarify the justification for non-payment of service taxon the EDC/IDC charges paid/payable to state government. 1.4 The assessee vide his letter dated 4.11.2015 has submitted that the builder isrecovering such charges from customer only to the extent they are paid to thegovernment. So, the same is not chargeable to service tax relying on the TRUD.O.F.th No.334/1/2010-TRU New Delhi, dated 26 February 2010; wherein it wasclarified that the development charges recovered from the customer shall be subjectto the service tax under the category of “Preferential Location and DevelopmentService” however if the builder is recovering such charges only to the extent they arepaid to the government then this would not be covered under the taxable value ofsuch service provided. 31.5 Further, in response to the office letter dated 21.12.2015, 03.02.2016 and 16.02.2016,the assessee vide his letter dated 04.03.2016 submitted the year wise breakup ofEDC/IDC charges.However, on the basis of information submitted by the assessee, the departmentalleges that excess amount (in the form of interest) charged by the assessee from hiscustomers in the guise of EDC/IDC is an extra consideration and the same is notcovered in the negative list and is liable to service tax.To defend the contention of thedepartment, let’s have a clear understanding of the payment arrangement with theNoticee in order to confirm the nature of interest charged.1.6 As per the agreement, the Noticee hereby charges Proportionate ExternalDevelopment charges(EDC), Infrastructure Development Charges as leviable by HUDAand any enhancement thereof by the government. Further, the obligation to pay thesale consideration and other charges and taxes as provided in the payment plan hasbeen elaborated as under:“As per the licenses issued by the DTCP to the LLP it was very clearly mentioned that theEDC and IDC charges need to be deposited with the government either on lump-sumbasis i.e. all payment made within 30 days of the grant of license or in ten (six monthly)installments along with the interest @12% p.a.“The structure of having the two alternatives for charging the consideration is solelytowards the value charged for providing the services. The interest has not to betreated separately as this is the amount charged in lieu of consideration.We can moreevidently relate it to the practical life comparing it with the illustration cited below:Illustration:Payment terms 2/10 net 30 "