2025 (5) TMI 1896 - AT - Service Tax

Levy of service tax - services provided to Nagar Parishad - Works Contract Services and Erection Installation and Commissioning Services - invoking extended period of limitation - cum-tax benefit - Mega Exemption Notification No. 25/2012-ST - Demand along with interest and penalty - HELD THAT - A perusal of the facts of case makes it abundantly clear that the work order for maintenance of street lights for the period 2015-16 is dated 31.3.2015. Consequently it does not satisfy the condition of the entry 12A of the Notification no. 25/2012-ST dated 20.6.2012 and therefore the appellant is not eligible for the said exemption. We draw support from the Supreme Court s decision in the case of Commissioner of Customs (Import) Mumbai vs. Dilip Kumar Company 2018 (7) TMI 1826 - SUPREME COURT (LB) wherein the Apex court held that exemption notification under a taxing statute should be interpreted strictly. Thus we find no infirmity in the impugned order and uphold the same. Consequently the appeal is dismissed.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the appellant is liable to pay service tax on the services provided to Nagar Parishad, Bhilwara and others for the year 2015-16, specifically in relation to maintenance of street lights under the category of Works Contract Services and Erection, Commissioning & Installation Services.

2. Whether the exemption notification, particularly entry 12A of Notification No. 25/2012-ST dated 20.06.2012 as amended, applies to the appellant's services, given the timing and nature of the contract.

3. Whether the demand for service tax for the period prior to April 2016 is barred by limitation.

4. Whether penalty under Sections 77(1)(a), 77(2), 78 and late fees imposed on the appellant are sustainable, considering allegations of suppression and non-compliance.

Issue-wise Detailed Analysis

1. Liability to Pay Service Tax on Services Provided to Nagar Parishad and Others for 2015-16

Legal Framework and Precedents: The relevant charging provisions invoked are Sections 65B(44), 65B(51), and 66B of the Finance Act, 1994, which govern the levy of service tax on Works Contract Services and related services such as erection, commissioning, and installation. The exemption regime is governed by Notification No. 25/2012-ST dated 20.06.2012 and its subsequent amendments, including Notification No. 6/2015-ST dated 01.03.2015.

Court's Interpretation and Reasoning: The Tribunal noted that exemption from service tax on services provided to Government or local authorities by way of erection, commissioning, installation, repair, maintenance, etc., was withdrawn effective 01.04.2015 by Notification No. 6/2015-ST. However, entry 12A of Notification No. 25/2012-ST restored exemption only if the contract was entered into prior to 01.03.2015 and appropriate stamp duty was paid.

Key Evidence and Findings: The work order for maintenance of street lights for 2015-16 was dated 31.03.2015, which is after the cut-off date for exemption under entry 12A. The appellant had not complied with the condition of having entered the contract before 01.03.2015.

Application of Law to Facts: Since the contract date did not satisfy the exemption condition, the appellant was not eligible for exemption and liable to pay service tax on the services rendered.

Treatment of Competing Arguments: The appellant contended that the services were related to public utility and not commercial in nature, invoking exemption under Sl. No. 12(a) of the Mega Exemption Notification No. 25/2012-ST, which excludes commerce, industry or any other business or profession. The Tribunal rejected this, emphasizing the strict interpretation of exemption notifications.

Conclusion: The Tribunal upheld the demand for service tax on services provided to Nagar Parishad and others for 2015-16, holding that the appellant was not entitled to exemption.

2. Applicability and Interpretation of Exemption Notification

Legal Framework and Precedents: The Tribunal relied heavily on the Supreme Court's decisions in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar & Company and Commissioner of Central Excise, New Delhi vs. Hari Chand Shri Gopal, which establish that exemption notifications under taxing statutes must be interpreted strictly, with the burden of proof on the claimant to establish entitlement.

Court's Interpretation and Reasoning: The Tribunal reiterated that exemption notifications are to be construed strictly and any ambiguity must be resolved in favor of the revenue. The appellant failed to prove compliance with the conditions of entry 12A of Notification No. 25/2012-ST, thus disqualifying them from exemption.

Key Evidence and Findings: The contract date and absence of timely stamp duty payment were determinative factors.

Application of Law to Facts: The Tribunal applied the strict interpretation principle and concluded that the appellant's claim for exemption was not sustainable.

Treatment of Competing Arguments: The appellant's reliance on the exemption for non-commercial services was not accepted due to the legislative amendments withdrawing exemption post 01.04.2015.

Conclusion: The Tribunal held that the appellant was not entitled to exemption under the relevant notifications.

3. Limitation Period for Demand of Service Tax

Legal Framework: The limitation for recovery of service tax is generally three years from the relevant period, subject to extended period provisions in cases of suppression or fraud.

Court's Interpretation and Reasoning: The appellant argued that the demand was time barred as the show cause notice was issued in 2018 for periods 2014-15 to 2015-16. However, the Tribunal noted that extended period of limitation was invoked due to willful suppression of facts by the appellant.

Key Evidence and Findings: The appellant failed to disclose relevant facts to the department and did not obtain service tax registration or file returns for the disputed period.

Application of Law to Facts: The extended period of limitation was validly invoked given the appellant's concealment and non-compliance.

Treatment of Competing Arguments: The appellant's contention on limitation was rejected due to the applicability of extended limitation provisions.

Conclusion: The demand was not time barred.

4. Sustainability of Penalties and Interest

Legal Framework: Penalties under Sections 77(1)(a), 77(2), 78 and interest provisions are imposed for non-compliance, suppression, and delayed payment of service tax.

Court's Interpretation and Reasoning: The Tribunal found that the appellant had willfully suppressed facts, did not obtain registration, and failed to file returns, thus attracting penalty provisions. The imposition of penalty under Section 78 for suppression was held to be justified.

Key Evidence and Findings: Non-disclosure during inquiry, absence of registration, and failure to file returns were critical.

Application of Law to Facts: Given the appellant's conduct, the penalties and interest were rightly imposed.

Treatment of Competing Arguments: The appellant's claim of no suppression and entitlement to waiver of penalty was rejected.

Conclusion: Penalties and interest were upheld.

Significant Holdings

"Every taxing statute including, charging, computation and exemption clause (at the threshold stage) should be interpreted strictly. Further, in case of ambiguity in a charging provision, the benefit must necessarily go in favour of subject/assessee, but the same is not true for an exemption notification wherein the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State."

"A person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception has to be construed strictly... If exemption is available on complying with certain conditions, the conditions have to be complied with."

"The exemption from service tax granted on services provided to the Government, a local authority or a government authority by way of construction, erection, commissioning, installation, completion, fitting out repair, maintenance of a civil structure or any other original works meant predominantly for use other than commerce, industry was withdrawn with effect from April 1, 2015."

"The appellant is not eligible for exemption as the contract for maintenance of street lights was entered on 31.03.2015, after the cut-off date prescribed in the exemption notification."

The Tribunal dismissed the appeal and upheld the demand of service tax, interest, and penalties on the appellant for the period in question. The core principles established include strict interpretation of exemption notifications, the burden of proof on the claimant for exemption, validity of extended limitation period in cases of suppression, and justification of penalties for non-compliance and concealment.