2025 (7) TMI 414 - AT - Service Tax

Jurisdiction - power of Learned Commissioner (Appeals) to remand the case - absence of complete records and documents - appeal cannot be decided at the appellate stage and was thus remanded to the Original Adjudicating Authority - works contract services - HELD THAT - The Original Adjudicating Authority has passed a detailed and well reasoned order and has dealt the disputes issue wise. The learned Commissioner (Appeals) did not have the power to remand and hence could not have remanded the matter to the Adjudicating Authority for denovo adjudication but should have decided the appeal on merits which has not been done in the present case. The Appellant in this connection claims support from the Hon ble Supreme Court s judgment in the case of MIL (India) Ltd. v. C.C.E. Noida 2007 (3) TMI 8 - SUPREME COURT wherein it had been held that the power of remand by the Commissioner (Appeals) had been taken away by Parliament by amending Section 35A of the Central Excise Act w.e.f. 11-5- 2001. The impugned order passed by the learned Commissioner (Appeals) cannot be sustained and is accordingly set aside - Appeal allowed.

Summary

The core legal questions considered in the judgment are:

1. Whether the appellant was liable to pay service tax on the works contract services provided to various entities under the category of "Tour Operator Service, Travel agent for booking of passage, accommodation etc.", or whether exemptions applied under the relevant notifications and rules.

2. Whether the appellant correctly discharged service tax liability on services provided to Maharishi Ved Vigyan Vishwa Peetham, Hindustan Construction Company Ltd., Aditya Birla Nuvo Ltd., Azim Premji Educational Trust, and other entities.

3. The applicability and interpretation of exemption notifications, particularly Notification No. 25/2012-ST dated 20.06.2012 and the Service Tax (Determination of Value) Rules, 2006, especially Rule 2A(i) and 2A(ii).

4. Whether the Commissioner (Appeals) had jurisdiction to remand the matter for de novo adjudication.

5. The validity of demand for service tax, interest, and penalties under Sections 73, 77, and 78 of the Finance Act, 1994, including the invocation of extended period of limitation due to alleged willful suppression of facts.

6. Whether the appellant had maintained proper accounts and records as required under the Service Tax Rules.

Issue-wise Detailed Analysis

1. Liability to pay service tax on works contract services and applicability of exemptions

The appellant was engaged in providing taxable services categorized under "Tour Operator Service" but was found to have provided works contract services to several entities. The Department issued a Demand cum Show Cause Notice (SCN) proposing a demand of service tax amounting to Rs. 95,35,411/- plus applicable interest and penalties, based on a mismatch between Form 26AS and ST-3 returns.

The adjudicating authority recalculated the service tax liability and confirmed a demand of Rs. 95,262/- while dropping the balance demand. The Commissioner (Appeals) remanded the matter for de novo adjudication due to incomplete records, which was challenged in this appeal.

Relevant legal framework includes Notification No. 25/2012-ST dated 20.06.2012 (Mega Exemption Notification) and Service Tax (Determination of Value) Rules, 2006. The Court emphasized the need to correctly classify the services and apply exemptions where applicable.

The Court observed that the adjudicating authority's order was detailed, issue-wise, and well reasoned. It found that the appellant had provided works contract services, which were taxable unless exempted under the notification.

2. Service tax liability on services provided to Maharishi Ved Vigyan Vishwa Peetham

Under Serial No. 13(c) of Notification No. 25/2012-ST, services related to construction of a building owned by an entity registered under Section 12AA of the Income Tax Act and meant predominantly for religious use by the general public are exempt.

The appellant constructed a Meditation Hall and Yagyashala for Maharishi Ved Vigyan Vishwa Peetham, which was registered under Section 12AA. The adjudicating authority accepted the exemption based on the certificate and the nature of the building.

The Commissioner (Appeals) erred by doubting the certificate's existence and remanding the matter without independent examination. The Court held that the appellant had rightly claimed exemption and the Commissioner (Appeals) had wrongly accepted the Department's contention without independent findings.

3. Service tax liability on services provided to Hindustan Construction Company Ltd.

Serial No. 12(d) exempts services provided to government or local authority by way of construction of canal, dam, or irrigation works. Serial No. 29(h) exempts sub-contractors providing works contract services to another contractor whose services are exempt.

The appellant acted as a sub-contractor to Hindustan Construction Company Ltd., the main contractor for a hydroelectric project dam, which was exempt under Serial No. 12(d). The appellant was thus entitled to exemption under Serial No. 29(h).

The Commissioner (Appeals) accepted the Department's objections regarding unsigned work orders and lack of RA bills without independent reasoning, which was found to be perverse. The Court referred to a precedent establishing that sub-contractors are exempt if the main contractor is exempt.

4. Service tax liability on services provided to Aditya Birla Nuvo Ltd. and Azim Premji Educational Trust

Rule 2A(i) of the Service Tax (Determination of Value) Rules, 2006, provides that the value of service portion in a works contract equals the gross amount charged less the value of property in goods transferred.

The appellant submitted purchase bills of materials consumed at the project sites for both entities. The adjudicating authority verified these invoices and determined the service portion by deducting the cost of materials from gross receipts.

The Court found that the goods were transferred as part of the works contract execution, thus the deduction was justified. The Commissioner (Appeals) erred in applying abatement under Rule 2A(ii) instead of deduction under Rule 2A(i) and misapplied the law.

5. Demand of service tax, interest, and penalties

The adjudicating authority held that the appellant had willfully suppressed facts by registering for "Tour Operator Services" but actually providing works contract services, availing abatement improperly, and not paying service tax timely.

Penalties under Sections 77 and 78 of the Finance Act, 1994, were imposed for non-maintenance of proper records and willful suppression with intent to evade tax. The Court upheld these penalties, finding that the appellant had not deposited all service tax collected and had suppressed material facts.

However, the Court rejected the extended demand of Rs. 95,35,411/- as unjustified but upheld the recalculated demand of Rs. 95,262/- with interest.

6. Jurisdiction of Commissioner (Appeals) to remand the matter

The Commissioner (Appeals) remanded the matter to the adjudicating authority for de novo adjudication, citing incomplete records.

The Court held that the Commissioner (Appeals) lacked jurisdiction to remand the matter after the amendment to Section 35A of the Central Excise Act. The power of remand had been taken away by Parliament, and the Commissioner (Appeals) should have decided the appeal on merits.

The Court set aside the remand order and restored the original adjudicating authority's order.

7. Maintenance of accounts and records

The adjudicating authority found that the appellant had not maintained proper accounts and failed to submit required documents, justifying penalties under Section 77(1)(b) and 77(1)(c).

The Court upheld these penalties as justified.

Significant Holdings

"The Original Adjudicating Authority has passed a detailed and well reasoned order and has dealt the disputes issue wise."

"The appellant has rightly discharged service tax liability on services provided to Maharishi Ved Vigyan Vishwa Peetham under Serial No. 13(c) of Notification No. 25/2012-ST dated 20.06.2012."

"As per para 29(h) of Notification no. 25/2012-ST dated 20.06.2012, sub-contractor services provided by party in this case, the benefit of exemption under para 12(d) of Notification no. 25/2012-ST dated 20.06.2012 has been extended to them."

"The benefit of Rule 2A(i) of Service Tax (Determination of Values) Rules, 2006 is applicable on the services provided to M/s Aditya Birla Nuvo Limited and M/s Azim Premji Educational Trust."

"The Commissioner (Appeals) did not have the power to remand and hence could not have remanded the matter to the Adjudicating Authority for de novo adjudication but should have decided the appeal on merits."

"Penalty under Section 78 made in SCN dt. 30.12.2020 is sustainable for willful suppression of facts with intent to evade payment of service tax."

"Imposition of penalty under Section 77(1)(b) & 77(1)(c) is justified for non-maintenance of proper accounts and records."

"The demand of Rs. 95,35,411/- under proviso to Section 73(1) of the Finance Act as demanded in the SCN dt. 30.12.2020 is not justified. However, the recalculated service tax amounting to Rs. 95,262/- after extending the due benefit available to the party as per the provisions of the Act should be demanded."

The Court allowed the appeal, set aside the remand order passed by the Commissioner (Appeals), and upheld the original adjudicating authority's order dated 08.04.2022.