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2021 (3) TMI 209 - AT - Service TaxEvasion of Service tax - repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Business auxiliary services - period April 2005 to March 2010 - Goods Transport Agency Services - period January 2005 to July 2009 - penalties. Repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Appellant submit that repair and maintenance of roads was not chargeable to service tax as per their understanding - HELD THAT:- The demand in respect of repair and maintenance of roads is undisputedly covered by the retrospective exemption provided by way of Section 97 of Chapter V of the Finance Act 1994. Therefore, the demand on this account needs to be set aside. Goods Transport Agency Services - period January 2005 to July 2009 - HELD THAT:- The appellant has already paid the amount along with interest and is not contesting the same. Therefore, the demand to this extent needs to be upheld. Business auxiliary services - period April 2005 to March 2010 - amount in question was wrongly shown in their books of accounts as commission but in fact it is their TDS amount only - service rendered to the subcontractors or not - HELD THAT:- There is no force whatsoever in the argument of the learned counsel that the amount shown as commission in their books of account is actually tax deducted at source (TDS). Learned counsel tried to convince us that this is TDS amount by saying that the amount shown as commission matches with the amount deducted as TDS from their payment by the Govt Department. These figures match because both are only 2% of the contract value. For instance if ₹ 100/- is the value of the contract, the Govt department pays the appellant ₹ 98/- and deducts ₹ 2/- as TDS. A credit for this ₹ 2/- also comes to the appellant which they can use to set off against their tax liability. In other words, the appellant has got the entire ₹ 100/-. In the second leg of transaction, the appellant is required to pay ₹ 100/- to the sub-contractor to whom he outsourced the work on back to back basis. He did so after deducting 2% as commission and paid only ₹ 98 to the sub-contractor. This ₹ 2 has been reflected in their books of account correctly as commission. In fact, a perusal of the profit and loss statements of the appellant during the relevant period shows that the amounts have been recorded on the income side as “commission” and there is no corresponding “ TO TDS” on the expenditure side. The net profit has been calculated after subtracting the expenses and depreciation from the income including the commission. This net income has been duly reflected in their income tax returns - as a matter of fact that the appellant has received commission of 2% of the contract value in contracts which they have outsourced to their subcontractors. Whether the commission so received is chargeable to service tax under the Head ‘Business Auxiliary Services’? - Revenue argues that the appellant is “promoting and marketing the services” of the sub-contractor - HELD THAT:- This is not a promotion or marketing of the services of the sub-contractors but actually outsourcing some of their work to the subcontractors. Although their assertion is that the contract is on back to back basis with no commission whatsoever, they were, in fact, deducting 2% as their own commission. Regardless of how much commission they deduct or whether they sub-contract for the same amount as they receive or for a much lower amount, this outsourcing arrangement does not amount to promoting or marketing the service of the sub-contractors to whom the work is outsourced. In view of the above, we find that no service tax can be charged from the appellant under the head business auxiliary services. Penalties - HELD THAT:- As bulk of the demands in the impugned order are already set aside, exercising the powers under Section 80 of the Finance Act 1994, all the penalties imposed upon the appellant is set aside. The impugned order is set aside except to the extent of confirmation of demand and interest on GTA services which they have already paid - Appeal allowed in part.
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