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TMI Blog2017 (11) TMI 1777X X X X Extracts X X X X X X X X Extracts X X X X ..... ngalore Zonal Unit, answerable to the Commissioner of Service Tax, Bangalore-V Commissionerate, demanding Service Tax of Rs. 4,78,34,474/- (Rs. 4,16,69,933/- + Rs. 61,64,541/-) for the period from April, 2013 to March, 2015, along with interest thereon, under the proviso to Section 73(1) of the Finance Act, 1994, with proposals for imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994, besides proposing appropriation of Rs. 4,16,69,933/- and Rs. 10,64,578/-, being the amounts paid by the applicant towards the demand and interest respectively. Brief facts : 1.1 The applicant is registered with the department for providing "Real Estate Agent Service", "Business Auxiliary Service", "Construction services other than Residential Complex, including Commercial/Industrial buildings or civil structures", "Survey and Map making Service", "Mining of mineral, Oil or Gas Service" and "Works Contract Service". The registered address is No. 2, Opposite to Devappa Garden, 1st Main Nagashettyhalli, RMV II Stage, Bangalore - 560094. On intelligence that the applicant had set up another firm in the name and style of M/s. P&D Enterprises at Plot No. 66, Ramlingeshwara Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable Service Tax during the period from April, 2013 to March, 2015 within the stipulated time as he was not aware of the provisions of Rule 3 of the Point of Taxation Rules, 2011; he stopped working in the mines of TBAPL from 16-6-2014; M/s. TBAPL did not allow him to enter the mines in spite of Court order and presence of his machineries inside the machines and therefore, he issued "Idle Charge" invoices for the machineries; M/s. TBAPL, however, did not entertain any bills, debit notes and as the invoices for "Idle Charges" were rejected by M/s. TBAPL, the same were not accounted in books of account. 1.3 From the verification, it appeared that the activities undertaken by the applicant by using his machinery and equipments were taxable services in terms of the provisions of Section 65B(44) and (51) of the Finance Act, 1994. The applicant had also undertaken civil construction work at the mines of M/s. TBAPL and had charged VAT on 60% of the value of civil work charges and Service Tax on 40% of the value and hence the civil construction works undertaken by the applicant were classifiable as declared service under Section 66E of the Act. The gross taxable value for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alia, that - * After dispute arose as to the payments, equipments supplied and remaining at the premises of TBAPL were not allowed to be taken out by M/s. TBAPL. He claimed for damages/losses, nomenclated as Idle Charges". As the matter went for litigation, he raised invoice for the same, though not accepted or agreed by M/s. TBAPL. There was doubt about the applicability of Service Tax on damages/loss since the matter went for litigation and it was thought appropriate to mention Service Tax in the invoice and accordingly mentioned in the invoices. * Mutual settlement was made on 16-4-2016 when M/s. TBAPL agreed to pay the amounts due to him. However, no payments were received and the said settlement was a mere document without any action. * Regarding delay in payment of Service Tax on the impugned activities during the period when services were rendered, the delay was merely due to financial crisis and not with intention to evade payment of Service Tax. * The Service Tax payable was clearly shown in the audited financial statements and therefore, it was clear that the applicant did not have intention to evade tax. * The entire mining industry came to halt during the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigating Agency by submitting all the information in his possession and had no mala fide intention to evade payment of Service Tax. 2.2 Based on the reply dated 7-4-2017 furnished by the applicant for the first notice dated 3-4-2017, the application of the applicant was allowed to be proceeded with by the Bench vide Order dated 17-4-2017. Jurisdictional Commissioner's Report : 3.1 The Commissioner of Central Tax, Bengaluru North Commissionerate, in his report dated 17-8-2017, submitted, inter alia that - * The applicant had admitted the Service Tax liability of Rs. 4,16,69,933/- on hiring of machinery, excavation of iron ore, loading crusting, screening, dumping, etc. and the dispute is only with regard to Service Tax on Idle Charges amounting to Rs. 61,64,541/-. * The applicant had paid the Service Tax liability of Rs. 4,16,69,933/- before the issuance of show cause notice and had also paid Service Tax of Rs. 61,64,541/- on Idle Charges under protest. * The interest payable by the applicant worked out to Rs. 91,24,149/- whereas he had admitted only Rs. 9,17,691/- and paid Rs. 10,64,578/-. * The applicant admitted his Service Tax liability and filed ST3 returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he name and style of M/s. P&D Enterprises (hereinafter referred to as "M/s. PDE") for exclusively providing of Mining and Civil Construction Services for the mines of M/s. Tiffin's Barytes Asbestos & Paints Ltd., Bellary (hereinafter referred to as "M/s. TBAPL) and had not discharged Service Tax liability and not filed ST-3 returns. 4.3 However, the applicant admitted Service Tax liability of Rs. 4,16,69,933/- and paid the same before issuance of show cause notice and Rs. 61,64,551/- which was under dispute was paid after the show cause notice was issued. He paid a total Service Tax of Rs. 4,78,34,474/- as demanded in the show cause notice and filed Service Tax 3 returns for the subsequent period. 4.4 It was submitted by the Learned Chartered Accountant that there are two issues involved in the matter, (a) the methodology of calculation of interest and consequently, the quantum of interest on account of delayed filing of statutory returns and payment of Service Tax; and (b) the second issue is relating to leviability of Service Tax on invoices raised under the nomenclature 'Idle Charges' on the machineries lying with his client. 4.5 With regard to the first issue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... till the filing of application. * No consideration had been received and there could not be tax on the same. 4.6 With regard to the second issue, the interest on Service Tax liability of Rs. 4,16,69,933/- it was submitted by the Chartered Accountant as under : * The Service Tax payable was clearly shown in the audited financial statements and the applicant did not have intent to evade tax. The service receiver cancelled the contract with effect from 16-6-2014 and all the machineries and equipments were kept idle. No contract was live for generation of funds. * He had to make payments to sub-contractors, fuel charges, day to day maintenance charges, salaries and wages to employees. All these factors made them deficient in cash flow to pay Service Tax in time. * He had substantial CENVAT credit in his account to the extent of Rs. 3.39 crores and he had to pay only Rs. 77.53 lakhs in cash towards the discharge of his Service Tax liability. * In his books of account relating to CENVAT credit he had regularly debited this amount towards discharge of his Service Tax liability but he only failed to file the statutory ST-3 returns. * It is not correct on the part of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - providing taxable services and charging Service Tax regularly to M/s. TBAPL and was in receipt of consideration. He did not pay Service Tax and also not filed ST-3 returns from April, 2013 onwards. This showed that the applicant was aware of the provisions of the Act and deliberately did not pay Service Tax or filed returns with intent to suppress the facts from the department. The applicant had paid Rs. 4,16,69,933/- towards Service Tax on hiring charges and Works Contract Service and Rs. 10,64,577/- towards interest, though the actual interest payable worked out to only Rs. 9,17,691/-. The applicant also paid unaccepted Service Tax of Rs. 61,64,540/-. 4.10 With regard to the methodology of calculation of interest on Service Tax liability of Rs. 4,16,69,933/-, he reiterated the Commissioner's report, and invited the Bench's attention to Annexure to the said report on the calculation of interest. However, he sought two weeks' time for making further submissions on the written submissions filed by the applicant today. The time sought was granted by the Bench. 4.11 On the issue of penalty, he submitted that since the applicant has failed to discharge the Service Tax lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax on Mining and Civil Construction Services. Investigation conducted by the DGCEI, Bangalore Zonal Unit, revealed that the applicant carried on mining and other related services for M/s. TBAPL, Chennai, at Bellary and did not pay appropriate Service Tax. Show cause notice was issued demanding Service Tax of Rs. 4,78,34,474/- (Rs. 4,16,69,933/- + Rs. 61,64,541/-) for the period from April, 2013 to March, 2015. The notice proposed appropriation of Rs. 4,16,69,933/- and Rs. 10,64,578/-, being the amounts paid by the applicant towards the demand and interest respectively. 6.3 The demand raised were on two grounds, viz, non-payment of Service Tax (Rs. 4,16,69,933/-) on mining operations done in the premises of M/s. TBAPL and Service Tax on "Idle Charges" (Rs. 61,64,541/-) for which the applicant billed the service recipient with Service Tax for some period and without Service Tax for the remaining period. The applicant paid Rs. 4,16,69,933/- (Rs. 3,39,16,856/- through Cenvat credit and Rs. 77,53,077/- through cash) before issuance of show cause notice and the Service Tax of Rs. 61,64,541/- demanded on "Idle Charges" subsequently. The applicant also paid Rs. 10,64,578/- towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant, vide his letter dated 20-10-2017, requested for providing of a copy of report of jurisdictional Commissioner submitted to the Bench consequent to the direction given during the hearing on 12-9-2017. However, as the jurisdictional Commissioner, in his report dated 17-10-2017, had reiterated his earlier stand with regard to taxability of "Idle Charges", which had already been addressed by the applicant during the personal hearing, it was not felt necessary to provide the copy of Commissioner's report dated 17-10-2017 since no new point has been put forth by the Commissioner. Further, as regards eligibility to Cenvat credit for adjustment towards the demanded amount, the Commissioner had conceded to the point of the applicant and consequently, the interest liability is lessened, which is discussed separately in this order. Therefore, the total Service Tax liability is settled at Rs. 4,78,34,474/-, as demanded in the show cause notice. The applicant having paid this amount, no further payment of Service Tax is required. 6.6 The other issue that needs to be looked into is the total interest liability. While the department claims that the interest liability worked out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this is a case of non-payment of Service Tax on Mining and Civil Construction Services. The applicant contested the demand of Service Tax on "Idle Charges" alone and accepted the remaining liability. However, the applicant had paid the entire demanded amount of Rs. 4,78,34,474/- including Service Tax on 'Idle Charges'. He had pleaded only financial constraints for non-payment of Service Tax. He had also not filed the statutory returns in time and filed belatedly. Financial constraints could not be accepted as a reason for non-payment of fiscal liabilities and non-filing of returns within the prescribed time. Hence, the applicant is liable to penalties as proposed in the show cause notice. Nevertheless, the Bench observes that the applicant had fully cooperated with the Bench and the department. Further, the applicant, even after contesting the demand on "Idle Charges", had paid the demanded amount. The eligibility of Cenvat credit to the applicant for adjustment towards the admitted liability had also been accepted by the jurisdictional Commissioner and consequently, the interest liability is also reduced to the extent of Cenvat credit. Considering the above, the Bench is inclined ..... X X X X Extracts X X X X X X X X Extracts X X X X
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