TMI Blog2022 (10) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... iod upto 01.07.2012 under the category of work contract services and should have been subjected to service tax under the category of work contract services after allowing the abatement as provided for - the revenue has not made any demand of service tax claiming the classification of the services under this category. Since show cause notice is the foundation for making the demand and same cannot be amended at later date at time of adjudication or appeal the demand made for the period upto 01.07.2012 cannot be sustained. For the period from 01.07.2012, the issue of classification of service under the taxable category had be done away with and the demand was to be made in respect of the services that are covered by the definition of service as per Section 65 B (44) of the Finance Act, 1994 and not specified in the negative list of services. Admittedly appellant also do not deny the same and have claimed that the services provided by them are exempt from payment of service tax under Serial No 13 (a) of the Exemption Notification No 25/2012-ST - Appellants have claimed that the work undertaken by them falls within the exclusive category of tunnel. However on examination of the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty under Section 76 and 77 are civil liabilities and do not require the existence of mens rea the penalties imposed under Section 76 and 77 are upheld. The appeal is partially allowed. - Service Tax Appeal No. 86433 of 2015 And ST/Cross/91126 of 2015 - FINAL ORDER NO. A/85895/2022 - Dated:- 27-9-2022 - MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND MR. AJAY SHARMA, MEMBER (JUDICIAL) Shri Sunil Gabhawalla, Chartered Accountant, for the Appellant Shri Nitin Ranjan, Deputy Commissioner, Authorised Representative for the Respondent ORDER This appeal is directed against order in original 01-03/STVI/RS/2015 dated 17.04.2015 of the Principal Commissioner Service Tax VI, Mumbai. By the impugned order Principal Commissioner has held as follows: Order I. Show Cause Notice F.No.V/STII/ HQ/AE/ENQ/Gr.09/09/2012/3139 dated 28-09-2012 for Rs.16,84,61.448/- for the period March 2010 to March, 2012. 5.1 I Confirm, in terms of Section 73(2) of the Finance Act, 1994 read with Section 68 ibid Rule 6 of Service Tax Rules, 1994, the demand of Service Tax amounting to Rs. 16,84,61,448/- (Rupees Sixteen Crore eighty four lakh sixty one thousand four hundred forty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndred seventy only) and order its recovery from the Noticee; 5.11 T order recovery of statutory interest at appropriate rate on the amount of Service Tax demand confirmed at Para 5.10 above from the Noticee, under the provisions of Section 75 of the Finance Act, 1994; 5.12 I impose penalty under Section 76 of the Finance Act, 1994 on Noticee, which shall be Rs. 100/- for every day during which such failure continues or at the rate of 1(one) percent of such tax per month, whichever is higher, starting from the first day after the due date till the date of actual payment of the outstanding amount of Service Tax subject to a maximum of fifty per cent of total Service Tax not paid; 5.13 I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) under Section 77 of the Finance Act, 1994, on the Noticee. 1.2 Cross objections to the appeal have also been filed. 2.1 On the basis of reference received from Commissioner, Service Tax, New Delhi, an enquiry was initiated against AIL to ascertain whether they have correctly discharged Service tax liabilities as per the contract document entered with M/s. Engineers India Ltd. (hereinafter referred to as EIL), for the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lalwani, Vice President-Taxation and authorised signatory of Appellant was recorded. On completion of investigations revenue was of opinion that appellant had contravened the provision of Sections 66, 67, 68, 69 and 70 of the Finance Act, 1994, read with Rules 2, 4, 6 and 7 of the Service Tax Rules, 1994, in as much as they a) failed to discharge Service Tax liability amounting to RS. 16,84,61 ,448/- (Rs. Sixteen Crores Eighty Four Lakhs Sixty One Thousand Four Hundred Forty Eight Only), on the gross value of taxable services provided to their client (El L), in terms of section 68 of the Finance Act, 1994, read with Rule 6 of the Service Tax Rules, 1994. b) failed to declare the correct gross value of taxable services provided by them, as required under Section 67 the Finance Act, 1994; c) failed to file periodical returns in form ST-3 in as much as they did not declare the gross value of services provided to their clients as required under section 70 of the Finance Act, 1994, read with Rule 7 of the Service Tax Rules, 1994; d. resorted to suppression of facts and willful mis-declaration with malafide intention to evade the Service Tax liabilities on the services render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner, authorized Representative for the revenue. 3.2 Arguing for the appellant learned Chartered Accountant submits that:- NDMC is a local authority established under The New Delhi Municipal Council Act, 1994 and is the owner of the project and EIL is only an implementing agency. The fact that EIL is inviting bid on behalf of NDMC is not only recognized by EIL, but also all Income tax and VAT tax deduction at source certificates are issued by NDMC. The same is accepted by the Ld. Commissioner in the OIO. The main work to be carried out by AIL was construction of the service corridor, i.e. underground tunnel (under the roads) and installation of drainage, sewerage, water supply pipelines and also for the provision of rain water harvesting and irrigation system. Show cause notice was issued demanding the service tax under taxable category of 'commercial or industrial construction service as defined by the Section 65 (25b) read with 65 (105) (zzzza) of the Finance Act, 1994. From the definition as per the above referred sections, it is apparent that only construction services which are commercial in nature are taxable. Construction services which are non commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RCL Infrastructures Projects Ltd. [2010 (17) STR 501 (Tri-Bang)] URC Construction (P.) Ltd [2009 (14) STR 792 (Tri- Chennai.)] Jaiprakash Gayatri Projects Ltd. [2011 (22) S.T.R. 64 (Tri. - Bang.)] Nagarjuna Construction Co. Ltd. [2011 [(22) S.T.R. 433 (Tri. - Bang.)] Ramky Infrastructure Ltd. [2011 (22) S.T.R. 85 (Tri. - Bang.)] The SCNs classified the services provided by the Appellant under 'Commercial or Industrial Construction', while the Ld. Commissioner confirmed the demand by classifying the service under 'Works Contract Service. A show cause notice is the foundation of a case and it is not permissible to confirm a liability against the assessee on a ground and basis which is different from the one as proposed in the notice. They rely on the following decisions in their support: Toyo Engineering India Limited [2006 (201) E.L.T. 513 (S.C.)] Ashish Ramesh Dasarwar [2017-TIOL- 3230-CESTAT-MUM] Gurjar Construction [2019-TIOL-2199-CESTAT-DEL] India Guniting Corporation [2021-TIOL-100-CESTATDEL] In view of the confusion prevailing and the interpretation issues involved, invocation of extended period of limitation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner has in the impugned order observed as follows: 4.1 I have carefully examined three Show Cause Notices under consideration, written submissions made by the Noticee, submissions made during the Personal Hearing and the materials on record. The demand of Service Tax is on the ground that the noticee has provided services in accordance with letter of acceptance dated 06.01.2010 issued by EIL to the Consortium including the Noticee. The total value of the contract awarded to the Consortium was Rs.236,70,48,257/-. Out of the said amount, work valued at Rs. 180,40,09,490/- was undertaken by the Noticee. The Show Cause Notice proposes to classify the services provided by the Noticee as Commercial or Industrial Construction Service defined under Section 65 (105) izza) read with Section 65 (25b) of the Finance Act. 1994. 4.2 Bidding documents is for Civil Structural and Finishing works including Electrical, Fire Fighting, Fire Detection, CCTV works for Service Corridor in middle circle of Connaught Place, New Delhi. The document was prepared and issued by EIL. The salient features of the tender document are as follows: EIL on behalf of M/s Sterling Wason Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Section 65(D) of Finance Act, 1994, as Negative List of services. 4.7 Commercial or industrial Construction Service is leviable to Service Tax with effect from 16.06.2005. Services provided in relation to commercial or industrial construction are leviable to Service Tax. The said service includes construction of a new building or a civil structure or a part thereof and also finishing services which are used primarily for commerce or industry. Connaught Place is a commercial centre primarily used for business or commerce. The scope of the work is to undertake civil, structural and finishing work including electrical, fire fighting, fire detection, CCTV works for service corridor in the middle circle of Connaught Place. It is not under dispute that the entire premises is meant for commercial or business use. The premises are rented for commercial purpose by NDMC. 4.8 Municipal Corporations do undertake functions which are not sovereign in nature but activities which are purely commercial in nature. Constructing commercial premises and renting it out for use in business or commerce are not part of sovereign function but is commercial in nature. What is relevant is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uding electricals, fire fighting, fire detection, CCTV works for service corridor in middle circle of Connaught place . The word tunnel is nowhere appearing in the title of bidding document as well. 4.10 The Noticee submitted copy of the Running Account Bill issued in the capacity of the contractor as Afcons -Sterling and Wilson Consortium . The claim of the Noticee that the work undertaken by them falls within the exclusive category of tunnel is neither substantiated nor established by any of the documentary evidence. I am, therefore, unable to consider favourably the unsubstantiated claim of the Noticee. 4.11 The contract is between EIL on behalf of NDMC and the Consortium. What is relevant is the understanding between the contracting parties on the nature of the work undertaken and the tax liability. The contract is to be interpreted as per the specific terms of the contract. The contract categorically specifies the work as composite works contract . The contracted price is inclusive of all taxes. The contracted price is fixed till completion of work. 4.12 It is pertinent to observe that the contract specifically mentions that the contracted price includes Ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Tax. 4.15 As regard to Noticee's claim about abatement of 67% of service tax liability is concerned, I find that abatements are available in terms of Rule 2A of Service Tax (Determination of Value) Rules, 2006 to the Service Provider but subject to the condition that the provider of taxable service shall not take cenvat credit of duties or cess paid on any inputs used in or in relation to the said works contract under the provisions of Cenvat Credit Rules, 2004. The Noticee have failed to produce any evidence so as to prove that they have not taken cenvat credit of duties or cess paid on the inputs used in or in relation to the impugned works contract. Therefore, in the absence of any such evidence, the Noticee's unsubstantiated claim for abatement is untenable. 4.16 In view of the foregoing, the impugned demands of Service Tax raised under (i) F.NO.VIST-1/HQIAF/ENQ/Gr. 09/09/2012/3139 dated 28-09-2012 for Rs 16,84,61,448/-, (ii) F.NO.ST-Il/Dn.IV/GIV/SCN/Afcons Infra/2013-14/4520 dated 09-05-2014 for Rs. 1,67,27,398/- and (iii) F.No.ST-VI/Dn-1/Afcon Infra/33/2013-14/2410 dated 11-02-2015 for Rs. 1,72,93,970/- are liable to be confirmed. 4.2.2 From the perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... followed the second Gannon Dunkerley case in segregating the service component of a works contract from the goods component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apportionment of the cost of establishment, other expenses and profit earned by the service provider as is relatable only to supply of labour and services. And, where value is not determined having regard to the aforesaid parameters, (namely, in those cases where the books of account of the contractor are not looked into for any reason) by determining in different works contracts how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n subjected to service tax under the category of work contract services after allowing the abatement as provided for. However we find that revenue has not made any demand of service tax claiming the classification of the services under this category. Since show cause notice is the foundation for making the demand and same cannot be amended at later date at time of adjudication or appeal the demand made for the period upto 01.07.2012 cannot be sustained. Similar view has been expressed by the Delhi Bench in the case of India Guniting Corporation [2021-TIOL-100- CESTAT-DEL], stating as follows: 19. Learned Counsel for the appellant has submitted that there was no necessity for the Commissioner to examine whether service tax is exempted under the Notifications because a demand made under a particular category of service cannot be confirmed under a different category of service. 20. That submission advanced by the learned Counsel for the appellant has force and it is not possible to accept the contention of the learned Authorized Representative of the Department that a demand made under a particular category can be confirmed under a different category. In this connection it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that has confirmed the demand of service tax, therefore, deserves to be set aside and is set aside. The appeal is, accordingly, allowed. 4.2.4 In case of Larsen and Tubro Ltd. [2021-TIOL-325-CESTAT-AHM] Ahmedabad Bench held as follows: 9. The above decision of the Tribunal is based on the view taken by the Hon ble Supreme Court in the case of Warner Hindustan Limited (supra) wherein the Hon ble Supreme Court has held as under: In our opinion, the Tribunal was quite wrong in these circumstances in allowing the appeal of the Excise Authorities and classifying the mint tablets as items of confectionary under Heading 17.04. The correct course for the Tribunal to have followed was to have dismissed the appeal of the Excise Authorities making it clear that it was open to the Excise Authorities to issue a fresh show cause notice to the appellant on the basis that the tablets were classifiable under Heading 17.04 as items of confectionary. This would have given the appellant the opportunity to place on record such material as was available to it to establish the contrary. It is impermissible for the Tribunal to consider a case that is laid for the first time in appeal becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961(43 of 1961) and meant predominantly for religious use by general public; (d) a pollution control or effluent treatment plant, except located as a part of a factory; or a structure meant for funeral, burial or cremation of deceased; 4.2.6 Appellants have claimed that the work undertaken by them falls within the exclusive category of tunnel. However on examination of the contract Commissioner has in para 4.10 of the impugned order, found that the work undertaken by the appellants is not in relation to tunnel. The contract specifically does not provide that work undertaken falls in relation to any tunnel. It is settled principle of law that exemption notifications need to construed strictly and any ambiguity in the same needs to be resolved in the favour of the revenue. Hon ble Supreme Court has in the case of Dilip Kumar Co [2018 (366) ELT (SC)] held as follows: 52 . To sum up, we answer the reference holding as under - (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar expenses relatable to supply of labour and services; and viii. profit earned by the service provider relatable to supply of labour and services; (c) Where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause. (ii) Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely:- (A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent. of the total amount charged for the works contract; (B) in case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods, service tax shall be payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir claim to abatement. For this purpose the matter needs to be remanded back to the original authority. 4.3 On issue of limitation and for invoking the extended period of limitation to make the demand under proviso to Section 73 (1) Commissioner has in the impugned order observed as follows: 4.17 The Noticee have contended that in the absence of suppression, the extended period of limitation cannot be invoked. I find that the noticee was fully aware of the fact that the construction activity carried out by them falls under the category of Works Contract Service as stipulated in Para 2.6.1 of the contract between them and EIL. Also as per Para 5.6 of special conditions of contract, the burden to pay service tax for the impugned works contract was on the Noticee and they were liable to pay service tax The Noticee self-assessed Service Tax liability and accordingly made Service Tax payment. The only source of information received by the department was ST-3 returns filed. It is not the case of the noticee that they have declared any information about the impugned works contract to the Department. Nonpayment of Service Tax was brought to the notice by the Commissionerate of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5 To confirm the demand of interest, impugned order observes as follows: 4.20 As held by the Hon'ble Supreme Court's in the case of Commissioner of Trade Tax, Lucknow Vs Kanhai Ram Thekedar, 2005 (185) ELT 3 (SC), the interest liability accrues automatically from confirmation of demand as recoverable. Therefore, the assessee is liable to pay interest at the appropriate rate under Section 75 of the Finance Act, 1994. We do not find any infirmity in the demand of interest as per the impugned order in respect of the amount of service tax that is required to be paid. 4.6 On the issue of penalty Impugned order records following findings: 4.21 As regard penalties proposed in the SCNs under Sections 76, 77 78 of the Finance Act, 1994, the noticee has submitted that no penalty is imposable upon them and in any case penalties under Section 76 and 78 being mutually exclusive cannot be imposed upon them simultaneously. In this connection, at the outset it has to be mentioned that the amendment made in Section 78 with effect from 10.05.2008. by way of insertion of a proviso to the effect that if penalty is payable under Section 78, the provisions of Section 76 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and do not require the existence of mens rea the penalties imposed under Section 76 and 77 are upheld. 4.7 During the course of the arguments both the sides have relied upon a large number of case laws which are clearly distinguishable and in our view have no relevance for the determination of the issues in hand. Hence we are not separately recording our findings in respect of each of the case law cited. 4.8 In view of the discussions as above we summarize our findings as follows: I. Show Cause Notice F.No. V/STII/ HQ/AE/ENQ/Gr.09/09/2012/3139 dated 28-09-2012 for Rs.16,84,61.448/- for the period March 2010 to March, 2012, is entirely for the period prior to 01.07.2012, hence the impugned order in respect of this show cause notice is set aside; II. Show Cause Notice F.NO.ST-IDn.IV/Gr.V/SCN/Afcons Infra/2013-14/4520 dated 09-05-2014 for Rs.1,67,27,398/- for the period April, 2012 to March, 2013, for the period upto 01.07.2012 impugned order is set aside. For the period after 01.07.2012 the matter is remanded back to the original authority for redetermination of amount of service tax payable after consideration of the claim of abatement as per Rule 2A of Service Tax (Deter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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