9911796707
TMI Blog2022 (12) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 20.2. I confirm Service Tax demand of Rs. 3,10,33,081/- (Rupees Three Crores Ten Lakhs Thirty Three Thousand Eighty One only) and determine the same as Service Tax payable on Works Contract services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period 0.0022047 to 30.06.2010, under the provisions of Section 73(2) of the Finance Act, 1994; 20.3.I confirm Service Tax demand of Rs. 13,78,709/- (Rupees Thirteen Lakhs Seventy Eight thousand Five Hundred Nine only) and determine the same as Service Tax payable on Renting of Immovable Property services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period June 2007 to September 2009, under the provisions of Section 73(2) of the Finance Act, 30.4. I confirm Service Tax demand of Rs. 14,24,939/- (Rupees Fourteen Lakhs Twenty Four Thousand Nine Hundred Thirty Nine only) and determine the same as Service Tax payable on 1 Business Support services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period October 2006 to September 2009, under the provisions of Section 73(2) of the Finance Act, 1994; 20.5. I order appropriation of Rs. 2,42,57,514/- paid by M/s. Sankalpa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also revealed that they had billed Service Tax @2%, @4% to the clients and collected the said tax from them but failed to deposit the said amount also in the government treasury, iii) the said failure amounted not only suppression of fact about the taxable services having been rendered and taxable value having been collected but also amounted to violation of provisions of sections 66, 67, 68, 69.70 and 73A /FA, 1994, read with rules 4,6 and 7 of STR, 1994; iv) The appellant vide letter dated 10.02.2011 informed that they had deposited an amount of Rs. 2,42,57,514 - (Rs. 2,40,42,308/- + Rs. 1,95.7891- + Rs. 19,4177-) towards their Service Tax liability and produced the copies of TR-6 challans. 2.3 Accordingly revenue opined that appellant contravened the provisions of Sections 66, 67, 68, 69, 70 and 73A of the FA, 1994 and Rules 6, 7 of the STR, 1994 in as much as they- (i) failed to include the Business Support services in the Service tax registration as required under Section 69 of FA, 1994, read with Rule 4 of STR. 1994; (ii) failed to pay service tax amounting to Rs 19,85,98,590/- in terms of Section 68 of FA, 1994 read with Rule 6 of STR, 1994, on the value of taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of Immovable Property services during the period 01.06.2007 to 30.09.2009 should not be demanded and recovered from them under proviso to Section 73( 1 )/F A. 1994: d. Service Tax amounting to Rs. 14.24,9397- (Rupees Fourteen lakhs twenty four thousand nine hundred thirty nine only) payable on Business Support service during 16.10.2006 to 30.09.2009 should not be demanded and recovered from them under section 73(1)/F A, 1994, read with the proviso thereto; e. The amount of Rs. 2,42,57,514/- deposited by the Noticee under various challans should not be appropriated at the Service Tax payable; f. Interest at applicable rates should not be charged and recovered from them under Section 75 of the Finance Act, 1994; g. Penalty should not be imposed on them under the provisions of Section 76 and 78 of the Finance Act, 1994; and h. Penalty should not be imposed on them under Rule 7C of Service Tax Rules, 1994 and Section 77 of the Finance Act, 1994. 2.4 The show cause notice was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal. 3.1 We have heard Shri Bharat Raichandani, Advocate for the appellant and Shri Nitin M T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at credit availed for the subsequent period which is not the subject matter of dispute for extending benefit of abatement notification 1/2006 during the period March, 2006 to May, 2007 is totally ignored by the Ld. Commissioner. The appellants submit that if the cenvat credit was actually availed and utilized, then it would have been reflected in their books of accounts, but since they have not availed any cenvat credit they have not accounted for in books The appellants has discharged entire service tax liability for March, 2006 in cash only and there was no availment/ utilization of cenvat credit during March, 2006. The appellants have relied upon judgment of Hon'ble Supreme court in the case of M/s Chandarpur Magnet Wires Pvt. Ltd. Vs. CCE, Nagpur (1996) 81 ELT 3. The appellants have also relied upon the judgment of Hon'ble Ahmadabad CESTAT in the case of CCE, Vadodara Vs Ram Krishna Travels Pvt. Ltd. 2010 (17) STR 487 wherein it was held that the benefit of notification no. 01/2006- ST dated 01.03.2006 cannot be denied if the CENVAT is reversed together with interest. Works contract services June, 2007 to June, 2010 3,10,33,081/- At Para 12.10 of the impugned ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be provided. The same is "consideration" as per the section 2(d) of the Contract Act, which provides that when at the desire of the promisor, the promisee or any other person has done or abstained from doing or promises to do or to abstain from doing something, such an act or abstinence or promise is called as consideration for the promise. The appellants humbly submit that they had entered into an agreement dated16.10.2006 with M/s Adventity BPO Pvt Ltd. for letting out their premises along with furniture and fixtures vide two separate agreements. The said rent income received by the appellant is liable for service tax under "Renting of Immovable property services" w.e.f. 01.06.2007. Tenure of the agreement was October 2006 to September 2009 The licensee, or terminated the agreement in the month of December, 2008. No service of "Renting of Immovable Property" were rendered by the appellants for the period from 01.01.2009 to 30.09.2009. The amount received from the lessee was on account of breach of contract i.e., violation of lock in period in instant case. Hence, the recovery of amount by adjusting security deposit cannot partake the character of "consideration". Business Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n observed: "11.1 Service tax demand of Rs 7,22,68,684/- on Commercial or Industrial Construction Services and Erection, Commissioning or installation services: ....... 11.2 The Noticee contends that they undertake only Turnkey contracts and supply material required for execution of any job as the same is part of their contract. Thus, there is no dispute on the fact of rendering the impugned services under a contract, which involved rendering of service as well as supply of material required for rendering the impugned service." 4.4 Hon'ble Supreme Court has in the case of Larsen & Toubro Ltd. [2015 (39) STR 913 (SC)] has observed as follows: "9. We have heard learned counsel for the parties. Before examining the contentions made on the both sides, it will be necessary to set out the Finance Act, 1994 insofar as it pertains to the levy of service tax. 10. Section 64. Extent, commencement and application. (1) This Chapter extends to the whole of India except the State of Jammu and Kashmir. (2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint. (3) It shall apply to taxable services provided on or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Explanation. 1 - For the removal of doubts, it is hereby declared that the value of a taxable service, as the case may be, includes,- (a) the aggregate of commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any subbroker; (b) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit; (c) the amount of premium charged by the insurer from the policy holder; (d) the commission received by the air travel agent from the airline; (e) the commission received by an actuary, or intermediary or insurance intermediary or insurance agent from the insurer; (f) the reimbursement received by the authorized service station from manufacturer for carrying out any service of any automobile manufactured by such manufacturer; and (g) the commission or any amount received by the rail travel agent from the Railways or the customer, but does not include, - (i) initial deposit made by the subscriber at the time of application for telepho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" 12. Section 67 of the Finance Act, 1994 was amended to read as follows :- "Valuation of taxable services for charging Service tax. - (1) Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall, - (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 on seventy per cent of the total amount charged for the works contract; (C) in case of other works contracts, not covered under subclauses (A) and (B) including maintenance, repair, completion and finishing services such as glazing, plastering, floor and wall tiling, installation of electrical fittings of an immovable' property, service tax shall be payable on sixty per cent of the total amount charged for the works contract. Explanation I. - For the purposes of this rule, - (a) "original works" means - (l) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; (d) "total amount" means the sum total of the gross amount charged for the works contract and the fair market value o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less the splitting of an indivisible works contract is done taking into account the eight heads of deduction, the charge to tax that would be made would otherwise contain, apart from other things, the entire cost of establishment, other expenses, and profit earned by the contractor and would transgress into forbidden territory namely into such portion of such cost, expenses and profit as would be attributable in the works contract to the transfer of property in goods in such contract. This being the case, we feel that the learned counsel for the assessees are on firm ground when they state that the service tax charging section itself must lay down with specificity that the levy of service tax can only be on works contracts, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. This not having been done by the Finance Act, 1994, it is clear that any charge to tax under the five heads in Section 65(105) noticed above would only be of service contracts simpliciter and not comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the same reason the Centre cannot include the value of the SIM cards, if they are found ultimately to be goods, in the cost of the service. As was held by us in Gujarat Ambuja Cements Ltd. v. Union of India [(2005) 4 SCC 214], SCC at p. 228, para 23 :- "This mutual exclusivity which has been reflected in Article 246(1) means that taxing entries must be construed so as to maintain exclusivity. Although generally speaking, a liberal interpretation must be given to taxing entries, this would not bring within its purview a tax on subject-matter which a fair reading of the entry does not cover. If in substance, the statute is not referable to a field given to the State, the court will not by any principle of interpretation allow a statute not covered by it to intrude upon this field." (at paras 88 and 89) 17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract is absolutely fallacious. In fact, it is an innovative subterfuge. We are inclined to think so as it would be frustrating the constitutional provision and, accordingly, we unhesitatingly repel the same." (at para 60) 19. In Larsen & Toubro Ltd. v. State of Karnataka, (2014) 1 SCC 708 = 2014 (34) S.T.R. 481 (S.C.) = 2014 (303) E.L.T. 3 (S.C.), this Court stated :- "In our opinion, the term "works contract" in Article 366(29- A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. Parliament had such wide meaning of "works contract" in its view at the time of the Forty-sixth Amendment. The object of insertion of clause (29-A) in Article 366 was to enlarge the scope of the expression "tax on sale or purchase of goods" and overcome Gannon Dunkerley (1) [State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., AIR 1958 SC 560 : 1959 SCR 379]. Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. If there is any ambiguity regarding any of these ingredients in a taxation statute then there is no tax in law. Then it is for the legislature to do the needful in the matter. This construction, in our considered view, amounts to supplementing the charging section by including something which the provision does not state. The construction placed on the said provision does not flow from the plain language of the provision. The proviso requires the exempted property to be subjected to tax and for the purpose of valuing that property alone the value of the other properties is to be taken into consideration. But, if in doing so, the said property becomes taxable, the Act does not provide at what rate it would be taxable. One cannot determine the rateable value of the small property by aggregating and adding the value of other properties, and arrive at a figure which is more than possibly the value of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has 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 contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Finance Act, 1994, would fall within its tentacles, which was never the intention of Parliament. .... 42. It remains to consider the argument of Shri Radhakrishnan that post 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice Tax payable on the services provided under such contracts/agreements. Service Tax is chargeable on the services rendered. In the case of indivisible works contract where the value of service cannot be identified or determined then Service Tax is chargeable on the whole value including the value of material/goods. However, since Service Tax is not payable on the value of goods, schemes like abatement or composition scheme are in place, which exclude the value of goods on assumptive basis. As per Section 67 of the Finance Act, 1994 the value of taxable service shall be the gross amount charged by the service provider for provision of the service. Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 stipulates that the gross amount charged for works contract shall include the value of all goods used in or in relation to execution of the works contract, whether supplied under any other contract for consideration or otherwise and value of all the services that are required to be provided for the execution of works contract. 12.12. The value of works contract service taken in the Show Cause Notice, supposedly on the basis of the details provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, as the same are legally acceptable. Based on the values certified by the Chartered Accountant, as per Sales Register and Financial Statements, the Service Tax computation on Work Contract services is as under - (Amt. in Rs.) Period Total Value Rate of Service Tax Amount of Service Tax payable 01.06.2007 to 29.12.2008 41,18,18,969/- 2.06% 84,83,471/- 01.03.2008 to 31.03.2008 5,43,37,514/- 4.12% 22,38,706/- 2008-09 12,45,64,561/- 4.12% 51,32,060/- 2009-10 35,52,34,869/- 4.12% 1,46,35,677/- 01.04.2010 to 30.06.2010 1,31,83,665/- 4.12% 5,43,167/- Total 3,10,33,081/- 4.7 From the observations made in the impugned order there seem to be no dispute in respect of the levy of service tax and admissibility of the Work Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 to the appellant. The dispute is only in respect of the manner of determination of the quantum of tax payable during the particular financial year. Prior to amendments made in 2010, the service tax was payable on the basis of the amount received during the particular period and not on the accrual basis. In case of Tempest Adverting (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable services:" The tribunal has granted full stay by Stay Order No. 334/06, dated 24-3-06, in view of the fact that appellants have not received value of taxable services from their customers in terms of Section 68 and Rule 6(1) of Service Tax Rules. The service tax is not liable to be paid as the assessee has not received the payments towards the value of taxable service. The appellants have been filing returns and informing the department about the non-receipt of the value of services rendered by their customers and about the non-payment of the same. The department is aware of these facts as the returns have been filed. Therefore, the issue of show cause notice beyond the period of one year is barred by time. For the reasons stated above, the appeal is thus allowed with consequential relief if any. 4.8 In case of Alpa Management Consultants Pvt Ltd. [2007 (6) STR 181 (T)] tribunal while following the decision in case of Tempest Adverting observed as follows: "4.1 In terms of the above order, Service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of monthly lease rent and fit-out rent charged and received by the Noticee, which is worked as Rs. 33,00,000/ and Rs. 27,00,000/- respectively, and has been included in the total amount received towards lease rent and rent for fit-outs for computing the Service Tax liability. The Show Cause Notice alleges that the Noticee had billed and collected Service Tax amount of Rs. 11,35,463/- during the period October 2006 to December 2008 but had failed to deposit the same in the Government account. The total demand of Service Tax made under the category of 'Renting of Immovable Property' is Rs. 13,78,7091- and that under 'Business Support Services' is Rs. 14,24,939/-, 13.2. The Noticee has submitted that during January 2009 to September 2009 no service was provided. The security deposit of Rs. 60,00,000/- was forfeited for Breach of the Agreement and it had no relation to the rent recoverable. It is further stated that there is no provision under "Renting of Immovable Property service and 'Business Support service to treat forfeiture of deposit as value of taxable service. 13.3. The receipt of Rs. 60,00,000/- by the Noticee is not in dispute. The only issue to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,00,000/- forfeited by the Appellant, is a consideration on the basis of the definition of term "consideration" as per Section 2 (d) of the Contract Act, 1962. However in the Finance Act, 1994, explanation to section 67, defines the term "consideration". In our view the manner in which the term consideration has been defined by the Finance Act, 1994 is not in pari materia with the definition as contained in Contract Act. In our view impugned order which relies solely on the definition as contained in the Contract Act, for holding that this amount is "consideration", for the services provided or to be provided cannot be upheld in view of the specific definition contained in Finance act, 1994. Commissioner needs to record a finding to the effect that this amount is an consideration as per the Finance Act, 1994 by referring to definition contained in therein. For the purpose of examining the issue again vis a vis the definition of "consideration" as per explanation to section 67 of the Finance Act, 1994 the matter needs to be remanded to the original authority for de-novo determination. 4.11 Thus in nut shell we record our findings in respect of the four demands made by the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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