TMI Blog2022 (12) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... ided 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. Appeal is partly allowed and the matter is remanded back to the original authority. - Service Tax Appeal No. 86241 of 2016 - A/86066/2022 - Dated:- 20-10-2022 - HON BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) AND HON BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL) Shri Bharat Raichandani, Advocate, for the Appellant Shri Nitin M. Tagade, Joint Commissioner, Authorised Representative for the Respondent ORDER PER: SANJIV SRIVASTAVA This appeal is directed against Order-in-Original No. 24/ST-VII/RK/2015-16 dated 31.12.2015 of the Commissioner of Service Tax-VII, Mumbai. By the impugned order following has been held: ORDER 20.1. I confirm Service Tax demand of Rs. 7,22,68,684/- (Rupees Seven Crores Twenty Two Lakhs Sixty Eight Thousand Six Hundred Eighty Four only) and determine the same as Service Tax payable on Commercial or Industrial Construction services and Erecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 41 of CESTAT (Procedure) Rules, 1982 for urging additional ground was disposed vide order No. M/85549-85550/2021 dated 22.11.2021. 2.1 The appellant registered with the Service tax department, provides works contract services. Works contract service, inter alia, includes demolition of existing brickwork, RCC wall and granite counter, making opening in wall, electrical work, fa ade work including glazing, cladding, installation of safety security system. 2.2 Based on the scrutiny of the records and investigations undertaken, the revenue was of the view that- i) although the Noticee had obtained Service Tax registration on 23-02-2005 under Commercial or Industrial Construction services and subsequently included other services in the registration, they had failed to pay Service Tax on the value of a) Commercial or Industrial Construction services/ Erection, Commissioning or Installation service, b) Works Contract service. c) Renting of Immovable Property service and d) Business Support services received during the period 01.03.2006 to 30.06.2010, and also failed to file ST-3 returns for the said period. ii) although they had billed and collected Service Tax amount of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a view to evade payment of Service Tax due from them. Therefore, it appeared that the extended period of limitation of time, as provided under the proviso to Section 73(1)/F A, 1994 is invokable for recovery of Service Tax amount of Rs. 19,85.98,590/- during the period 01.03.2006 to 30.06.2010. They appeared liable to pay interest at applicable rates under Section 75 ibid on the said Service Tax and also appeared liable to penalty under Sections 76, 77 and 78/F A. 1994. 2.4 Based on above a show cause notice dated 21.04.2011 was issued to the appellant asking them to show cause as to why: a. Service Tax amounting to Rs. 7,22,68,684 - (Rupees Seven Crore Twenty Two Lakhs Sixty Eight Thousand Six Hundred Eighty Four only) payable on Commercial or Industrial buildings and civil structures services and Erection, Commissioning and Installation service during the period 01.03.2006 to 31.05.2007, should not be demanded and recovered from them under proviso to Section 73( 1 )/F A, 1994; b. Service Tax amounting to Rs. 12.35,26.258/- (Rupees Twelve crore thirty five lakhs twenty six thousand two hundred fifty eight only) payable on Works Contract services during the period 01.06. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Issue wise submission against each part of the demand is per the table below: Nature of Service Period Amount (Rs.) Commercial or industrial construction services March 2006 to May 2007 7,22,68,684/- At Para 11.4 of the impugned order it is stated that the Appellant in ST-3 return filed for the period of October, 2006 to March 2006 has taken cenvat till February, 2006 and an amount of Rs. 58,945/- has been shown as utilized. At Para 11.7 of the impugned order it is stated that appellant has not satisfied the condition of nonavailment of cenvat credit as stipulated under in notification 1/2006, hence the appellant is not entitled to take the benefit of abatement. At Para 11.8 of the impugned order it is stated that the appellant has attempted to disown their own submissions In this regards, the appellants as submitted earlier states that they, have never availed or utilized any credit cenvat credit while discharging the service tax liability for the above referred period. The Appellants have never availed nor utilized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same are based on the sales register and financial statements of appellant. The Ld. Commissioner erred in considering the value of taxable services as per the finance statements for determining the service tax liability under works contract composition scheme, Appellants have already submitted statement computing. service tax liability vide letter dated the 8.10.2015 under works contract scheme. The appellant relies upon section 68 read with Rule 6 of the service tax rules, 1994. According to the said section the appellants have the discharged service tax liability on the amount received towards the service charges during the impugned period in view of Rule 6 of the Service Tax Rules, 1944. Appellants have relied upon the judgment of M/s Tempest Adverting (P) Ltd. Vs. CCE, Hyderabad (2007) 9 STR 312 in which it is held that amount due from customers not to be included in taxable value for levy demand of service tax. Appellants have relied upon the judgment of M/s Alpa Management consultants Pvt. Ltd. Vs. CST, Bangalore (2007) 6 STR 181 in which it was held that tax cannot be recovered based on returns shown in Income Tax Returns. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onthly hire charges. The appellant relied upon D.O.F. No. 334/4/2006 TRU dated 28.02.2006 in which it has clarified the scope of taxable service. All such services as provided by the business centers by giving assistance/ support in operating the infrastructures in an office are made taxable. The appellants submit that theirs is not a Business Centre who provides support service. In fact their principal business activity is construction related activities of fit-out turnkey projects. They do not provide reception with competent personnel. All the equipment as listed in the schedule to the agreement are given on hire basis. In view of the above justifications, the appellants submit that they have merely given the right to use the furniture, fixtures for which we charge fixed monthly hire charges and hence the same is not liable to service tax under infrastructural support services thereby under business support services. 3.3 Learned Authorized representative reiterates the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in the appeal and during the course of arguments. 4.2 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less the context otherwise requires, --- (105) taxable service means any service provided - (g) to a client, by a consulting engineer in relation to advice, consultancy or technical assistance in any manner in one or more disciplines of engineering [but not in the discipline of computer hardware engineering or computer software engineering; (zzd) to a customer, by a commissioning and installation agency in relation to erection, commissioning or installation; (zzh) to any person, by a technical testing and analysis agency, in relation to technical testing and analysis; (zzq) to any person, by a commercial concern, in relation to construction service; (zzzh) to any person, by any other person, in relation to construction of a complex; Explanation : For the purposes of this sub-clause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imile (FAX) or telegraph or telex or for leased circuit: (ii) the cost of unexposed photography film, unrecorded magnetic tape or such other storage devices, if any, sold to the client during the course of providing the service; (iii) the cost of parts or accessories, or consumables such as lubricants and coolants, if any, sold to the customer during the course of service or repair of motor cars, light motor vehicle or two wheeled motor vehicles; (iv) the airfare collected by air travel agent in respect of service provided by him; (v) the rail fare collected by rail travel agent in respect of service provided by him; (vi) the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service; (vii) the cost of parts or other material, if any, sold to the customer during the course of providing erection, commissioning or installation service; and (viii) interest on loans. Explanation 2. - Where the gross amount charged by a service provider is inclusive of service tax payable, the value of taxable service shall be such amount as with the addition of tax payable, is equal to the gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertainable, be the amount as may be determined in the prescribed manner. 13. Pursuant to the aforesaid, the Service Tax (Determination of Value) Rules, 2006 were made, Rule 2A of which reads as under :- 2A. Subject to the provisions of section 67, the value of service portion in the execution of a works contract, referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely :- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Explanation. - For the purposes of this clause, - (a) gross amount charged for the works contract shall not include value added tax or sales tax, as the case may be, paid or payable, if any, on transfer of property in goods involved in the execution of the said works contract; (b) value of works contract service shall include, - (i) labour charges for execution of the works; (ii) amount paid to a sub-contractor for labour and services; (iii) charges for planning, designing and archi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) total amount means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting - (i) the amount charged for such goods or services, if any; and (ii) the value added tax or sales tax, if any, levied thereon: Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. Explanation 2. - For the removal of doubts, it is clarified 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. 14. Crucial to the understanding and determination of the issue at hand is the second Gannon Dunkerley judgment which is reported in (1993) 1 SCC 364. By the aforesaid judgment, the modalities of taxing composite indivisible works contracts was gone into. This Court said :- ....... 15. A reading of this judgment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar that any charge to tax under the five heads in Section 65(105) noticed above would only be of service contracts simpliciter and not composite indivisible works contracts. 16. At this stage, it is important to note the scheme of taxation under our Constitution. In the lists contained in the 7th Schedule to the Constitution, taxation entries are to be found only in lists I and II. This is for the reason that in our Constitutional scheme, taxation powers of the Centre and the States are mutually exclusive. There is no concurrent power of taxation. This being the case, the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be struck down. In the present case, the dichotomy is between sales tax leviable by the States and service tax leviable by the Centre. When it comes to composite indivisible works contracts, such contracts can be taxed by Parliament as well as State legislatures. Parliament can only tax the service element contained in these contracts, and the States can only tax the transfer of property in goods element contained in these contracts. Thus, it becomes very important to segregate the two elements comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 :- To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment. (at page 427) 18. Similarly, in Kone Elevator India (P) Ltd. v. State of T.N. - (2014) 7 SCC 1 = 2014 (34) S.T.R. 641 (S.C.) = 2014 (304) E.L.T. 3 (S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 contract. The additional obligations in the contract would not alter the nature of contract so long as the contract provides for a contract for works and satisfies the primary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term works contract . Nothing in Article 366(29- A)(b) limits the term works contract to contract for labour and service only. The learned Advocate General for Maharashtra was right in his submission that the term works contract cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some works . We are also in agreement with the submission of Mr. K.N. Bhat that the term works contract in Article 366(29-A)(b) takes within its fold all genre of works contract and is not restricted to one species of contract to provide for labour and services alone. Parliament had all genre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 itself. Moreover, what rate of tax is to be applied to such a property is also not indicated. (at paras 12 and 16) 22. Equally, this Court in Govind Saran Ganga Saran v. CST, 1985 Supp SCC 205, held :- The components which enter into the concept of a tax are well known. The first is the character of the imposition known by its nature which prescribes the taxable event attracting the levy, the second is a clear indication of the person on whom the levy is imposed and who is obliged to pay the tax, the third is the rate at which the tax is imposed, and the fourth is the measure or value to which the rate will be applied for computing the tax liability. If those components are not clearly and definitely ascertainable, it is difficult to say that the levy exists in point of law. Any uncertainty or vagueness in the legislative scheme defining any of those components of the levy will be fatal to its validity. (at para 6) 23. To similar effect is this Court s judgment in CIT v. B.C. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 27. In fact, the speech made by the Hon ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated :- State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 observations, these appeals are disposed of. 4.5 In view of the observations as made by the Commissioner in para 11.2 of the impugned order it is quite evident that demand of service tax has been made in respect of indivisible contracts for turnkey projects, involving supply of services and the material for provision of the said services. Since Hon ble Supreme Court has concluded that these services could not have been taxed prior to the introduction of work contract services by the Finance Act, 2007, we have no hesitation in holding that the demand made in respect of these services, by denying the abatement claimed can survive. However we also put on record that the learned Counsel has undertaken that apart from the amount demanded (Rs 7,22,68,684/-) confirmed by the impugned order no other relief shall be sought by the appellant. 4.6 In respect of the demand made at Sl No. 2, in respect of the Work Contract Services post 01.07.2007, Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provided by the representative of the Noticee, is as under - 2007-08 (01.06.2007 to 31.03.2008) 2008-09 2009-10 01.04.2010 to 30.06.2010 45,10, 96,904/- 20,78,09,379/- 35,75,44,543/- 5,10,51,977/- From the statement dated 22.01.2010 of Shri. Pravin Vyankatesh Sathe, Head Finance Accounting of the Noticee Company, it is seen that as per the balance sheet the total value sale of contract is as under: 2007-08 2008-09 2009-10 upto December 2009 58,10,90,551/ 12,45,64,561/ 30,31,02,319/ However, in his statement dated 09.03.2011 Shri. Sathe had given the amount received by the Noticee towards the value of works contract as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as if he is the person liable for paying the Service Tax in relation to such service. RULE 6 (1) Payment of Service Tax. - The service tax shall 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 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises in December 2008, i.e. before the Agreement period ending 30.09.2009. In the Show Cause Notice the aforesaid amount has been apportioned in the ratio of the amount 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act, 1994, on which Service Tax is payable by the Noticee. 4.11 From the impugned order, para 13.4, it is evident that Commissioner has concluded that the amount of Rs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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