Maharani Construction Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
Summary: The present appeal was filed by M/s Maharani Construction against the order of the Commissioner (Appeals), CGST & CX, Ranchi, upholding the adjudication order confirming service tax demand, including Cess, of Rs. 21,87,931/- along with interest and equal penalty. Penalties were also imposed under Sections 77(1)(a), (b) and (c) of the Finance Act, 1994.
The demand related to services rendered to four organisations: District Welfare Office, Dumka of Rs.1,20,000/-, District Development Office, Dumka of Rs.2,87,971/-, Zila Parishad of Rs.3,56,224/- and World Vision India of Rs.14,23,744/-. The Department’s proceedings were based substantially on information available in Form 26AS of the Income Tax Department.
The appellant challenged the demand principally on limitation. It submitted that the figures reflected in Form 26AS were also included in its Profit/Loss Account and Balance Sheet, which were public documents, and that there was no suppression of facts or positive evidence of mala fide intention or mens rea to evade service tax. Reliance was placed on Kush Constructions Vs CGST NACIN, Luit Developers Private Limited Vs Commissioner of CGST & Central Excise and M/s Piyush Sharma Vs Commissioner of CGST & CX, Patna-I. The appellant contended that the Department could not treat the entire amount appearing in Form 26AS as consideration for taxable services without examining the nature of the receipts.
On merits, the appellant submitted that services rendered under the agreements with the District Welfare Office, District Development Office and Zila Parishad were exempt under Serial No. 12A of Notification No. 25/2012-ST dated 20.06.2012, as the services had been rendered to State Government authorities. The District Welfare Office agreement concerned construction of four staff quarters in Eklavya Model Residential School, Kathijoria-I; the District Development Office agreement concerned construction of two Anganbari Kendras; and the Zila Parishad agreement concerned construction of six shops. In relation to the shops, the appellant contended that the purpose for which the shops were subsequently to be used was irrelevant because the service had been rendered to the State Government authority.
For services rendered to M/s World Vision India, the appellant submitted that the recipient was a charitable trust registered under Section 12AA of the Income Tax Act, 1961. It therefore claimed exemption under Serial No. 13(c) of Notification No. 25/2012-ST. The appellant also explained that “World Vision of India” and “World Vision India” referred to the same entity.
The Tribunal found merit in the limitation argument. It observed that the Department had demanded service tax solely on the basis of data supplied by the Income Tax Department, representing the gross value received by the appellant. Relying on Kush Constructions, Luit Developers and Piyush Sharma, the Tribunal held that Form 26AS figures could not by themselves establish service tax liability without evidence that the amounts represented consideration for taxable services. The notice issued on 22.12.2020 demanded service tax for 2015-16 and 2016-17, and the Tribunal held that the entire demand was beyond the normal limitation period and that the extended period could not be invoked.
On merits, the Tribunal held that services under the three agreements with State Government authorities were exempt under Serial No. 12A of Notification No. 25/2012-ST dated 20.06.2012. The Tribunal further accepted the appellant’s submission that, even if service tax were payable under Reverse Charge Mechanism, the same would be available as CENVAT credit, resulting in revenue neutrality. It relied upon Commissioner of Central Excise vs. Angadpal Industries Pvt. Ltd. for the proposition that where the situation is revenue neutral, the demand could not be sustained.
With respect to World Vision India, the Tribunal found that “World Vision of India” and “World Vision India” were one and the same entity. Since the recipient was registered as a charitable trust under Section 12AA of the Income Tax Act, 1961, the construction services were held exempt under Serial No. 13(c) of Notification No. 25/2012-ST dated 20.06.2012.
The Tribunal consequently held that the service tax demand was unsustainable both on limitation and on merits. Since the demand itself was not sustainable, the question of interest and penalties did not arise. The impugned order was therefore set aside and the appeal was allowed.
Cases Discussed
- Kush Constructions Vs CGST NACIN, 2019 (24) GSTL 606 (Tri. All)
- Luit Developers Pvt. Ltd. Vs Commissioner, CGST, Service Tax Appeal No. 75792 of 2021, Order dated 23.02.2022
- M/s Piyush Sharma Vs Commissioner of CGST & CX, Patna-I, Service Tax Appeal No. 75856 of 2021
- Piramal Healthcare Limited Vs Commissioner of Central Excise and Service Tax, Indore, 2015 (5) TMI 211
- Commissioner of Central Excise Vs Angadpal Industries Pvt. Ltd., 2015 (325) ELT 228 (SC)
- Aban Lyod Chiles Offshore Ltd. Vs CCE, 2006 (200) ELT 370 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT KOLKATA
The present Appeal has been filed by the Appellant, M/s Maharani Construction, against the impugned order dated 03.04.2023, passed by the Commissioner (Appeals), CGST & CX Ranchi, wherein the Ld. Appellate Authority has upheld the Order-in-Original. In the Order-in-Original, the Ld. Adjudicating authority has confirmed the service tax demand, including Cess, of Rs. 21,87,931/-along with interest and equal amount of tax as penalty. Penalty has also been imposed under Sections 77(1) (a), (b) and (c) of the Finance Act, 1994. Aggrieved against the impugned order of the Commissioner (Appeals), the Appellant preferred this appeal.
2. The Appellant submits that in the impugned order, the demand of service tax totally amounting to Rs.21,87,939/-has been confirmed in respect of the services rendered to the following organizations:
(i) Service rendered to District Welfare Office – Rs.1,20,000
(ii) Service rendered to District Development Office – Rs.2,87,971/-
(iii) Service rendered to Zila Parishad – Rs.3,56,224/-
(iv) Service rendered to World Vision – Rs.14,23,744/
3. The Appellant submits that the demand in the instant case is barred by limitation. It is their contention that the entire proceedings has been carried out on the basis of information available in Form 26AS of Income Tax department. Since these figures are included in the Profit/Loss Account in the Balance Sheet, which is a public document and so there can be no suppression. Moreover, the Department has not adduced any positive evidence to show malafide intention or mens rea for evasion of Service Tax, under any particular head of Taxable Services. Since none of the ingredients necessary for invoking extended period of limitation as visualized under proviso to Sec. 73(1) of the Act exists in this case, the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable. In this regard, the Appellant relied on the decision of the Hon’ble Supreme Court in the case of Aban Lyod Chiles Offshore Ltd. vs. CCE reported in 2006 (200) ELT 370 (SC) wherein it has been held that when all the facts were already within the knowledge of the Department, invoking extended period of limitation to demand duty is not justified.
4. The Appellant submits that the demand of Service Tax cannot be made solely on the basis of difference between Income tax return and 26AS Statement. In the present case, the Service Tax Department has demanded service tax solely on the basis of the data provided by the Income Tax Department, which is the gross value as received by the Appellant and it is no longer res integra that the Department cannot straightaway take in account the amount shown in the ITR for the purpose of charging and demanding Service Tax, without verifying the nature of such amount received, as to whether service tax is payable or not. In this regard, the Appellant relied on the decision in the case of Kush Constructions vs CGST NACIN reported in 2019 (24) GSTL 606 (Tri. All), wherein the CESTAT has held that “revenue cannot raise the demand on the basis of such difference without examining the reasons for the said difference and without establishing that the entire differential amount was on account of consideration for providing services.”
5. The Appellant also relied on the decision of Tribunal, Kolkata, in the case of Luit Developers Pvt. Ltd. vs. Commissioner, CGST bearing ST No. 75792 of 2021, vide Order dated 23.02.2022, wherein it has been held that the figures reflected in Form 26AS cannot be used to determine Service Tax liability unless there is evidence shown that it was due to a taxable service. The Appellant also relied on the decision of Tribunal, Kolkata, in the case of M/s Piyush Sharma vs. Commissioner of CGST & CX, Patna – I bearing ST Appeal No. 75856 of 2021, in support of their contention.
6. Regarding merits of the demand, the Appellant submits that the services provided by them are exempt from service tax, as per the details submitted below:
(i) Agreement with District Welfare Office, Dumka
As per the above contract, the Appellant was required to construct four staff quarters in Eklavya Model Residential School, Kathijoria – I, against which the amount was received from the District Welfare Office, Dumka. Since such amounts were received from the District Welfare Office, Dumka, it is quite evident that this Authority is under the State Government Department and as such, they have provided services to the State Government Department which is exempt from whole of service tax as per Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012. In this regard, the Appellant placed their reliance on the decision in the case of Piramal Healthcare Limited vs. Commissioner of Central Excise and Service Tax, Indore, reported in 2015 (5) TMI 211, wherein CESTAT had observed that since the Appellant is required to pay service tax under Reverse Charge Mechanism and as the provision of payment of service tax was not known to the appellant, the appellant had not made payment of service tax under RCM in time. If at all, they have paid the service tax in time, the same was available to them as CENVAT Credit. Therefore, it is a situation of revenue neutrality. It is a settled law by the Hon’ble Supreme Court in the case of Commissioner of Central Excise vs. Angadpal Industries Pvt. Ltd. reported in [2015 (325) ELT 228 (SC)] wherein it has been held that where the situation is revenue neutral, no demand can sustain.
(ii) Agreement with District Development Office, Dumka
In respect of this contract, the Appellant was required to construct two Anganbari Kendras against which the amount was received from the District Development Office, Dumka. The Anganbari kendras were constructed for the sole purpose of providing basic health care, sanitation, nutrition, education facilities to the villages which was awarded to the Appellant from the Government Departments. Since such amounts were received from the District Development Office, Dumka, it is quite evident that this Authority is under the State Government Department and as such, they have provided services to the State Government Department which is exempt from whole of service tax as per Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012.
(iii) Agreement with Zila parishad
With respect to this contract, the Appellant was required to construct six shops against which the amount was received from the Zila Parishad. Since such amounts were received from the Zila Parishad, it is quite evident that this Authority is under the State Government Department and as such, the Appellant has provided services to the State Government Department which is exempt from whole of service tax as per Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012. The Appellate Authority has denied the exemption on the sole ground that the purpose of the construction of shops was for commercial use and getting rent from the shops. In this regard, the Appellant submits that they are not concerned as to what was the purpose for constructing the shops. As they were engaged by the State Government to construct the shop, the service has been rendered to the State Government, as such they are entitled for the exemption provided under Serial No. 12A of Notification No. 25 / 2012 – ST dated 20.06.2012.
(iv) Agreement with M/s World Vision India
With respect to this contract, the Appellant rendered the service to M/s World Vision India which is registered as a Charitable Trust under Section 12AA of the Income Tax Act, 1961. Therefore the construction services provided by them to the said Charitable Trust becomes exempted from the whole of service tax vide Serial 13(c) of Notification No. 25/2012 – ST dated 20.06.2012. In the impugned Order, the Appellate Authority denied the exemption on a technical ground that the Appellant had provided details of the Trust whose name in the Certificate was mentioned as “World Vision of India” whereas exemption was being claimed for “World Vision India”. In this regard, the Appellant submits that “World Vision of India” and “World Vision India” are one and same and submitted evidence to that effect. Accordingly, they contended that being a charitable trust, services provided by them become exempt from whole of service tax.
7. The Ld. A.R. reiterated the findings in the impugned order.
8. Heard both sides and perused the appeal documents.
9. I observe that in the instant appeal the main ground raised by the Appellant is limitation. The Appellant submits that the demand in the instant case has been raised on the basis of information available in Form 26AS of Income Tax department. Since these figures are included in the Profit/Loss Account in the Balance Sheet, which is a public document and so there can be no suppression. It is their contention that the Department has not adduced any positive evidence to show malafide intention or mens rea for evasion of Service Tax, under any particular head of Taxable Services. Accordingly, they argued that none of the ingredients necessary for invoking extended period of limitation as visualized under proviso to Sec. 73(1) of the Act exists in this case and hence the demand confirmed in the impugned order by invoking extended period of limitation is not sustainable. I find merit in the argument of the Appellant. In the case of Aban Lyod Chiles Offshore Ltd. vs. CCE reported in 2006 (200) ELT 370 (SC), the Hon’ble Supreme Court has held that when all the facts were already within the knowledge of the Department, invoking extended period of limitation to demand duty is not justified.
10. In the present case, I observe that the Service Tax Department has demanded service tax solely on the basis of the data provided by the Income Tax Department, which is the gross value as received by the Appellant. I observe that the demand of Service Tax cannot be made solely on the basis of difference between Income tax return and 26AS Statement, as held by the Tribunal in the case of Kush Constructions vs CGST NACIN reported in 2019 (24) GSTL 606 (Tri. All). The same view has been taken by the Tribunal, Kolkata, in the case of Luit Developers Pvt. Ltd. vs. Commissioner, CGST bearing ST No. 75792 of 2021, vide Order dated 23.02.2022 wherein it has been held that the figures reflected in Form 26AS cannot be used to determine Service Tax liability unless there is evidence shown that it was due to a taxable service. The decision of Tribunal, Kolkata, in the case of M/s Piyush Sharma vs. Commissioner of CGST & CX, Patna – I in ST Appeal No. 75856 of 2021, also supports the above view. Thus, by relying on the decisions cited above, I hold that extended period cannot be invoked in this case. The Notice in this case was issued on 22.12.2020, demanding service tax for the period 2015-16 and 2016-17. Thus, the entire demand has been raised beyond the normal period of limitation. In view of the discussions above, the demand of service tax by invoking extended period is not sustainable in this case. Accordingly, I hold that the demand is liable to be set aside on the ground of limitation.
11. Regarding, merits of the case, the Appellant submitted that the agreement with District Welfare Office, Dumka was for construction of four staff quarters in Eklavya Model Residential School, Kathijoria – I, for which the payment was received from District Welfare officer of the State Government. The agreement with District Development Office, Dumka was for construction of two Anganbari Kendras for which the amount was received from the District Development Office, Dumka, an Authority under the State Government Department. As they have rendered the service to the State Government, the services are exempted from whole of service tax as per Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012. In respect of the agreement with Zila parishad, they were required to construct six shops against which the amount was received from the Zila Parishad. Since such amounts were received from the Zila Parishad, the services have been provided to the State Government Department which is exempt from whole of service tax as per Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012. It is their submission that the Appellate Authority has denied the exemption on the sole ground that the purpose of the construction of shops was for commercial use and getting rent from the shops. In this regard, the Appellant submits that they are not concerned as to what was the purpose for constructing the shops. As they were engaged by the State Government to construct the shop, the service has been rendered to the State Government, as such they are entitled for the exemption provided under Serial No. 12A of Notification No. 25 / 2012 – ST dated 20.06.2012.
12. I find merit in the above arguments of the Appellant. In all the above cases, the services have been rendered to state Government authorities. The services rendered to the State Government has been exempted under Serial No. 12A of Mega Exemption Notification No. 25 / 2012 – ST dated 20.06.2012. I find that the Appellant is eligible for the exemption as the services in all the above cases have been rendered to State Government authorities. The Appellant further submits that even if they are required to pay service tax under Reverse Charge Mechanism, the same will be available to them as Cenvat credit and hence the entire issue is of revenue neutral. I find merit in the contention of the appellant. In the case of Commissioner of Central Excise vs. Angadpal Industries Pvt. Ltd. reported in [2015 (325) ELT 228 (SC)], the Hon’ble Supreme Court has held that where the situation is revenue neutral, no demand can sustain. Accordingly, I hold that the demand of service tax in the impugned order in respect of all the three agreements mentioned above are not sustainable on merit also.
13. In respect of the demand of service tax on the services rendered to M/s World Vision India, I observe that they are registered as a Charitable Trust under Section 12AA of the Income Tax Act, 1961. Therefore, the construction services provided to the said Charitable Trust are exempted from service tax vide Serial 13(c) of Notification No. 25/2012 – ST dated 20.06.2012. In the impugned Order, the Appellate Authority denied the exemption only on a technical ground that the Appellant had provided details of the Trust whose name in the Certificate was mentioned as “World Vision of India” whereas exemption was being claimed for “World Vision India”. In this regard, the Appellant submits that “World Vision of India” and “World Vision India” are one and same and submitted evidence to that effect. I find that ‘World Vision of India’ and ‘World Vision India’ are one and the same. Accordingly, I hold that the appellant are eligible for the exemption provided under Serial 13(c) of Notification No. 25/2012 – ST dated 20.06.2012. Thus, I hold that the demand of service tax on this count in the impugned order is not sustainable.
14. Thus, I hold that the demand of service tax confirmed in the impugned order is not sustainable on merit as well as on limitation. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise and accordingly, I set aside the same.
15. In view of the above discussion, I set aside the impugned order and allow the appeal filed by the Appellant.
(Pronounced in the open court on…22.11.2023…)
