Apex Viswa Engineering Services Private Limited Vs Commissioner of Service Tax (CESTAT Chennai)
CESTAT Chennai held that invocation of extended period of limitation justified as non-filing of ST-3 returns for such a long period i.e., from March 2006 to March 2010 will make the intent to evade tax obvious.
Facts- M/s. Apex Viswa Engineering Services Pvt. Ltd. (the appellant herein) are engaged in the construction of commercial/industrial buildings and structures and received construction charges for the services provided which they have accounted for under contract receipts.
The appellants have challenged the order passed by Commissioner of Service Tax confirming the demand of Service Tax of Rs.7,59,82,639/- for the period from April 2006 to September 2010 and also of Service Tax of Rs.59,87,226/- for the period from October 2010 to June 2011 u/s. 73(1) of the Finance Act, 1994 read with Section 73(2) of the Act along with recovery of interest u/s. 75 of the Finance Act, 1994 on the Service Tax demanded and also imposed penalties u/s. 77 and Section 78 of the Finance Act, 1994.
The revenue noticed during the course of audit of accounts of the assessee that the appellants have collected Service Tax on the taxable value but did not pay the credit of the government on the construction services provided. Investigation conducted revealed that the appellants undertook the construction of commercial and residential buildings and construction charges were received and accounted as “income from contract receipts”. The appellants have not filed Service Tax returns for more than five years i.e. from March 2006 onwards. Construction materials such as cement, steel etc., were supplied by the customers free of cost for construction service provided by the appellants, but did not include the value of such free supply materials to arrive at the gross receipts though they have availed the abatement provided under Notification No. 1/2006-ST dated 01.03.2006 and also concessional rate of duty as prescribed under Works Contract Composition Scheme.
Conclusion- Held that the provisions of the proviso to Section 73(1) of the Finance Act, 1994 are pari pasu and pari materia to the provisions of the proviso to Section 11A of the Central Excise Act, 1994. The intention to evade payment of tax is manifest and articulated by the non-disclosure of the details of the provision of services and receipt of consideration. Non-filing of ST-3 returns for such a long period i.e., from March 2006 to March 2010 will make the intent to evade tax obvious. So invocation of extended period is justified, consequently, the imposition of penalty are also required to be upheld.
FULL TEXT OF THE CESTAT CHENNAI ORDER
M/s. Apex Viswa Engineering Services Pvt. Ltd., Mandaveli, Chennai – 600 028 (the appellants herein) are engaged in construction of commercial/industrial buildings and structures and received construction charges for the services provided which they have accounted under contract receipts.
2. The appellants have challenged the Order-in-Original No. 17 & 18/2013 dated 28.02.2013 passed by Commissioner of Service Tax, Anna Nagar, Chennai, confirming the demand of Service Tax of Rs.7,59,82,639/- for the period from April 2006 to September 2010 and also of Service Tax of Rs.59,87,226/- for the period from October 2010 to June 2011 under Section 73 (1) of the Finance Act, 1994 read with Section 73 (2) of the Act along with recovery of interest under Section 75 of the Finance Act, 1994 on the Service Tax demanded and also imposed penalties under Section 77 and Section 78 of the Finance Act, 1994. The Order also appropriated the Service Tax of Rs.21,00,000/- paid by the assessee.
3. The facts in brief in these appeals are that the Revenue noticed during the course of audit of accounts of the assessee that the appellants have collected Service Tax on the taxable value but did not pay to the credit of government on the construction services provided. Investigation conducted revealed that the appellants undertook construction of commercial and residential buildings and construction charges were received and accounted as “income from contract receipts”. The appellants have not filed Service Tax returns for more than five years i.e. from March 2006 onwards. Construction materials such as cement, steel etc., were supplied by the customers free of cost for construction service provided by the appellants, but did not include the value of such free supply materials to arrive at the gross receipts though they have availed the abatement provided under Notification No. 1/2006-ST dated 01.03.2006 and also concessional rate of duty as prescribed under Works Contract Composition Scheme.
4.1 In their written submission, the appellants have put forth that their entire funds got blocked during the period from January 2009 to March 2011 due to disputes in respect of some projects executed by them.
4.2 The Ld. Consultant Shri V. Prasanna Krishnan for the appellants have contended that there are circulars which provide that in an arrangement involving contractors and sub-contractors, there cannot be double taxation at any stage for the same service and as long as main contractors pay Service Tax there is no liability for the sub-contractors to pay Service Tax relying on TRU’s letter F.No. 341/18/2004-TRU (Pt) dated 17.12.2004. It has been contended that they have been executing the works in the capacity of sub-contractors to various main contractors in several projects and as the main contractors were registered with the Service Tax department under Works Contract Service and must have paid Service Tax. Even, if the Service Tax is paid by them the same would be available as input credit to the main contractors.
4.3 Further, the appellant has put forth that the clarification about the Service Tax liability of sub-contractor was issued by CBEC only on 23.08.2007 vide it’s Master Circular on Service Tax but the period of dispute in these appeals pertained to the period from April 2006 onwards. They relied on the decisions rendered in the following case laws in support of their above contentions, as given below:-
(i) Viral Builders vs. Commissioner of Central Excise, Surat [2011 (21) STR 457 (Tri. Ahmd.)]
(ii) Evergreen Suppliers vs. Commissioner of Central Excise, Mangalore [2008 (9) STR 467 (Tri. Bang.)]
(iii) AP Enterprises vs. Commissioner of Service Tax Chennai [2008 (12) STR 585 (Tri. Chennai)]
(iv) Commissioner of Central Excise, Nagpur vs. Solar Explosive Ltd. [2011 (21) STR 448 (Tri. Mum.)]
4.4 They have argued that as their case involves genuine legal interpretation and also financial hardship faced by them, there is no suppression of facts, mis-statement of fraud etc., and hence, the proposal to invoke larger period under proviso to Section 73 (1) is not justifiable.
4.5 The cum-tax benefit and wrong Service Tax rates were applied and the Revenue has unjustifiably denied the abatement in terms of Notification No. 1/2006-ST and the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 though materials value was included.
5.1 The Ld. adjudicating authority have found the appellant‟s contentions as not correct and not justifiable since as early as on 10.09.2004, i.e, at the time of imposition of levy on commercial construction service, the Ministry vide para 13.1 of F.No.B2/8/2004-TRU dated 10.09.2004 has clarified that contractor is liable to pay Service Tax for the services provided to real estate owners as given below:-
“13. Construction Service (Commercial and Industrial Buildings or Civil Structures)
13.1 ……. Estate builders who construct buildings/civil structures for themselves (for their own use renting it out or for selling it subsequently) are not taxable service providers. However, if such real estate owners hire contractor/contractors, the payment made to such contractors would be subjected to service tax under this Head. The tax is limited only in case the service is provided by a commercial concern.”
5.2 The adjudicating authority has also relied on the Ministry letter vide F.No. 332/35/2006-TRU dated 01.08.2006 which has clarified that the contractors/sub-contractors are liable to pay Service Tax for the services provided to promoter/developer, as given below:-
