Passi Construction Vs CCE & ST- Ludhiana (CESTAT Chandigarh)
In a recent ruling by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Chandigarh, in the case of Passi Construction versus the Commissioner of Central Excise, Ludhiana, it has been held that penalties under Sections 77 and 78 of the Finance Act, 1994 will not be applicable if there is no intent to evade payment of service tax.
Background:
The appellant, Passi Construction, was engaged in providing services related to building and civil structures falling under the category of “Commercial or Industrial Construction Services.” The dispute arose during an audit of the records of M/s Ganga Acrowools Ltd, where it was observed that the appellant had received a considerable amount for providing commercial or industrial construction services. A show-cause notice was issued, demanding service tax along with interest and penalties.
The appellant contended that they had already discharged their service tax liability by paying a certain amount with interest. The Commissioner (Appeals) confirmed the demand of service tax, dropped a portion deposited by the appellant, and denied certain benefits and abatement. Penalties under Sections 76, 77, and 78 were imposed.
Key Observations:
Abatement Benefit: The tribunal observed that the Commissioner (Appeals) had not allowed the benefit of abatement on the gross value to the extent of 67% under Notification No. 1/2006-ST dated 01.03.2006. The appellant argued that they had provided evidence to establish that it was a works contract and that the gross amount charged included the value of goods and materials supplied. The service recipient had issued a certificate supporting this claim.
Works Contract Certification: The tribunal noted that the service recipient had certified that the contract was inclusive of material and goods required for completion, and no separate payment was made for the supply of material. Additionally, the service recipient deducted Works Contract Tax TDS under the Punjab VAT Act, further supporting the nature of the contract.
CBEC Circular and Legal Precedent: The tribunal emphasized a circular issued by the Central Board of Excise and Customs (CBEC) stating that contracts treated as works contracts for the purpose of VAT/Sales Tax would also be treated as works contracts for the purpose of levy of Service Tax.
Limitation on Demand: The tribunal held that the substantial demand was barred by limitation as the department failed to establish that the appellant intended to evade the payment of service tax, a crucial factor for invoking the extended period of limitation.
Penalties and Lack of Intent: Since the appellant paid the service tax after the audit objection and availed abatement, the tribunal concluded that there was no intention to evade payment of service tax. As a result, penalties under Sections 77 and 78 were not justified.
Conclusion:
In light of the above considerations, the tribunal set aside the impugned order, allowing the appeal of Passi Construction and providing consequential relief, if any, as per the law. The ruling reinforces the principle that penalties should be imposed judiciously, considering the taxpayer’s intent and compliance actions.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal is directed against the impugned order dated 30.10.2012 passed by the Commissioner (Appeals) of Central Excise, Chandigarh-I whereby the Ld. Commissioner (Appeals) has confirmed the demand of service tax and also dropped the amount of service tax of Rs. 11,47,641/- deposited by the appellant and gave cum tax benefit. The Ld. Commissioner (Appeals) also did not extend the benefit of 67% of abatement under Notification No. 1/2006-ST dated 01.03.2006. However, he has dropped the penalty under Section 76 of the Finance Act, 1994, but has not extended benefit of Section 80 and also confirmed the penalties under Section 77 and 78 of the Act.
2. Briefly the facts of the case are that the appellant is engaged in providing services in relation to building and civil structure or a part thereof, falling under category of “Commercial or Industrial Construction Services”. During the course of audit of the records of M/s Ganga Acrowools Ltd, it was observed that during the period 22.06.2006 to 31.08.2010, the appellant had received Rs. 3,08,64,546/- for providing commercial or industrial construction services to them. It appeared that the appellant was required to pay service tax of Rs. 37,53,353/- w.e.f. 22.06.2006 which was not paid by the appellant.
