CESTAT Delhi Drops Pre-2016 Royalty Demand, Upholds Works Contract Tax

Tirupati Build-Con Private Limited Vs Commissioner (CESTAT Delhi)

Summary: The appeal was filed against Order-in-Original No. 09/COMMR/ST/JBP/2019 dated 17.03.2020 passed by the Commissioner, Central GST, Central Excise & Customs, Jabalpur. The impugned order confirmed late fee of Rs.28,200/-, interest of Rs.1,22,937/-, service tax of Rs.4,12,960/- on royalty paid to the State Government, CENVAT credit demand of Rs.93,59,799/- on capital goods, an amount of Rs.29,55,763/- relating to input services, and service tax of Rs.1,17,09,035/- on works contract services, along with applicable interest and penalties.

Tirupati Build-Con Private Limited was engaged in construction of roads and other civil constructions and provided taxable works contract service under Section 65B(54) of the Finance Act, 1994. The appellant also availed CENVAT credit on input services and capital goods and was liable to pay service tax under reverse charge on specified services.

The Tribunal considered four principal disputed demands: royalty charges paid for stone quarrying mines to the Government of Madhya Pradesh, CENVAT credit on capital goods, CENVAT credit relating to input services, and service tax on works contract services.

On royalty, the appellant relied upon mining agreements executed before 01.04.2016. The Tribunal followed the reasoning in S R Traders and the decision concerning Madhya Pradesh State Mining Corporation Limited, holding that the taxable event is the time when the service is provided or agreed to be provided. Since the mining-right agreements were executed before 01.04.2016, the Tribunal found no merit in confirming the service tax demand of Rs.4,12,960/- and set aside the demand.

On CENVAT credit of Rs.93,59,799/- relating to capital goods, the Tribunal found that the appellant was providing both taxable and exempted services and had produced a Letter of Award concerning civil works which did not fall within the category of public roads. The Tribunal observed that where capital goods are used for both taxable and exempted services, CENVAT credit cannot be denied or varied merely on that ground. It also rejected the ground concerning the timing of credit in relation to the invoice, observing that credit is admissible on receipt of capital goods under duty-paying documents specified under Rule 9 of the CENVAT Credit Rules, 2004. The demand was therefore dropped.

In respect of Rs.29,55,763/- relating to input services, the Tribunal distinguished between services used exclusively for exempt services and common input services used for both taxable and exempt services. It observed that common input services require reversal in accordance with Rule 6(3) and Rule 6(3A), as applicable. Relying on the principle discussed in Galaxy Diesel, the Tribunal held that proportionate reversal could be available even where the procedure prescribed in the rule had not been followed. Since the impugned order had not correctly determined the amount requiring reversal and had instead proceeded on the basis of seven percent of the value of exempted services, the matter was remanded to the original authority for determination of the correct amount.

The service tax demand of Rs.1,17,09,035/- concerned two specific work orders: construction of an RCC Bridge over Baishaha Nala in the mining area of SECL and construction of an Ash Bund/Ash Dyke at STPS, Sarni. The Tribunal found that these were not the public-road or dam activities claimed by the appellant. The work orders included materials and involved transfer of property in goods, and the value of the work included service tax. The Tribunal therefore upheld the service tax demand on these works contract services.

The Tribunal also upheld invocation of the extended period of limitation. It noted that the appellant had not filed the relevant ST-3 returns at the time of the first audit and had not produced all records before the audit officers. The Tribunal held that the subsequent re-audit was not a ground to invalidate the extended period and relied upon the principle that a person cannot take advantage of his own wrong.

Since the tax liabilities upheld by the Tribunal had not been discharged by the due date, the demand of interest was also upheld. Relying on the decision in Rajasthan Spinning and Weaving Mills Ltd., the Tribunal upheld the penalties under Section 78 in respect of the demands sustained.

The appeal was accordingly partly allowed. The royalty demand of Rs.4,12,960/- and capital goods CENVAT credit demand of Rs.93,59,799/- were dropped; the input-service credit matter involving Rs.29,55,763/- was remanded for quantification; and the works contract service demand of Rs.1,17,09,035/-, extended limitation, interest and applicable penalties were upheld.

Background and Impugned Order

The appellant held Service Tax Registration No. “AACCTO370RSD001” and was engaged in construction of roads and other civil constructions and providing taxable works contract service as defined under Section 65B(54) of the Finance Act, 1994.

During audit, the department alleged non-payment of late fee of Rs.28,200/-, short payment of interest of Rs.1,22,937/-, non-payment of service tax of Rs.4,12,960/- on royalty, wrong availment of CENVAT credit of Rs.93,59,799/- on capital goods, non-payment or non-reversal of Rs.29,55,763/- relating to input services, and non-payment of service tax of Rs.1,17,09,035/- on works contract services.

A Show Cause Notice dated 31.07.2019 was issued proposing recovery of the amounts, interest and penalties under the relevant provisions of the Finance Act, 1994 and CENVAT Credit Rules, 2004.

The Commissioner adjudicated the notice through Order-in-Original No. 09/COMMR/ST/JBP/2019 dated 17.03.2020 and confirmed the demands.

Submissions of the Appellant

The appellant contended that the departmental audit proceedings were not legally valid and that the proceedings initiated for the second time were time barred.

The appellant also submitted that invocation of the extended period of limitation was not justified as the essential ingredients were absent.

On royalty, the appellant relied upon S R Traders and contended that the mining agreements had been executed before 01.04.2016 and therefore the royalty charges paid under those agreements were exempt from service tax.

Regarding capital goods CENVAT credit of Rs.93,59,799/-, the appellant submitted that the capital goods were used for providing both taxable and non-taxable services and therefore credit could not be denied merely because they were also used for exempt services.

The appellant similarly contended that the demand relating to input services under Rule 6 of the CENVAT Credit Rules, 2004 could not be sustained as it provided both taxable and non-taxable services.

Regarding works contract services, the appellant claimed that the services were exempt under the applicable exemption notification and relied upon its understanding of the nature of the work undertaken.

The appellant further submitted that interest and penalty were not imposable if the underlying demands did not survive.

The Authorized Representative for the Revenue reiterated the findings recorded in the impugned order.

Royalty Paid to Government for Mining Rights

The impugned order had confirmed service tax of Rs.4,12,960/- on royalty of Rs.27,53,067/- paid to the State Government for mining minor mineral, namely ’27-Stone Crusher Gitti’.

The adjudicating authority relied upon the changes effective from 01.04.2016 concerning services provided by the Government or local authority and the reverse charge mechanism.

The appellant submitted that the quarrying rights had been granted under Assignment Order No 414/ Mineral/2008/Sub Leas/Umaria dated 17.06.2008 and that another mining lease agreement for ten years from 04.12.2007 had been executed and registered on 27.02.2008. Since the agreements were registered before 01.04.2016, the appellant contended that royalty paid under those agreements remained exempt even where payment was made after 01.04.2016.

The Tribunal considered S R Traders, which in turn considered the decision in Madhya Pradesh State Mining Corporation Limited. The reasoning relied upon was that the taxable event for service tax is when the service is provided or agreed to be provided.

Since the agreements concerning the grant of mining rights were executed before 01.04.2016, the Tribunal found that the service was received pursuant to arrangements entered into before the relevant change in taxability.

The Tribunal also noted the similar view expressed by the Kolkata Bench in Broad Son Commodities Pvt Ltd.

The Tribunal therefore held that there was no merit in confirming the royalty demand and set aside the demand of Rs.4,12,960/-.

CENVAT Credit on Capital Goods

The impugned order had denied CENVAT credit of Rs.93,59,799/- on capital goods including Concrete Batching Plant, Air Cooled Chillers, Paver Finisher, Vibratory Soil Compactor Model HAMM-311 and other road construction machinery.

The adjudicating authority had held that the capital goods were used exclusively for exempted services and that the appellant had not produced sufficient evidence to establish their use for both taxable and exempt services.

The appellant contended that the capital goods were used for both taxable and exempted services. In support, it produced the Letter of Award issued by Reliance Industries Limited for carrying out “Early Civil Works – CBM Projects, Shahdol M.P.” involving construction of roads and other amenities which, according to the appellant, did not fall within the category of public roads.

The Tribunal observed that the appellant was providing both taxable and exempted services and held that where capital goods are used for providing both taxable and exempted services, CENVAT credit cannot be denied or varied merely on that basis.

The Tribunal also rejected the contention that the credit was inadmissible because of the two-year condition referred to in the impugned order. It observed that the condition was not applicable to deny credit where the capital goods were being used for providing taxable as well as exempted services.

The Tribunal further considered the allegation that credit had been taken before the date of invoice. It observed that credit is admissible immediately on receipt of capital goods under duty-paying documents specified under Rule 9 of the CENVAT Credit Rules, 2004 and that credit could not be denied merely because it had been taken prior to the date of the invoice.

The Tribunal therefore found no merit in the denial of Rs.93,59,799/- CENVAT credit.

CENVAT Credit on Input Services

The impugned order confirmed Rs.29,55,763/- relating to input services on the basis that the appellant had provided both exempted and non-exempted services.

The adjudicating authority held that the appellant had not established that the input services were used for both taxable and exempted services and had not followed the prescribed procedure under Rule 6(3A).

The Tribunal observed that the legal position differs between input services used exclusively for exempt services and common input services used for both taxable and exempt services.

Where common inputs and input services are used for both taxable and exempt services, the credit is required to be reversed in accordance with Rule 6(3) and Rule 6(3A), as amended from time to time.

The Tribunal observed that the benefit of proportionate reversal would be available even where the procedure prescribed in the rule had not been followed.

The Tribunal relied upon Galaxy Diesel, where the demand calculated at 8%/6%/5% of exempted services was held unsustainable in circumstances where the relevant CENVAT credit attributable to exempted services had been reversed with interest.

The Tribunal found that the impugned order had not correctly determined the amount requiring reversal and had compared the credit taken on input services with seven percent of the value of exempted services, resulting in recovery of the entire amount.

The matter was therefore remanded to the original authority for determination of the correct amount to be reversed in accordance with the observations of the Tribunal.

Service Tax on Works Contract Services

The demand of Rs.1,17,09,035/- related to works undertaken for M/s South Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P. Power Generating Company Limited (STPS), Sarni.

The appellant had claimed that the works related to roads, bridges and dams and were exempt under Notification No.25/2012-ST dated 20.06.2012.

The impugned order, however, examined two specific work orders. One concerned construction of an RCC Bridge over Baishaha Nala in the approach road of Khairaha of Sohagpur Area, District Shahdol, and the other concerned construction of an Ash Bund in 111 Hectare land for the existing units at STPS, Sarni.

The Tribunal noted that the demand was not in respect of the approach road to the Khairaha UG Mine Project. The impugned order had specifically recorded that no demand was made in respect of that work order.

The Tribunal therefore rejected the appellant’s submission that the demand related to construction of a public road.

The Tribunal further found that the work orders involved materials and transfer of property in goods and therefore qualified as works contracts under the Finance Act, 1994.

The work order relating to SECL specifically provided that the value included service tax and that the service tax component would be reimbursed to the contractor against supporting documents. The Tribunal observed that this showed that the appellant was aware that service tax was payable and that the service recipient had paid the amount to the appellant.

With respect to the work undertaken for MPPGCL, Sarni, the Tribunal rejected the appellant’s claim that it involved construction of a dam. The work order concerned construction of an Ash Bund/Ash Dyke for disposal of fly ash generated in the thermal power plant.

The Tribunal therefore held that the service tax demand relating to the two work orders was rightly confirmed.

The demand of Rs.1,17,09,035/- was accordingly upheld.

Extended Period of Limitation

The appellant challenged invocation of the extended period of limitation, principally referring to the second audit.

The impugned order recorded that the first audit had taken place on 21.04.2017, when the ST-3 returns for the relevant period had not yet been filed. The subsequent audit identified further facts and resulted in a direction for re-audit.

The Tribunal found that the appellant had not filed the relevant ST-3 returns at the time of the first audit and had not produced all the records before the audit officers.

The Tribunal held that the matter was not simply one of a second audit but involved re-audit after the department found that the relevant records had not been produced during the earlier audit.

The Tribunal therefore found no merit in the appellant’s objection to the extended period of limitation.

The Tribunal also referred to the principle that no person can take advantage of his own wrong, relying upon Municipal Committee Katra and the principle stated therein.

The extended period of limitation was accordingly held invokable.

Interest and Penalty

The Tribunal observed that the appellant had not discharged the tax liability by the due date and therefore the demand of interest could not be faulted.

The Tribunal relied upon Hemant N Talekar, Bharat Sanchar Nigam Limited, Tata Steel Ltd. and Inma International Security Academy Pvt Ltd. in relation to interest.

For penalties under Section 78 of the Finance Act, 1994, the Tribunal relied upon Rajasthan Spinning and Weaving Mills Ltd. and upheld the penalties imposed in respect of the demands that survived.

Final Findings

S No.	Issue	Amount Involved (Rs.)	Finding
1	Royalty charges paid against stone quarrying mines to the Government of Madhya Pradesh	4,12,960	Dropped
2	Denial of CENVAT Credit in respect of Capital Goods availed by the appellant	93,59,799/-	Dropped
3	Denial of CENVAT Credit in respect of input services	29,55,763/-	Matter remanded for quantification
4	Demand of service tax on works contract services	1,17,09,035/-	Demand Upheld
5	Extended period of Limitation is invokable		Upheld
6	Demand of Interest		Upheld
7	Penalty imposed under Section 78 in respect of demands upheld		Upheld

The appeal was partly allowed in terms of the above findings.

Cases Discussed

• M/s. Madhya Pradesh State Mining, Corporation Limited vs. Principal Commissioner, CGST & Central Excise, Bhopal (M.P.) [2023 (4) TMI 1075-CESTAT New Delhi]
• Broad Son Commodities Pvt Ltd. [2024 (21) CENTAX 392 9Tri – Cal)]
• Finolex Industries Ltd. [FINAL ORDER NO. A/85393-85395/2022 dated 02.03.2022 in Excise Appeal No. 1214 to 1216 of 2012]
• Galaxy Diesel [FINAL ORDER NO. 11280/2023 dated 19.06.2023 in SERVICE TAX Appeal No. 11147 of 2014 -DB]
• Chandrapur Magnet Wires Pvt. Limited vs. CCE, Nagpur – 1996 (81) ELT 3 (SC)
• Mercedes Benz India (P) Limited vs. CCE Pune-1 – 2015 (40) STR 381 (Tri. Mum.)
• Hello Minerals Water (P) Limited vs. UOI – 2004 (174) ELT 422 (All.)
• Kundan Cars Pvt. Limited vs. CCE, Pune – 2016 (43) S.T.R. 630 (Tri. – Mumbai)
• Bombay Minerals Limited vs. CCE & ST, Rajkot – 2019 (29) GSTL 361 (Tri. – Ahmd.)
• EXCEL ENGINEERING Versus COMMISSIONER OF CENTRAL EXCISE & S.T., MEERUT -ll [2017(50)STR,295(Tri.-All.)]
• Commissioner v. Excel Engineering. 2018 (12)G.S.T.L. J89 (S.C.)
• GAMMON INDIA LTD. Versus COMMISSIONER OF C. EX., CUS. & S.T., NAGPUR [2015(37)STR.225(Tri. -Mumbai)]
• MANTRI DEVELOPERS P. LTD. Versus COMMR. OF CUS., C. EX.& S.T., HYDERABAD -IV [2014(36)STR.944(Tri.- Bang.)]
• DASWANI CLASSES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR -I [2017(52)STR.264(Tri.-Del.)]
• Tamilnadu Coop Textiles Processing Mills Ltd Vs CCE Salem reported in 2007 (207) ELT 593 (Tri)
• Kores India Ltd VS. CCE Chennai reported in 2003 (152) ELT 395(Tri.Che)
• Commissioner v. Kores India Ltd. 2015(318)ELT.A,252 (SC)
• Municipal Committee Katra [Order dated 09.05.2024 in CIVIL APPEAL NO(S). 14970-71 OF 2017]
• Union of India v. Maj. Gen. Madan Lal Yadav [(1996) 4 SCC 127]
• Hemant N Talekar [2012 (26) STR 309 (Kar)]
• Bharat Sanchar Nigam Limited [2013 (30) STR 441 (T -Del)]
• Tata Steel Ltd. [2013 (29) STR 541 (T-Kol)]
• Inma International Security Academy Pvt Ltd [2005 (180) ELT 107 (T-Chennai)]
• Rajasthan Spinning and Weaving Mills Ltd. [2009 (238) ELT 3 (SC)]

FULL TEXT OF THE CESTAT DELHI ORDER

This appeal is directed against the Order-in-Original No. 09/COMMR/ST/JBP/2019 Dated: 17.03.2020 passed by the Commissioner Central G S T, Central Excise & Customs Jabalpur. By the impugned order following has been held, –

”ORDER

A. In respect of Para 1:-

(I) I determine and confirm the amount of late fee of R

s.28,200/- (Rupees Twenty Eight Thousands Two Hundred Only) for late filing of service tax returns for the 04/2016 to 06/2017 and order for its recovery from the Noticee under Section 70(1) of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.

B. In respect of Para 2: –

(I) I determine and confirm the amount of interest of Rs.1,22,937/- (Rupees One Lakh Twenty Two Thousands Nine Hundreds Thirty Seven Only) on late payment of service tax and order for its recovery from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.

C. In respect of Para 3: –

(I) I determine and confirm the amount of Service tax of Rs.4,12,960/- (Rupees Four Lakhs Twelve Thousand s Nine Hundred Sixty Only) on royalty amount, for the period 04/2016 to 06/2017 and order for its recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017.

(II) I order recovery of interest, at appropriate ra te, on demand of Service tax of Rs.4,12,960/- from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.

(III) impose penalty of Rs.4,12,960/ – (Rupees Four Lakhs Twelve Thousands Nine Hundred Sixty Only) under Section 78(1) of the Finance Act,1994 read with Section 174 of CGST Act. 2017. However, the Noticee is given an option to pay only 25% of this penalty amount subject to condition that entire amount of Service tax and interest along with 25% penalty under Section 78(1) are paid within thirty days of communication of this order.

D. In respect of Para 4:-

(I) I determine and confirm the amount of Capital Goods credit of Rs.93,59,799/- (Rupees Ninety Three Lakhs Fifty Nine Thousands Seven Hundred Ninety Nine Only) for the period 04/2014 to 06/2017 and order for its recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017.

(II) I order recovery of interest, at appropriate rate, on demand of Capital Goods credit of Rs.93,59,799/- from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.

(III) I impose penalty of Rs.93,59,799/- (Rupees Ninety Three Lakhs Fifty Nine Thousands Seven Hundred Ninety Nine Only) under Section 78(1) of the Finance Act,199 4 read with Rule 15(3) of the Cenvat Credit Rules, 2004 and Section 174 of CGST Act, 2017. However, the Noticee is given an option to pay only 25% of this penalty amount subject to condition that entire amount of Cenvat credit and interest along with 25% penalty under Section 78(1) are paid within thirty days of communication of this order

E. In respect of Para 5: –

(I) I determine and confirm the amount of Rs.29,55,763/ – (Rupees Twenty Nine Lakhs Fifty Five Thousands Seven Hundred Sixty Three Only) which has been taken or input services and order for its recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017

(II) I order recovery of interest, at appropriate rate, on demand of Rs. 29,55,763/- from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017.

(III) I impose penalty of Rs.29,55,763/- (Rupees Twenty Nine Lakhs Fifty Five Act,1994 read with and Section 174 of CGST Act, 2017. However, the Noticee is given an Thousands Seven Hundred Sixty Three Only) under Section 78(1) of the Finance Cenvat credit and interest along with 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017

F. In respect of Para 6: –

(I) I determine and confirm the amount of Service tax of Rs.1,17,09,035/- (Rupees One Crore Seventeen Lakhs Nine Hundred Thirty Five Only) on works contract service, for the period 04/2014 to 06/2017 and order for itsits recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017.

(II) I order recovery of interest, at appropriate rate, on demand of Rs.1,17,09,035/- the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017

(III) I impose penalty of Rs.1,17,09,035/ – (Rupees One Crore Seventeen Lakhs Nine Hundred Thirty Five Only) under Section 78(1) of the Finance Act,1994 read with and Section 174 of CGST Act, 2017. However, the Noticee is given an option to pay only 25% of this penalty amount subject to condition that entire amount of Service tax and interest along with 25% penalty under Section 78(1) are paid within thirty days of communication of this order.

21. The Show Cause Notice No. 01/Commr/ST/Audit/2019 -20 dated 31.07.2019 is disposed of, in the above terms.”

2.1 Appellant is holding Service Tax Registration No. “AACCTO370RSD001”, and is engaged in construction of roads & other civil constructions and providing taxable service i.e. “works contract service” as defined under Section 65B(54) of Chapter V of the Finance Act, 1994. On the GTA and Security Service appellant as service recipient is required to pay service tax under Reverse Charge Mechanism (RCM). The y are also availing Cenvat credit on input services and capital goods under the provisions of the Cenvat Credit Rules. 2004.

2.2 During the courses of audit covering the period from 04/2017 to 06/2017 following was observed:

(I) Non-payment of late fee of Rs.28,200/- for late filing of service tax returns for the period 04/2016 – 09/2016 to 04/2017 – 06/2017 hereby alleging contravention of the provisions of Section 70 of the Finance Act, 1994 read with Rule 7C of the Service Tax Rules, 1994.

(II) Short payment of interest of Rs.1,22,937/ – on late payment of service tax for the period_04/2016 to 03/2017 thereby alleging contravention of the provisions of Section 75 of the Finance Act, 1994.

(III) Non-payment of service tax of Rs.4,12,960/- on ‘royalty paid to State Government Mineral Department during the period 04/2016 to 06/2017 under reverse charge mechanism (RCM) thereby alleging contravention of the Notification No. 6/2016-ST dated 18.02.2016 and 30/2012-ST dated 20,06,2012, as amended

(IV) Wrong availment of cenvat credit of Rs.93,59,799/- on capital goods used exclusively in providing exempted service during the period 04/2014 to 06/2017th ereby alleging contravention of the provisions of Rule 4 and 6(4) of the Cenvat Credit Rules, 2004

(V) Non-Payment/ Non reversal of amount of Rs.29,55,763/- on input service credit availed as required under Rule 6 of Cenvat Credit Rules, 2004 during the period 04/2014 to 06/2017 thereby alleging contravention of the provisions of Rule 6 and 6(3A) of the Cenvat Credit Rules. 2004.

(VI) Non-payment of service tax of Rs.1,17,09,035/ – on works contract service’ during the period 04/2014 to 06/2017 thereby alleging contr avention of the provisions of Section 67, 68 and 70 of the Finance Act, 1944.

2.3 A Show Cause Notice dated 31.07.2019 was issued to the Appellant asking them to show cause as to why:

A. In respect of Para 1 of the Final Audit Report: –

(I) Late Fee amounting to Rs.28,200/- for late filing of service tax returns for the period Apr 2016 to June 2017 should not be demanded and recovered from them under Section 70(1) of the Finance Act, 1994.

B. In respect of Para 2 of the Final Audit Report: –

(I) The amount of interest of Rs.1,22,937/- on late payment of service tax should not be demanded and recovered from them under Section 75 of the Act.

C. In respect of Para 3 of the Final Audit Report: –

(I) Service tax amounting to Rs.4,12,960/ – for the period 04/2016 to 06/2017, should not be demanded and recovered from them under proviso to sub -section (1) of Section 73 of the Act.

(II) Interest at appropriate rate should not be recovered from them under Section 75 of the Act, on the service tax so demanded.

(III) Penalty should not be imposed upon them under Section 78 of the Act, for non- payment/ short payment of service tax in violation of the provisions of the Act and the rules framed there under with intention to evade payment of service tax.

D. In respect of Para 4 of the Final Audit Report: –

(I) Capital Goods credit amounting to Rs.93,59,799/ – for the period 04/2016 to 06/2017, should not be disallowed and recovered from them under Rule 14(1)(i) of the CENVAT Credit Rules, 2004 read with proviso to Sub-Section (1) of Section 73 of Finance Act, 1994.

(II) Interest at appropriate rate should not be recovered from them under Section 75 of the Act on the amount of CENVAT credit so disallowed.

(III) Penalty should not be imposed upon them under provisions contained in Rule 15(3) of the Cenvat Credit Rules, 2004 read with Section 78 of the Act for wilfully suppressing the facts with intention to evade payment of service tax equal to the amount of CENVAT credit wrongly availed and utilized.

E. In respect of Para 5 of the Final Audit Report: –

(I) Amount of Rs.29,55,763/- which has been taken on input services should not be recovered from them under the provisions contained in explanation III of sub-rule 3(D) of rule 6 and Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Sub-Section (1) of Section 73 of Finance Act,1994.

(II) Interest at appropriate rate should not be recovered from them under Section 75 of the Act on the amount so recovered.

(III) Penalty should not be imposed upon them under Section 78 of the Act, for contravention of the provisions Act and the rules framed there under with intention to evade payment of service tax equal to the amount required to be paid under Rule 6 of the Cenvat Credit Rules, 2004.

F. In respect of Para 6 of the Final Audit Report: –

(I) Service Tax amounting to Rs.1,17,09,035/- for the period 04/2014 to 06/2017 should not be demanded and recovered from them under proviso to sub section (1) of Section 73 of the Act.

(II) Interest at appropriate rate should not be recovered from them under Section 75 of the Act on the service tax so demanded

(III) Penalty should not be imposed upon them under Section 78 of the Act, for non- payment/ short payment of service tax in contravention of the provisions Act and the rules framed there under with intention to evade payment of service tax.

2.4 The show cause notice has been adjudicated as per the order in original referred in para 1 above. Aggrieved appellant has filed this appeal.

3.1 We have heard Shri Mukul Gupta, Shri Prateek Gupta and Shri Bharat Agarwal, Advocates for the appellant and Shri Aejaz Ahmad, Authorized Representative for the revenue.

3.2 Learned Counsel for the appellant submits that,-

> Notice for Departmental audits not legally valid as not covered by Section 72, 72A & 82 of the Finance Act, 1994.

> Proceedings initiated for the second time are time barred and is an exercise of excessive use of delegated power.

> Invocation of extended period of limitation not justified s essential elements do not exist.

> Issue of taxability of royalty is no longer res-integra and covered by the decision in the case of S R Traders.

> Cenvat Credit of Rs 93,59,799/ – on capital goods cannot be denied or varied for the reason that these capital goods have been use for providing taxable and non taxable services.

> As the appellant has provided both taxable and non taxable services demand made in terms of Rule 6 for recovery of the Cenvat Credit of Rs 29,55,763/- on input services cannot be justified.

> The services classified under the work contract service are exempt as per the mega exemption notification.

> No interest and penalty is imposable as the demands do not survive.

3.3 Authorized representative reiterated the findings recorded in the impugned order.

4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. From the submissions made before us it is evident that appellant in this appeal is pressing against the demand confirmed against them, by invoking extended period of limitation in respect of,-

(i) Royalty charges paid by them against stone quarrying mines to the Government of Madhya Pradesh,

(ii) Denial of CENVAT Credit in respect of Capital Goods availed by them.

(iii) Denial of Cenvat Credit in respect of input services.

(iv) Demand of the service tax on work contract services.

Royalty charges paid by the m against stone quarrying mines to the Government of Madhya Pradesh

4.2.1 Impugned order records as follows for confirming this demand:

10.2 Now, in this regard, I would like to quote here the relevant provisions of Chapter V of the Finance Act, 1994 and Rules, Notification & Circulars issued there under:

(i) By virtue of Section 109 (1) of the Finance Act, 2015 read with Section 66 D (a) 9iv) of the Finance Act, 1994, as amended, any service provided by the Government or Local authority to a business entity was made chargeable to Service tax, with effect from 01.04.2016 vide Notification No. 06/2016 -ST dated 18.02.2016.

(ii) Assigning he right to use a natural resource by the mode granting permission to draw water from natural source for use and such activities characterized by a consideration in the form of “Royalty’, have therefore been rendered as taxable with effect from 01.04.2016, for which suitable amendment in Rule 2(1) (d)

(i)(E) of the Service Tax Rules, 1994, was also brought forth vide Notification No.17/2016-ST dated 01.03.2016.

(iii) The Central Government vide Notification No.22/2016-ST dated 13.04.2016 and by way of the insertion of clause 61 in Notification No.25/2012-ST dated 20.06.2012 has exempted such services of the Government that was provided prior to 01.04.2016. Further by virtue of entry at SI. No.6 of the Table in Notification No. 30/2012-ST dated 20.06.2012, as amended vide Notification No. 18/2016-ST dated 01.032016, the liability to pay Service Tax on any such service provided by Government shall be on the service recipient on 100% reverse charge basis.

(iv) Section 66B of the Finance Act, 1994, as amended, mandates for the levy of a tax at the rate of fourteen per cent on the value of al services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed

(v) Section 67(1)(i) ibid; mandates that where Service tax is chargeable on any taxable service with reference to its value, then such value shall, 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.

(vi) Section 67(3) ibid; mandates that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after the provision of such service.

(vii) Therefore, with effect from 01.04.2016, the services of ‘assignment of right to use a natural resource’ rendered by the Government to category of person other th an farmer stands declared as taxable, because it does not fall in the “Negative List of Services” as prescribed under Section 66D ibid.

(viii) A fact that fortifies the taxability of such services rendered by the Government is that services provided prior to 01,0 4,2016 were specifically exempted vide Notification No.22/2016-ST dated 13.04.2016 and by way of the insertion of clause 61 in Mega Notification No.25/2012-ST dated 20.06.2012.

(ix) This issue of the taxability of the services rendered by the thereto, which explicitly discussed that “any activity undertaken by Government or a local Circular No. 192102/2016-Service Tax dated 13/04/2016 at SI.No.5 in the Table annexed lo the assignment of the right to use a natural resource had also Government with regard been clarified in CBEC performing such activities is liable to Service tax. It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not. As long as the payment is made (or fee charged) for getting a service in return, it is to be regarded as a consideration for that service and taxable irrespective of by what name such payment is called. It is also clarified that service tax is leviable on any amount, in lieu of any permission or license granted by the Government or a local authority. The allocation of natural resources by the Government or a local authority to categories of persons other than individual farmers would be leviable to Service Tax. In terms of Rule 2(1) (d)(E) of the Service Tax Rules, 1994, service tax is liable to be recovered from the service recipients in respect of the services provided by the Government or a local authority under Reverse Charge Mechanism. In view of the above, it is immaterial, by whatever name the payment is made to the State Government against the services rendered by way of assignment of right to use natural resources as mining lease. I therefore do not agree with the submission of the Noticee and also the case cited by them being specific to those respective cases are found to be not relevant here in present context.

10.3 I find that the period involved in the instant issue is from 04/2016 to 06/2017. In viewof the aforesaid provisions, it is held that the Noticee is legally required to pay service tax ofRs.4,12,960/- (Service Tax Rs.3,85,430/-, SBC Rs.13,765/- & KKC Rs.13,765/-), alongwith interest, on royalty amount of Rs. 27,53,067/- paid to the State Government for miningof Minor Mineral namely ’27-Stone Crusher Gitti” under proviso to sub – section (1) of Section73 of the said Act read with Section 174 of CGST Act, 2017. Held accordingly.

4.2.2 Against the above findings the contention of the appellant before us is that undisputedly the appellant was quarrying stones from the designated mines allocated to them by Assignment Order No 414/ Mineral/2008/Sub Leas/ Umaria dated 17.06.2008, granting them the mining right for 10 years and another mining lease agreement for the period of 10 years from 04.12.2007 was executed and registered on 27.02.2008. As both the mining lease agreements were registered prior to 01.04.2016, the royalty charges paid in terms of these agreements will be exempted even if these amounts are paid after 01.04.2016 as has been held by the CESTAT.

4.2.3 We find that CESTAT has in case of S R Traders (Final Order No 50660/2023 in Service Tax Appeal No 54002 of 2018 held as follows:

3. Section 66D of the Finance Act, 19942 which contains the list of negative services, includes services by Government and local authority excluding services mentioned in clauses (i), (ii), (iii) and (iv). It needs to be noted that prior to April 01, 2016, under clause (iv) only „support service‟, other than services covered under clauses (i) to (iii) provided to business entities was mentioned, but ―support service‟ from April 01, 2016 was substituted by ―any service‟. Thus, w.e.f. April 01, 2016, the service provided to the appellant became taxable.

4. Though the agreements were entered prior to April 01, 2016 in the present case, the contention of the Department is that since the payment under the agreements were to be made after April 01, 2016, the appellant would be liable to pay service tax.

5. This precise issue came up before a Bench of the Tribunal in M/s. Madhya Pradesh State Mining, Corporation Limited vs. Principal Commissioner, CGST & Central Excise, Bhopal (M.P.) [2023 (4) TMI 1075-CESTAT New Delhi]. In regard to short payment of service tax on dead rent paid by the appellant to the State Government, which was taxable on a reverse charge basis against the receipt of services concerning grant of mining rights, the Bench held that for the purposes of levying service tax, the taxable event is construed at the time the service is provided or agreed to be provided. Therefore, in order to determine whether levy of services tax is applicable on a particular activity, it is necessary to determine the point of time when such activity is provided or agreed to be provided and since the agreements between the appellant and the State Government regarding grant of mining right were executed prior to April 01, 2016, on which date the transaction in mining of right to use natural resources became taxable, the appellant would not be liable to pay the service tax. The relevant portions of the decision are reproduced below:

“13. The second category of demand pertains to the alleged short-payment of tax to the extent of dead rent surface rent paid by the appellant to the State Government, which has been held to be taxable on reverse charge basis against the receipt of service concerning grant of mining rights.

14. The contention of the learned counsel for the appellant is that the demand is not sustainable as the service was received prior to 01.04.2016, when such services from the Government were not subject to tax.

15. The charging provision prescribing levy of tax is section 66B of the Finance Act and it is as follows:

”66B. There shall be levied a tax (hereinafter referred to as the service tax at the rate of fourteen per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.”

16. Thus, for the purpose of levying service tax, the taxable event is construed as the time when the service is provided or agreed to be provided. Thus, in order to determine whether levy of tax is applicable on a particular activity, it is necessary to determine the point of time when such activity is provided or agreed to be provided. In the present case, the agreement between the appellant and State Government for grant of mining rights was executed on 02.01.2016 and on this date, the transactions involving assignment of right to use natural resource was not taxable.

17. In this connection section 66D of the Finance Act, as it existed prior to 01.04.2016, can be referred to and it is as follows: “66D The negative list shall comprise of the following services, namely:-

(a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere-

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than Government;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers; or (iv) Support services, other than services covered under clauses (i) to (i) above, provided to business entities”

18. Thus, prior to 01.04.2016, barring a few exceptions, all services provided by the Government were covered under the negative list and accordingly, not subjected to service tax.

19. With effect from 01.04.2016, however, section 66D (a)(iv) of the Finance Act was amended and ‘all services provided by the government to a business entity were excluded from the negative list of services. Thus, services rendered by the government to a business entity became chargeable to service tax with effect from 01.04.2016. 20. In the present case, the appellant received services in relation to assignment of right to use natural resources from the State Government by virtue of the agreement dated 02.01.2016 and, therefore, the provisions of service tax, as were in force prior to 01.04.2016, would be applicable. Grant of natural resources was not excluded from the scope of negative list prior to 01.04.2016 and so no tax implication can be fastened on the appellant for such period.‖ (emphasis supplied)

4.2.4 Similar view has been expressed by the Kolkata Bench in the case of Broad Son Commodities Pvt Ltd. [2024 (21) CENTAX 392 9Tri – Cal)]. In view of the above decisions, we do not find any merits in the confirmation of the demand made on this account, and set aside the same.

Wrong availment of CENVAT Credit of Rs.93,59,799/ – on Capital Goods used exclusively in providing exempted service

4.3.1 For denying the CENVAT Credit in respect of the capital goods impugned order observes as follows:

11. It has been alleged in the impugned show cause notice that on scrutiny of ST-3 Returnsof the Noticee, for the period 04/2014 to 06/2017 and capital good s credit documents on which the Noticee had availed Cenvat credit during the said, it was observed that Noticee had availed Cenvat credit amounting to Rs.93,59,799/ on capital goods i.e. Concrete Batching Plant, Air Cooled Chillers, Paver Finisher, Vibratory Soil Compactor Model HAMM-311 and other road construction machineries, which were used exclusively in providing exempted service for construction of public roads. It was alleged that the Noticee had utilized the Cenvat credit of Rs.27,13,774/- towards payment of their service tax liability during he said period and the remaining amount of Cenvat credit of Rs.66,46,025/ – wa scarried forwarded to TRAN-1 during transitional period of GST.

11.1 I find that the Noticee in their defence submission has not disputed the availment and utilization of said amount of Cenvat credit on aforesaid capital goods during the period under consideration and therefore the details of computation of Cenvat credit on capital goods during the period under consideration are not reiterated here. However, they they inter-alia primarily contended that they are into provision of integrated construction services consisting of various taxable as well as exempted services; that the capital goods are not used solely in the provision of exempt services, but also for providing taxable services; that when capital goods have been utilized in the provision of exempted as well as non-the exempted services, no violation of Rule 6(4) of the Credit Rules can be found against Noticee. They therefore contended that the said amount of Cenvat credit on capital goods are admissible to them.

11.2 For the sake of convenience and better understanding, let me reproduce here-in-below the relevant provisions of Cenvat Credit Rules, 2004.

i. ……

11.3 I find that though the Noticee has claimed that the aforesaid capital goods were not used solely in the provision of exempt services, but also for providing taxable services and that when the capital goods have been utilized in the provision of exempted as well as non-exempted services, the provisions of Rule 6(4) of the Cenvat Credit Rules, 2004 are not applicable, but has not produced any material evidence in support of their contention. They have also not given the details of taxable and non-taxable projects/ services undertaken by them during the period under consideration or any material evidence of any nature to prove that the aforesaid capital goods were used for providing both taxable and exempted services. In absence of any supporting material evidence, I do not find the submission of the Noticee convincing and hence, the same in not acceptable.

11.4 l find from ST-3 returns of the Noticee for the year 2014-15 that they had availed cenvat credit of Rs,4,29,909/- during the financial year 2014-15 and utilized the same for the payment of service tax. Sub-rule (4) of Rule 6 of Cenvat Credit Rules, 2004,which prevailed during this period, reads as ‘CENVAT Credit shall not be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services’. It therefore indicates that the Cenvat credit of Rs.4,29,909/- is not admissible to the Noticee, as they have availed Cenvat credit on road construction machineries which are used exclusively in providing exempted services for construction of public roads and other exempted civil structures.

11.5 I also find that the Noticee had availed the Cenvat credit of Rs.89,29,890/- on capital goods during the period 04/2016 to 06/2017 and utilized the Cenvat credit of Rs.22,83,865/-for the payment of their service tax liability during that period. Sub-rule (4) of Rule 6 of CENVAT Credit Rules,2004 as amended by Finance Bill 2016, which prevailed during this period reads as ‘No CENVAT Credit shall be allowed on capital goods exclusiv ely in the manufacture of exempted goods or in providing exempted services for a period of two years from the date of commencement of the commercia l production or provision of services’. The Noticee had availed and utilized Cenvat credit on capital goods before the period of two years stipulated in sub- rule (4) of Rule 6 of the Cenvat Credit Rules, 2004 as amended by Finance Bill, 2016. It therefore indicates that the Cenvat credit of Rs.89,29,890/- is not admissible to the Noticee, as they have availed Cenvat credit on road construction machineries which are used exclusively in providing the exempted services for construction of public roads and other exempted civil structures

11.6 In this regard, it has also been alleged in the impugned show cause notice the Noticee have shown availment of Cenvat credit on capital goods in their ST-3 returns for the period 04/2016 to 06/2017 before the issuance date of invoices and the same is inadmissible in terms of Rule 4 of the Cenvat Credit Rules, 2004, which is reproduced hereinbelow:

“4. Conditions for allowing CENVAT credit – (1) The CENVAT credit in respect of inputs maybe taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service.

(2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent., of the duty paid on such capital goods in the same financial year.”

I find that the Noticee in their defence submission has not submitted anything in this regard. Undoubtedly, the date of receipt of capital goods should always be after the date of issuance of the invoice, but the silence of the Noticee on this aspect substantiate the allegations levelled in the impugned show cause notice to be true. It is therefore held that inaddition to the above reasons for disallowance of Cenvat credit on capital goods, the Noticee is also not legally entitled for the aforesaid amount of Cenvat credit on this ground too. In view of the above provisions and facts of the case, it is held that the Cenvat credit ofRs.93,59,799/- is not admissible to the Noticee and the same is liable to be recovered from them under Rule 14(1)(i) of the Cenvat Credit Rules, 2004 read with proviso to Sub-Section(1) of Section 73 and 75 of Finance Act, 1994 read with Section 174 of CGST Act. 2017. Held accordingly.

4.3.2 Undisputedly appellant in the present case ar e providing the taxable and exempted services. Even the exemption in respect of the road construction services etc., being provided by the appellant is conditional exemption notification providing exemption in respect of the construction of public road. Appellant have claimed before the adjudicating authority that the capital goods against which they have claimed the CENVAT credit were not used exclusively for providing the exempted services but were used for providing both taxable and exempted services. To substantiate there claim they have produced the copy of Letter of Award iisued by Reliance Industries Limited vide LOA No: RIL/CBM/045/LOA/ 112822/2013 dated 10.12.2013 for carrying out “Early Civil Works – CBM Projects, Shahdol M.P.” for construction of roads and other amnesties which do not fall within the category of public roads and hence not exempted. It is settled law that if the capital goods are used for providing both the taxable and exempted services then the CENVAT credit in respect of such capit al goods cannot be denied or varied. Reliance is placed on the decision of Mumbai Bench in case of Finolex Industries Ltd [FINAL ORDER NO. A/85393-85395/2022 dated 02.03.2022 in Excise Appeal No. 1214 to 1216 of 2012].

4.3.3 The second ground for denial as per the impugned order is that appellant could not have availed the said credit prior to expiry of two years of usage of the said capital goods as per the provisions contained in CENVAT Credit rules, as they existed at the relevant time. We do not find any merits in the said submission for the reason that the said condition is not qua the availment of the credit, but qua the use of capital goods for providing both taxable and exempted services. In terms of the said condition the credit could not have been denied or varied if after the expiry of usage of the capital goods for providing both taxable and exempted services, the capital goods were put to use exclusively for providing the exempted services. The said condition is not applicable if the goods are being used for providing the taxable and exempted services.

4.3.4 The last ground, for denial of this credit is that the appellant had taken the credit even before the date of the invoice. We are not able to make any sense of the said ground. Credit is admis sible to the appellant immediately on the receipt of the capital goods, under the cover of duty paying documents, it may be invoice or any other document as per the Rule 9 of CENVAT Credit Rules, 2004. In absence of the invoice goods would have been received by the appellant under cover of any of the documents specified in rule 9, giving the details of the duty paid against the goods, otherwise how could have appellant have taken the credit. The credit taken against any of such document as specified, cannot be denied just for the reason that the credit has been taken prior to the date of the invoice. If the reason for the denial of credit is to be agreed to then revenue should have made demand against the person clearing the goods without cover of invoice or the document evidencing the payment of duty.

4.3.5 In view of discussions as above we do not find any merits in the denial of this credit, and the confirmation of this demand.

Non-Payment/Non reversal of an amount of Rs.29,55,763/ – on Input Service Credit availed under Rule 6 of CCR, 2004:

4.4.1 For denying the CENVAT Credit in respect of the input services impugned order observes as follows:

12. It has been alleged in the impugned show casue notice that on scrutiny of ST-3returns of the Noticee and Cenvat credit documents for the period 04/2014 to 06/2017, it was, observed that they have availed Cenvat credit of Rs.29,55,763/- on input services which is not admissible to them in terms of Rule 6 of the Cenvat Credit Rules,2004 as during the period under consideration they had provided both exempted and non-exempted services.

12.1 I find that the Noticee in their defence submission has not disputed the availment and utilization of said amount of Cenvat credit on input services during the period under consideration and therefore the details of computation of Cenvat credit on capital goods during the period under consideration are not reiterated here. However, they inter-alia primarily contended that they are into provision of integrated construction services consisting of various taxable as well as exempted services; that the capital goods/ input services are not used solely in the provision of exempt services, but also for providing taxable services; that when capital goods/ input services have been utilized in the provision of exempted as well as non-exempted services, there is no violation of Rule 6 of the Credit Rules and the said amount of Cenvat credit on input services are admissible to them.

12.2 Rule 6 of the Cenvat Credit Rules, 2004 is relevant here to decide the instant issue. Rule 6 is reproduced hereinbelow:

12.3 Further, the following are the judicial rulings which have bearing on the issue involving the reversal of Cenvat credit availed on inputs/ input services which are used in providing exempted services in terms of Rule-6(3A) ibid or payment of an amount equivalent to seven percent of the value of exempted services.

i. ……..

12.4 I find that though the Noticee has claimed that the capital goods/ input services were not used solely in the provision of exempt services, but also for providing taxable services and that when the capital goods/ input services have been utilized in the provision of exempted as well as non -exempted services, the provisions of Rule 6 of the Cenvat Credit Rules, 2004 are not applicable, but has produced any material evidence in support of their contention. They have also not given the details of taxable and non-taxable projects/services undertaken by them during the period under consideration or any material evidence of any nature to prove that the input services availed by them were used for providing both taxable and exempted services. In absence of any supporting material evidence, I do not find the submission of the Noticee convincing and hence, the same is not acceptable. It is explicit that the Noticee have taken Cenvat credit on input services, which were used for providing the exempted services, as they failed to prove their claim of Cenvat credit on capital goods as well as input services. Noting is on record which could prove that they have maintained separate account for the capital goods/ input, input services, which are used for providing the exempted services and that they have availed only proportionate Cenvat credit on input, input services used for providing the exempted services, so that the benefits of Cenvat credit specified in Rule 6 in this regard, could be extended to them. It is also undisputed that they have not followed the procedures prescribed in this regard in as much as they have not exercised the option for payment of proportionate amount of credit as set out under sub-rule 3(A) of Rule 6 of the Cenvat Credit Rules, 2004. As the Notice have not exercised option to pay under Sub -Rule 3(A) of said rules, they are required to pay an amount equal to seven percent of value of the exempted services subject maximum of the sum total of opening balance of the credit of input and input services available at the beginning of the period 2014-15 to 2017-18 (up to June 17) and the credit of input and input services taken during of that period. In instant case, looking to the higher value of exempted services, the Noticee are required to pay sum total of opening balance and credit taken during the period and in the impugned show cause notice, it works out to be Rs.29,55,763/ – and therefore the same or correctness of said amount. In view of the aforesaid provisions of law and legal matrix is not reproduced here as the Noticee has not disputed the quantification it is held that the Cenvat credit of Rs.29,55,763/- is not legally admissible to the Noticee and is liable to be Rule 6 and Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 73(1) of recovered from them under the provisions contained in Explanation III of sub-rule 3(D) of the Finance Act, 1994 read with Section 174 of CGST Act, 2017. Held accordingly.

4.4.2 We have already observed that in the case of the capital goods the only thing that is required to be shown is that the same has been used for providing the taxable service or have been used for the manufacture of dutiable finished goods. If the usage of the capital goods is for providing the taxable service or have been used for the manufacture of dutiable finished goods then in that case the credit taken in respect of the capital goods cannot be denied or varied for the reason that the same have also been used for providing non taxable service or used for manufacture of the exempt goods.

4.4.3 In case of input and input services, the law is quite clear that no credit would be admissible in respect of input and input services which have been solely used for providing non-taxable/ exempt services or used for manufacture of non-dutiable/ exempt goods. Similarly credit taken in respect of input and input services which have been used for providing taxable services or used in manufacture of excisable goods the credit cannot be denied or varied.

4.4.4 In case of the common inputs and input services which are used for providing both taxable and non-taxable/ exempt services the credit is to be reversed as per the formula as per the Rule 6(3) and 6 (3A) as amended from time to time. It is settled law that that the benefit of proportionate reversal will be available to appellant even if the procedure outlined in the said rule is not followed.

4.4.5 In case of Galaxy Diesel [FINAL ORDER NO. 11280/2023 dated 19.06.2023 in SERVICE TAX Appeal No. 11147 of 2014 -DB] Ahmedabad Bench held as follows: ―

We find that the Revenue‘s case is that even though the respondent have admittedly paid back the entire Cenvat credit availed along with interest which was partly attributed to exempted service even then the respondent is liable to pay 8%/6%/5% amount of value of exempted services in terms of Rule 6(3) of Cenvat Credit Rules, 2004. We find that on this issue much water has been flown and in various cases, the Courts and Tribunal held that once the Cenvat credit of the common inputs used in relation to exempted service is reversed along with interest, the demand of 8%/6%/5% in terms of Rule 6(3) will not sustain. The Commissioner has also taken support from one of the land mark judgment in the case of Chandrapur Magnet Wires Pvt. Limited vs. CCE, Nagpur – 1996 (81) ELT 3 (SC) wherein it was held that even though the modvat credit was availed but subsequently the same is reversed along with interest situation become as if no Cenvat credit is availed. Accordingly the benefit of notification was extended. Some of the judgments wherein the similar issue has been decided in favour of the respondent are cited below:- (a) Mercedes Benz India (P) Limited vs. CCE Pune-1 – 2015 (40) STR 381 (Tri. Mum.) (b) Hello Minerals Water (P) Limited vs. UOI – 2004 (174) ELT 422 (All.) (c) Kundan Cars Pvt. Limited vs. CCE, Pune – 2016 (43) S.T.R. 630 (Tri. – Mumbai) 3 Appeal No. ST/11147/2014 -DB (d) Bombay Minerals Limited vs. CCE & ST, Rajkot – 2019 (29) GSTL 361 (Tri. – Ahmd.)

5. As regards the judgments relied by learned AR, we find that the judgment has been subsequently distinguished, therefore, the same is not applicable.

6. In view of the discussions made hereinabove and the judgments cited, the demand of 8%/6%/5% cannot be made in the facts of the present case when the resp ondent has admittedly paid back the entire Cenvat credit along with interest which was partly attributed to exempted service. Therefore, the demand is not sustainable ….”

4.4.6 In view of the above discussions the appellant has either to pay back the entire credit availed in respect of the common input services availed by them during the period or the amount that can be determined on the proportionate basis. The impugned order fails to determine the said amount in correct perspective and have compared the amount of credit taken in respect of the input services with amount determined on the basis of the seven percent of the value of exempted services, and asked for reversal of entire amount of credit taken in respect of the input services. For determination of the correct amount that needs to be reversed in terms of the above observations the matter needs to be remanded back to the original authority.

Para 06: Non-payment of service tax of Rs.1,17,09,035/ – on Works Contract Service:

4.5.1 For confirming the demand made in respect of work contract services, impugned order observes as follows: ―

13. It has been alleged in the impugned show cause notice that on scrutiny of ST-3returns and financial documents viz. i.e. Balance Sheet, Profit & Loss A/c, Income ledger &Work Orders for the period 04/2016 to 06/2017 of the Noticee, it was observed that they had provided taxable services to M/s South Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P. Power Generating Company Limited (STPS) (MPPGCL), Sarni, received service charges totalling to Rs.20,25,57,300/- from them, but failed to pay service tax ofRs.1,17,09,035/-, treating them as exempted service.

13.1 The Noticee in their defence submission has stated that the works contract undertaken by them in SECL, Sohagpur and MPPGCL Sarni, does not involve the transfer of property in any way. It is the basic aim and object of bringing those work contracts in the net of service tax if work contracts involve transfer of property. They stated that they mostly carry out only those work contracts where transfer of property is not involved. Since the receiver of their services does not pay back service tax to them and whatever service tax, they have received the same has been duly paid to the department. They stated that they have carried out work related to roads, bridges and dams for SECL, Sohagpur and MPPGCL, Sarni. They have also submitted the copy of some work orders and contended that they constitute a bona fide belief and in good faith that they are not liable for service tax. They added that assuming but not accepting if any service tax is payable that has to be paid by recipient of the service as the service tax is an indirect tax basically payable by the recipient of the service, though as per the scheme of the Finance Act, 1994, they may be responsible for depositing the tax with the Central Government. They also added that as per Notification No 25/2012 dated 20.06.2012 work done by them has been specifically exempted from service tax under point no 12(a), 12(d), 12(f) and 13(a) of the said notification.

13.2 The perusal of Work Order Ref. No. GM(C)SECL/BSP/WOSGP/2014/35 dated19.11.2014 of M/s. SECL, Sohangpur Area revealed that it was for ‘Construction of R.C.C.Bridge over Baishaha Nala in approach road of Khairaha of Sohagpur Area, Dist: Shahdol (M.P.). The total offer value including service tax was Rs. 1,15,46,750.45 subject to certain terms and conditions. It is specified in clause 3. of terms & conditions that “no escalation is payable on account of materials, labour and POL as stipulated period of completion is six months.”

In clause 4., it is mentioned that “the arrangement of all materials, tools and plants etc. required for the work will be the responsibility of the Noticee.” In clause 5, it is mentioned-that “compaction of formation and paving materials is to be done with the help of vibratory roller only as per latest MORT&HMOST specifications.The bitumen pavement work has to be done by using hotmix plant and paver finisher, asper latest MORT&HMOST speci fications for road& bridges works.”In clause 9., it is mentioned that “The service tax will be applicable for the work as per norms of the company. The amount towards service tax will be reimbursed to the contractor from the Area, subject to submission of documentary evidence with supporting documents to the concerned department in regard to actual payment made on that account. During evaluation, component of service tax has been calculated @ 4.944% of the quoted value amounting to Rs, 5,43,977.11 (Rs. Five Lakhs Forty-Three Thousand Nine Hundred Seventy -Seven and Paise Eleven) only. The total offer value including service tax is Rs. 1,15,46,750.45 (Rs. One Crore Fifteen Lakhs Forty-Six Thousand Seven Hundred Fifty and Paise Forty-Fiveonly)”.

Thus, from the above specified conditions, it is unambiguous that the work of construction of R.C.C. Bridge over Baishaha Nala in approach road of Khairaha of Sohagpur Area, Dist: Shahdol (M.P.) was inclusive of materials, labour, tools, etc. as wellas service tax. It involves transfer of property in goods, which is leviable to tax as sale of goods It was done within the mining area of M/s. SECL and exclusively meant for use of M/s. SECL, primarily for the purpose of commerce or industry.

13.3 Further, the perusal of Work Order Ref. No. 03 – 01/STPS/EES/2010/1683/4416 dated02.08.2010 revealed that it was for ‘Construction of Ash Bund in 111 Hectare land by raising it from ground level for existing unit 1 to 9 including all allied works at STPS, Sarni.”The Para No. 2 of said work order specifically mentioned that “The value of contract is estimated to be Rs. 33,17,26,164/- (Rupees Thirty three Crores Seventeen lakh Twenty Six Thousand One Hundred Sixty Four) only inclusive of all i.e. cost of cement, steel, taxes, duties etc.” Thus, from the above stipulated conditions, it is unambiguous that the work of construction of Ash Bund-in 111 Hectare land by raising it from ground level for existing unit1 to 9 including all allied works at STPS, Sarni was inclusive of materials, labour, tools, etc.as well as service tax. It involves transfer of property in goods, which is leviable to tax assale of goods. It was done within the area of M/s MPPGCL (STPS), Sarni and exclusively meant for the use of M/s MPPGCL (STPS), Sarni, primarily for the purpose of commerce orindustry.

13.4 Above facts clearly show that in above contracts, the rates are inclusive of service tax payable and the Noticee has already recovered the amount of service tax involved therein, from their service receivers. However, they have not deposited said amount into Govt. account by falsely claiming exemption of Service tax.

14. Work Contract” is defined in Section 65B(54) of the Finance Act, 1994, which reads as “(54) “works contract” means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any movable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property.” It is evident that following conditions must be satisfied cumulatively in order to consider` the service as works contract:

(a) There should be transfer of property in goods involved in the execution of contract. which is leviable to tax as sale of goods The words ‘leviable to tax’ refer to charging section of VAT Act and would cover a situation where the tax is leviable on transfer of property but is exempt by any notification. This iS S because exemption by any notification does not mean that the tax is not leviable Thus. it is not necessary that VAT has been actually paid on the transfer of property involved in such contract. It is enough if transfer of property is leviable to tax as sale of goods for determining whether such contract is a works contract or not.

(b) Such contract is for the purpose of carrying out construction, erection, commissioning., installation, completion, fitting out, repair, maintenance, renovation, alteration and carrying out any other similar activity or a part thereof, or in relation to, any movable or immovable property. The definition provided u/s 65B(44) is an exhaustive definition but simultaneously ends with an inclusive limb i.e. “any other similar activity”. Hence, the last part of the definition for carrying out any other similar activity or a part thereof in relation to such property’ has wide implication. Thus, it can be concluded that work contract is the composite/ single contract for providing: –

a) transfer of property in goods and

b) provision of service

14.1 …….

14.2 ……..

14.3 ………

14.4 In view of the above provisions, it would not be out of place to conclude service providers uses the goods in execution of Works contract, the property of which is transferred, it qualifies as works contract. However, if the service provider only provides the services of erection, construction, commissioning, installation etc. without use of goods, the services will not be considered as works contract but will be considered as specified services and exemption under sr. no. 12, 13 & 14 of Notification No. 25/2012- ST dated20.06.2012 would be available. I find that in the instant case, the work for ‘Construction of R.C.C. Bridge over Baishaha Nala in approach road of Khairaha of Sohagpur Area, Dist: Shahdol (M.P.) provided to M/s. SECL and the work for ‘Construction of Ash Bund in 111Hectare land by raising it from ground level for existing unit 1 lo 9 including all allied work sat STPS, Sarni”, are the works contract, as accordingly to the terms & conditions of these two work orders, the work includes the cost of service, materials, labour, tools etc. The contention of the Noticee that these two works does not involves transfer of property in goods is incorrect and devoid of facts mentioned in the aforesaid two work orders, which they have accepted and accordingly performed the works.

15. The contention of the Noticee that they have carried out work related to roads, bridges and dams for SECL, Sohagpur and MPPGCL, Sarni and constitute a bonafide beliefand in good faith that they are not liable for service tax, is also incorrect in as much as it is forthcoming from the aforesaid two work order s itself that they have constructed R.C.C.Bridge within the mining area of M/s. SECL and have constructed ‘Ash Bund’ for M/s. MPPGCL, which are meant for commerce and industry. The aforesaid two work orders are not concerned with any construction of road or dam. I do not agree with the submission of the Noticee that they constitute a bonafide belief and in good faith that they are not liable for service tax for the reason that it has been specifically mentioned in the work orders that the value of the work is inclusive of service tax, which the Noticee has already recovered from M/s. SECL, Sohagpur and M/s. MPPCGL, Sarni through their running bills. It is thus reasonably accepted that the Noticee was aware of the terms and conditions of the aforesaid work orders specifically that the work to be undertaken by them was taxable under the Finance Act, 1994 and that they were required to pay service tax on the same as also the service receivers were ready to accept the works as taxable under the Finance Act,1994 and accordingly they not only computed the value of works but also paid the same tothe Noticee. I find that these facts have not been disputed by the Noticee.

15.1 I also find that the Noticee in support of their contention has submitted the copy of work order ref. no. GM(C)/SECL/BSP/ WO/SGP/2013/12 dated 23.01.2015 of M/s. SECL, which was for preparation of sub base with WBM of approach road to Khairaha UG Mine Project of Sohangpur Area, Dist: Shahdol (MP) (Length -1.97 km)’ and has also submitted some of the photographs of the said work. They have also submited the copy of Contract No. 045/112822 dated 21.01.2014 of Ms. Reliance Industries Ltd for ‘early civil works for GGS & WGS (earth work, area grading & development works). I find that the reliance on these two work orders were wrongly placed by the Noticee as these two work orders, are not the part of impugned show cause notice and also no demand of service tax has been made on the amounts involved in these two work orders These two work orders, photographs and the submissions of the Noticee regarding these two work orders. are therefore out of place and not relevant in the instant case.

15.2 I further find that the Noticee has contended that as per Notification No 25/2012 dated 20.06.2012 work done by th em has been specifically exempted from service tax under point no 12(a), 12(d), 12(f and 13(a) of said notification. I find that serial no. 12 of Notification No. 25/2012-ST dated 20.06.2012 grants exemption to construction services provided to Government or local authority or Governmental authority. Serial No. 13 also grants exemption to certain categories of works. Serial No. 12 and 13 reads as follows:

“12. Services provided to the Government, a local authority or a governmental authority by way of const ruction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of –

(a) a civil structure or any other original work meant predominantly for use other than for commerce, industry or any other business or profession;

(b) ……..;

(c) ………,

(d) canal, dam or other irrigation works;

(e) ……..

(f) a residential complex predominantly meant for self use or use of their employees or other persons specified in the Explanation 1 to clause (44) of Section 65B of the said Act;

13. Services provided by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of,-

(a) a road, bridge, tunnel, or terminal for road transportation for use by general public;

…….

It could be seen from the serial number 12(a) of said notification that the exemption is available-only when a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession. In the instant case, the construction services viz. construction of RCC Bridge and Ash Bundhave been provided by the Noticee to M/S. South Eastern Coalfield Limited and M/S.M.P.Power Generating Company Limited which are meant predominantly for use for commerce/ industry/ business. M/s SECL is engaged in production/ mining of coal which is sold for a consideration. Whereas, M/s. MPPGCL is engaged in generation of electricity which is sold for a consideration and therefore, it would not be out of place to conclude that M/s. SECL and M/s. MPPGCL are commercial and profit oriented company. Hence, the exemption is not available to them under serial number 12(a) of said notification.

The Noticee has also claimed exemption under serial number 12(d) of said notification, which grants exemption to construction of canal, dam or other irrigation works. In the instant case, it is undisputed that accordingly to the aforesaid two work orders, the Noticee has constructed RCC Bridge and Ash Bund, which in any sense cannot be equated with canal, dam or other irrigation works. Hence, the exemption is not available to them under serial number 12(d) of said notification. The Noticee has also claimed exemption under serial number 12(f) of said notification, which grants exemption to construction of a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation I to clause 44 of Section 65B of the Act. In the instant case, it is undisputed that accordingly to the aforesaid two work orders, the Noticee has constructed RCC Bridge and Ash Bund and not residential complex. Hence, it is not covered under serial number12(d) of said notification.

The Noticee has also claimed exemption under serial number 13(a) of said notification, which grants exemption to construction of a road, bridge, tunnel, or terminal for road transportation for use by general public. In the instant case, accordingly to the aforesaid two work orders, since the Noticee has constructed RCC Bridge within the premises of M/s. SECL and Ash Bund within the premises of M/s. MPPGCL, which are undoubtedly and predominantly meant for their own use and not for use by general public. Hence, the exemption is not available to them even under serial number 13(a) of said notification.

15.3 Further, Section 66D specify certain services on which service tax is not leviable. I find that the services provided by the Noticee are not covered under the said negative list, which indicates that these services are taxable.

15.4 In the case of EXCEL ENGINEERING Versus COMMISSIONER OF CENTRALEXCISE & S.T., MEERUT -ll [2017(50)STR,295(Tri.-All.)] it has been held that …. This case is maintained in Supreme Court [Commissioner v. Excel Engineering. 2018 (12)G.S.T.L. J89 (S.C.)] In the case of GAMMON INDIA LTD. Versus COMMISSIONER OF C. EX., CUS. &S.T., NAGPUR [2015(37)STR.225(Tri. -Mumbai)] it has been held that ……… In the case of MANTRI DEVELOPERS P. LTD. Versus COMMR. OF CUS., C. EX.& S.T., HYDERABAD -IV [2014(36)STR.944(Tri.- Bang.)] it has been held that ……..

16. In view of the aforesaid discussion, legal matrix and judicial rulings, it is held that the contract for the construction of RCC Bridge and Ash Bund is appropriately classifiable as ‘works contract and an amount of Rs.20,25,57,300/- received by the Noticee from M/s South Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P. Power Generating Company Limited (STPS) (MPPGCL), Sarni, is taxable under the provisions of the Finance Act, 1994 and the rules made thereunder. It is also held that the Noticee is legally required to pay Service tax of Rs.1,17,09,035/ – (Service Tax- Rs.1,10,07,933/- EdCess-Rs.40,233/- SHEC Cess- Rs.20,117/- SB Cess- Rs.3,21,296/- KK Cess- Rs. 3,19,457/-)under the taxable category of works contract sub-section (1) of Section 73 and 75 of the service’ and the same is recoverable from them along with interest in terms of proviso to Act read with Section 174 of CGST Act, 2017. Held accordingly.”

4.5.2 From the above findings recorded in the impugned order it is evident that the demand is made in respect of two specific work order which were for construction of R C C Bridge over the Baishaha Nala in the mining area of SECL and was not in respect of the approach road to KhairakhaU G Mine Project of Sohagpur District. The claim made by the appellant that the demand has been made in respect of this road which is a public road cannot be su stained. Impugned order specifically records the details of the work order for construction of approach road and also observes that no demand has been made in respect of said work order in the show cause notice. We do not find any merits in the submissions made by the appellant in this regard that construction of roads for use of general public is exempted from the payment of service tax, as no demand has been made in respect of any such activity undertaken by the appellant. Impugned order has examined the work order specifically to conclude that these works involved transfer of property in the goods and hence qualify as “work contracts” as defined under Finance Act, 1994. Further the work order specifically provides as observed from clause 9 of the same that the value of work order is inclusive of service tax calculated @ 4.944% of the work value. Thus appellant was well aware that service tax was being paid by the service recipient to the appellant and he was duty bound to deposit the same with exchequer and follow the provisions of Chapter V of the Finance Act, 1994 and rules made thereunder.

4.5.3 The work order from the M/s MPPCGL Sarni is also not in respect of construction of “Dam” as claimed by the appellant but is in respect of construction ash bund/ ash dyke for the disposal of fly ash generated in the thermal power plant of the service recipient. Appellant counsel to a specific query raised by the bench during the course of argument to effect that dams are built over river or streams, then on which stream this dam claimed to have been constructed by the appellant was built, counsel failed to provide any satis factory reply, he only referred to certain pictures which were also produced before the adjudicating authority. We do no find any picture of the “dam” amongst the pictures referred. Impugned order also records specific finding negating the said claim. An ash dyke, also known as an ash pond or ash disposal site, is a structure used to store ash, a byproduct of coal-fired power plants, typically in a slurry form. These dykes are constructed with embankments, often using soil or other materials, to contain the ash and prevent it from spreading. The primary purpose of an ash dyke is to manage the large volumes of ash generated by thermal power plants and to minimize land wastage. The claim of appellant that they had constructed the “Dam” as per the work order of M/s MPPCGL is without any merits and needs to be rejected.

4.5.4 Thus we find that impugned order has rightly concluded the service tax is required to be confirmed against the said two work order.

Extended period of Limitation:

4.6.1 On issue of invoking extended period of limitation, impugned order observes as follows: ―

17. I find that in the impugned show cause notice, the extended period of limitation as provided under proviso to Section 73(1) of the Finance Act, 1994 has been invoked for the dis-allowance and recovery of Cenvat credits and also for the demand and recovery of service tax, involved therein.

17.1 The Noticee in their defence has stated that the show cause proceeding initiated is illegal and as Internal First Audit under EA 2000 was conducted on 21.04.2017 for theperiod 04/2014 to 03/2017, whatever the demand was created same has been paid and again second audit was conducted on 21/22.02.2019 on the same issues involving the same period which is illegal. The Additional Commissioner (Audit), Central GST & Central Excise, Bhopal, was therefore requested vide letter F.No. V(ST)15 – 88/Audit-BPL/TBC/ Adj-I/JBP/2019-20/16363 dated 21.01.2020 to throw light on the circumstances in which re -auditing the records of the party for the period of 2014-15 and 2016-17 was undertaken. The Assistant Commissioner (Audit), Central GST & Central Excise, Circle -lI1, Jabalpur vide letter F.No. V(ST)222/Tirupati/Gr-16/JBP-|1/2018-19/221 dated 30.01.2020 informed asunder:

“1 ………

2 ……..

3. ……..

On perusal of the records available, the circumstances for. re- audit are submitted as under:-

(i) The earlier Audit was under taken on 21.04.2017 and at that time the Assessee has not filed ST -3 Return for the period 2016-17. It is filed on03.11.2017 for the period Apr- Sep, 2016 and on 28.10.2017 for Oct’16 toMar17.

(ii) The letter for conducting Audit was issued to the Noticee by the Superintendent (Audit) on 21.06.2016. The Assessee has Opposed for conducting of EA-2000 Audit and filed Writ Petition No. 12506/2016 on25.07.2016 before the Hon’ble High Court of M.P. Principal Bench, Jabalpur for declaring he relevant provisions of EA-2000 Audit as Ultra virus and made the Superintendent (Audit) as one of the Respondent. The WP is still pending before the Hon’ble High Court without any Stay vide Order dated02.03.2017, reproduced as under: –

“Challenging the constitutional validity of Rule 5A(2) of the Service Tax Rules,1994 read with Section 94(1) and 94(2)(k) of the Service Tax Rules, 1994. this writ petition has been filed. During the course of hearing, we are informed that the Delhi High Court inWrit Petition (C) No. 5192/15 M/s Mega Cabs Pvt. Ltd. Vs. Union of India and others vide judgment rendered on 3/06/16 has allowed the writ petition and the constitutional validity of the provision challenged before us has been heldto be ultra-vires.

Against the same, matter is pending before Hon’ble the Supreme Court in Special Leave to Appeal (C) No (s). 26675/16 Union of India & others M/s. Mega Cabs Pvt. Ltd. and there is stay of the impugned order passed by the Delhi High Court on 26/09/16. Accordingly, we adjourn hearing of the matter.

The petition be listed for consideration after the pending S.LP. is decided by the Supreme Court. Registry to inform, this Court after the matter is decided by the Supreme Court.”

4. It clearly reflects that the Assessee was non-cooperative for conducting Audit and not provided the documents properly for conduction of Audit. Thus, the Audit was conducted on the basis of records made available to safeguard the Govt. Revenue, which was going to be time-barred on passage of time and accordingly DAR No. 01/ST/JBP/Gr-1/2017-18 dated 01.05.2017 was issued.

5. Again, the Audit for the further period April-June, 2017 was conducted and Balance Sheet based reconciliation w as started with comparison to the taxable value declared in ST-3 Returns. On the basis of the same, new facts were noticed by the Audit Team while conducting Audit, which was suppressed (not disclosed) by the Assessee during the previous Audit. Accordingly, the direction has been given by the Hon’ble Commissioner (Audit) for re-audit for previous period

6. In view of the above, the suppression of facts invoked in the Show Cause Notice issued to the Assessee appears legal and proper.’

17.2 To follow the principle of natural justice, the submission of the Audit was communicated to the Noticee vide letter F.No. V(ST)15-88/AUDIT-BPL/TBC/ADJ-I/2019/ 76967 dated 07.02.2020 and they were requested to submit their comments on the same The Noticee vide their letter d ated 11.02.2020 submitted as under:

i. They have challenged notice on the legal issue before the High Court. As far as cooperating in the first audit under EA 2000, a second notice was issued on 09.09.2016 and in compliance of the same they have submitted all the documents before the authorities That the first audit was completed on 21.04.2017 for the period 01/2013 to 03/2017.

ii. The second audit under EA 2000 was conducted on21/22.02.2019 for the period04/2017 to 06/2019 in which again the period from 04/2016 t o 03/2017 was enquired against which they have raised the legal ground that it is illegal since the same period has already been considered in the first audit on 21.04.2017 than again same period cannot be covered under second audit dated 21/22.02.2019.

iii. In view of the above, they would like to submit that they have been fully cooperative in all the proceedings and nowhere it has been mentioned by any authority that they have not cooperated in the audit proceedings and the enquiry done by the audit authorities for the same period in the second audit is illegal.

17.3 1 find that the Noticee has not submitted anything on the comments of the audit that when the earlier Audit was under taken on 21.04.2017 at that time the Assessee has not filed ST – 3 Return for the period 2016-17 and it is filed on 03.11.2017 for the period Apr-Sep, 2016 and on 28.10.2017 for Oct16 to Mar’17. Further, though the Noticee has stated that they have submitted all the documents before the authorities but they have not submitted any material evidence of any nature as to how, when, for what period and what records were submitted by them to the audit. In view of the above facts, it is explicit that during the course of previous audit the entire records of the company was not produced before the audit officers for the purpose of audit and the objections raised in the previous audit report were based and limited to the records available with the department and those made available by the Noticee. Subsequently, when the second audit was conducted, the relevant records which were submitted by the Noticee including the records of the previous periods and the objections were raised by the auditors, which comprised of new facts, which was suppressed by the Noticee during the previous audit. Now, therefore, the contention of the Noticee that the show cause notice proceedings is illegal is not correct and hence is not acceptable to me.

17.4 ……. It is also on record and proven facts that during the period under consideration they had availed huge amount of Cenvat credit on input services which were used for both exempted and taxable output services and failed either to reverse the proportionate cenvat credit or to pay an amount equal to seven percent of the value of exempted service, as per provisions of Cenvat Credit Rules, 2004 discussed supra. Further, though they have claimed to have used the input services for providing both exempted and taxable services but failed to substantiate their claim by production of affirmative material evidences, including the maintenance of separate account of input and input services used for exempted and dutiable output services. It is also on record that during the period under consideration they had

‘works contract service’ to M/s. SECL and Ms. MPPGCL by constructing RCC Bridge and Ash Bund within their business premises exclusively for their own use for consideration and which is held to a taxable service in the foregoing paras. However, the Noticee has deliberately suppressed these facts from the department by not dis closing the same in theirST-3 returns and deliberately evaded the payment of service tax, inspite of knowing the facts that the element of service tax in included in the value of the work order and said service tax has been recovered by them as detailed in foregoing paras, but not deposited into Govt. account

The aforesaid deliberate commission of offence indicates their malafide intention behind knowingly suppressing these facts in their ST-3 returns or mis-stating these facts in their ST-3 returns with intent to evade payment of service tax and to avail inadmissible Cenvat credit on capital goods and input services. Undoubtedly, by doing so, the Noticee has contravened the various provisions of the Finance Act, 1994 and the rules made thereunder, as alleged in the impugned show cause notice. Thus, invocation of the proviso to Section 73(1) of the Finance Act, 1994 for demanding Service tax, was warranted and justifiable in the instant case. Following catena of decisions strengthen my aforesaid view.

a. In the case of DASWANI CLASSES LTD. Versus COMMISSIONER OF CENTRALEXCISE, JAIPUR -I [2017(52)STR.264(Tri.-Del.)] it has been held that “……”

b. In the case of Tamilnadu Coop Textiles Processing Mills Ltd Vs CCE Salem reported in 2007 (207) ELT 593 (Tri) th e Hon’ble Tribunal has held that ”…..”

In the case of Kores India Ltd VS. CCE Chennai reported in 2003 (152) ELT 395(Tri.Che) the Hon’ble CEGAT has held in similar situation that, “…..” This case was affirmed in 2015(318)ELT.A,252 (SC).

17.5 Applying ratio of the above judgments and in view of the facts of the case, I do not agree with the contention of the Noticee and it is held that the invocation of extended period of limitation for demand of service tax and dis-allowance of wrongly availed Cenvat credit under proviso to Section 73(1) of the Finance Act 1994 read with Section 174 of CGST Act,2017, as detailed in the impugned show cause notice, is proper and justified. Held accordingly.”

4.6.2 From the above we find that the impugned order has recorded appropriate reasons for invoking extended period of limitation for making this demand. Except for ground of second audit appellant has not raised any other ground for invocation of extended period of limitation. We do not find any merits in the said ground as it is evident from the impugned order that appellant had not filed the ST-3 returns for the period of dispute at the time of first audit and have not produced all the records before audit officers. Even otherwise it is not the case of second audit but a case of re-audit of the records of the appellant after taking note of the fact that the appellant had not cooperated at the time of first audit and have not provided all the records to the audit officers for the relevant period. The factum of not providing the records for audit itself amounts to suppression of the facts with intent to evade payment of service tax.

4.6.3 It is settled law that no one should be allowed to take the benefit of his on wrongs. Appellant who had not produced the records for audit in first instance cannot argue against the re -audit of the records subsequently. Hon’ble Supreme Court has in the case of Municipal Committee Katra [Order dated 09.05.2024 in CIVIL APPEAL NO(S). 14970-71 OF 2017] held as follows: ―

17. We have considered the submissions advanced at bar and have perused the material available on record and have gone through the impugned judgments.

18. The situation at hand is squarely covered by the latin maxim nullus commodum capere potest de injuria sua propria‘, which means that no man can take advantage of his own wrong. This principle was applied by this Court in the case of Union of India v. Maj. Gen. Madan Lal Yadav [(1996) 4 SCC 127] observing as below: –

”28. …In this behalf, the maxim nullus commodum capere potest de injuria sua propria— meaning no man can take advantage of his own wrong — squarely stands in the way of avoidance by the respondent and he is estopped to plead bar of limitation contained in Section 123(2). In Broom’s Legal Maxim (10th Edn.) at p. 191 it is stated: ―

”… it is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure. The reasonableness of the rule being manifest, we proceed at once to show its application by reference to decided cases. It was noted therein that a man shall not take advantage of his own wrong to gain the favourable interpretation of the law. In support thereof, the author has placed reliance on another maxim frustra legis auxilium invocat quaerit qui in legem committit. He relies on Perry v. Fitzhowe [(1846) 8 QB 757: 15 LJ QB 239]. At p. 192, it is stated that if a man be bound to appear on a certain day, and before that day the obligee puts him in prison, the bond is void. At p. 193, it is stated that ―it is moreover a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned‖. At p. 195, it is further stated that ―a wrong doer ought not to be permitted to make a profit out of his own wrong‘. At p. 199 it is observed that ―the rule applies to the extent of undoing the advantage gained where that can be done and not to the extent of taking away a right previously possessed.

19. It is beyond cavil of doubt that no one can be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is a sound principle that he who prevents a thing from being done shall not avail himself of the non- performance he has occasioned. To put it differently, ‘a wrong doer ought not to be permitted to make profit out of his own wrong‘. The conduct of the respondent-writ petitioner is fully covered by the aforesaid proposition.’

4.6.3 Thus we do not find any merits in the submissions made by the appellant for invoking the extended period of limitation for making the demand. Interest and Penalty.

4.7 As the appellant has not discharged the tax liability by the due date the demand of interest cannot be faulted with. Reliance is placed on the following case laws:

> Hemant N Talekar [2012 (26) STR 309 (Kar)]

> Bharat Sanchar Nigam Limited [2013 (30) STR 441 (T -Del)]

> Tata Steel Ltd. [2013 (29) STR 541 (T-Kol)]

> Inma International Security Academy Pvt Ltd [2005 (180) ELT 107 (T-Chennai).

4.8 In view of the decision of Hon’ble Supreme Court in the case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (238) ELT 3 (SC)] we uphold the penalties imposed upon the appellant under Section 78 of the Finance Act, 1994 in respect of the demands upheld by us.

Summarizing our findings

4.9 In view of the discussions as above we summarize our findings as follows:

S No.	Issue	Amount Involved (Rs.)	Finding
1	Royalty charges paid by them against stone quarrying mines to the Government of Madhya Pradesh	4,12,960	Dropped
2	Denial of CENVAT Credit in respect of Capital Goods availed by them	93,59,799/-	Dropped
3	Denial of CENVAT Credit in respect of input services	29,55,763/-	Matter remanded for quantification
4	Demand of the service tax on work contract services	1,17,09,035/-	Demand Upheld
5.	Extended period of Limitation is invokable.
6.	Demand of Interest upheld
7.	Penalty imposed under Section 78 upheld in respect of demand at 3 and 4 above.

5.1 The appeal is partly allowed as indicated in para 4.9 above.

(Order Pronounced on 01.08.2025)