Reliable Enterprises Vs Commissioner of CGST & Central Excise (CESTAT Kolkata)
Summary: CESTAT Kolkata disposed of Reliable Enterprises’ appeal against an order confirming service tax of ₹1,60,40,851, equivalent penalty and other statutory liabilities. The show cause notice dated 22 October 2021 had proposed recovery of ₹3,56,02,057, including cesses, for April 2016 to June 2017 by treating receipts reflected in income-tax records as consideration for taxable services. The adjudicating authority partly confirmed the demand with interest, an equivalent penalty under Section 78, penalties under Section 77 and a late fee for non-filing of returns. The dispute concerned works-contract transactions with Sintex entities, commission from Vodafone SIM/recharge distribution, and supplies of plastic dustbins, Portolet toilets and other equipment to government departments and local bodies.
The appellant submitted that equipment receipts of ₹22,06,18,526 represented sales on which VAT had been paid; Vodafone distribution transactions were exempt under Serial No.29(f) of Notification No.25/2012-ST dated 20 June 2012; and the demand was unsustainable on limitation. It also relied on replies furnished to departmental notices and letters to contest invocation of the extended period. The Revenue supported the adjudication order.
The Tribunal held that part of the demand fell beyond the five-year period, recording the cutoff in paragraph 6 as “31st, September, 2016”. For works contract service rendered to the Sintex entities, it retained liability for 1 October 2016 to 30 June 2017, using the source wording “at the rate of 33% of gross amount received”, together with interest. It set aside the entire demand on Vodafone commission under the cited exemption. On goods supplies, the Tribunal examined the invoices reproduced in the order and found that the appellant had sold goods on which VAT had been paid, rather than provided services. The corresponding demand was therefore set aside. The Tribunal expressly held that no penalty was imposable and disposed of the appeal in these terms.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The appellant is in appeal against the impugned order wherein demand service tax of Rs.1,60,40,851/ has been confirmed against the appellant along with equivalent amount of penalty imposed on the appellant under Section 78 of the Finance Act, 1994.
2. The facts of the case are that the Appellant, M/s Reliable Enterprises, a sole proprietorship concern of Mr. Rishu Shree, having its principal place of business at 1-A, First Floor, KamtaRamsakhi Enclave, Beside Dayanand Boys School, Mithapur, Khagaul Road, Patna–800001, is engaged in the business of providing taxable services under the categories of “Clearing & Forwarding Agent Service” and “Business Auxiliary Service”. The Appellant was duly registered with the Service Tax Department bearing Registration No. CJFPS5467MST001 under the provisions of the Finance Act, 1994 and has been carrying on its business in the ordinary course. Throughout the relevant period, the Appellant bona fide believed that it was complying with the statutory provisions applicable to its business activities and had no intention whatsoever to suppress any material facts or evade payment of Service Tax.
2.1 That on the basis of the aforesaid allegations, the Assistant Commissioner, CGST & Central Excise, Patna (West) Division issued Show Cause Notice dt 22.10.2021 proposing recovery of Service Tax amounting to Rs.3,56,02,057/- inclusive of Education Cess, Secondary & Higher Education Cess, Swachh Bharat Cess and KrishiKalyanCess, for the period April, 2016 to June, 2017.
2.2 That while issuing the aforesaid Show Cause Notice, the Department proceeded on the assumption that the entire amount reflected in the Income Tax records constituted taxable consideration for services rendered by the Appellant.
2.3 That on the basis of the aforesaid figures, the Department computed Service Tax liability by applying the applicable rates on the entire receipts and proposed recovery of Service Tax amounting to Rs.3,56,02,057/- (Rupees Three Crores Fifty-Six Lakhs Two Thousand Fifty-Seven only), inclusive of applicable cesses, for the period 2016-17 and April, 2017 to June, 2017. Besides the proposed recovery of tax under the proviso to Section 73(1) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017, the Department also proposed recovery of applicable interest under Section 75 and imposition of penalties under Sections 77 and 78 of the Finance Act, 1994 on the allegation that the Appellant had deliberately suppressed the taxable value of services with an intention to evade payment of Service Tax.
2.4 That upon completion of the adjudication proceedings, the Adjudicating Authority passed the impugned Order whereby, out of the total proposed demand of Rs.3,56,02,057/-, only Rs.1,60,40,851/- (Rupees One Crore Sixty Lakhs Forty Thousand Eight Hundred Fifty-One only) was confirmed under Section 73(2) of the Finance Act, 1994 read with Section 174 of the CGST Act, 2017, while the remaining demand was dropped. The Adjudicating Authority also confirmed recovery of interest under Section 75 of the Finance Act, 1994, imposed an equivalent penalty of Rs.1,60,40,851/- under Section 78, imposed a further penalty of Rs.10,000/- under Section 77(2) for non-filing of ST-3 Returns, imposed late fee of Rs.20,000/- under Section 70 read with Rule 7 of the Service Tax Rules, 1994 and also imposed an additional penalty of Rs.10,000/- under Section 77(1)© for alleged failure to produce documents during the course of investigation. The Adjudicating Authority further observed that the penalty under Section 78 would stand reduced to 25% of the confirmed demand provided the confirmed tax, applicable interest and reduced penalty were paid within thirty days from the date of receipt of the Order.
2.5 The appellant had supplied sanitary equipments of dustbin sets to the government departments and local bodies on which they paid the VAT.
2.6 The appellant had received the payment of Rs.22,06,18,526/ for the supply of equipments from Sintax Industries, Sintax prefab and infra Ltd, , Nagar parishad Gopal Gunj , Nagar Parishad Bihata , Patna Municipal corporation , Siwan Municipal & Deoghar Municipality, The appellant had paid appropriate VAT on these transactions.
2.7 The appellant had made an agreement for the distribution of recharge vouchers . The department had alleged that the service tax is payable on these transactions.
2.8 The appellant had received the amount for Rs.77,39,818/- for the renovation and alteration of factory plant of M/s sintex in which the goods had been supplied. So, the department had alleged that appellant is liable to pay the service tax on these transactions.
2.9 Against the said order, the appellant is before us.
3. The ld.Counsel for the appellant submits that the appellant had received the payment of Rs.22,06,18,526/ for the supply of equipments from Sintax Industries, Sintax prefab and infra Ltd, , Nagar parishad Gopal Gunj , Nagar Parishad Bihata , Patna Municipal Corporation , Siwan Municipal &Deoghar Municipality. The appellant had paid appropriate VAT on these Tansactions. So the appellant would not be liable to pay the service tax.
3.1 He further submits that the appellant had made an agreement for the distribution of recharge vouchers with Vodafone . The department had alleged that the service tax is payable on these transactions. These transactions are exempted from service tax under Serial No.29(f) of mega exemption Notification No.25/2012-ST dated 20.06.2012.
3.2 On the limitation, he submits that the period in dispute is 2015-16 to June 2017, for which the service tax had been demanded and the Show-cause notice had been issued on 22.10.2021. Therefore, he submits that on the limitation ground also, the appellant would not be liable to pay service tax as the extended period of limitation is not invokable.
3.3 It is further submitted that the appellant had made reply to the show-cause notices and letters by intimating in details, so the extended period of limitation is not invokable. Accordingly, he prays that the service tax would not be demanded on the basis of limitation also.
3.4 Finally, he submits that the impugned order is not sustainable in the eyes of law on merit as well as on limitation, accordingly, the same be set aside by allowing the appeal with consequential benefits.
4. The ld.A.R. for the Revenue has justified the impugned order.
5. Heard both the parties and considered the submissions.
6. We find that the appellant has contended that the period involved in this case is from 2016-17 up to June, 2017 and the show-cause notice has been issued to the appellant on 22.10.2021. In that circumstances, it is prayed that part of the demand is beyond the extended period of limitation as show-cause notice has been issued beyond five years. Therefore, we hold that the demands up to 31st, September, 2016, are not sustainable on limitation itself.
7. We further take note of the fact that the impugned order has confirmed the demands on three issues, namely-
(i) The appellant has supplied materials as works contract to Sintax Prefab and Intra Limited and Sintex Industries Ltd. and has not paid service tax ;
(ii) The appellant has taken distributorship of Vodafone SIM and received the accrued commission.
(iii) The appellant has supplied plastic dustbins, Portolet toilets etc. to the local bodies and State Governments.
Issue (i)
The appellant has supplied materials as works contract to Sintax Prefab and Intra Limited and Sintex Industries Ltd. and has not paid service tax –
8. With regard to “works contract service” rendered to Sintax Prefab and Intra Limited and Sintex Industries Ltd., the appellant is liable to pay service tax within a period of limitation i.e. 01.10.2016 to 30.06.2017 at the rate of 33% of gross amount received.
Issue (ii)
The appellant has taken distributorship of Vodafone SIM and received the accrued commission –
9. We find that the said commission is exempted at Sl.No.29(f) of Notification No.25/2012-ST dated 20.06.2012. Therefore, on the commission earned from Vodafone Limited, the appellant is not liable to pay service tax. Therefore, whole of the demand on this account is set aside.
Issue (iii)
The appellant has supplied plastic dustbins, Portolet toilets etc. to the local bodies and State Governments –
10. We further take note of the fact that the appellant has supplied plastic dustbins, portolet toilets etc. to the local bodies and to that extent, the appellant has produced the invoices that the said invoices pertain to the sale of the said goods, on which VAT has been paid. For better appreciation of facts, the said invoices are extracted below :
11. From the above, it is very much clear that the appellant has not provided any service, but has supplied plastic dustbins, portolet toilets etc., on which VAT has been paid. Therefore, on such supply, the appellant is not liable to pay service tax. Therefore, the demand confirmed on this account is also set aside.
12. In view of the above, the following order is being passed :
The appellant is liable to pay service tax rendered to Sintax Prefab and Intra Limited and Sintex Industries Ltd., for the period 01.10.2016 to 30.06.2017 at the rate of 33% of gross amount received along with interest. No penalty is imposable on the appellant.
13. In these terms, the appeal is disposed off.
(Pronounced in the open court on 16.10.2026)
