Sankalpan Infrastructure Pvt. Ltd Vs Commissioner of Service Tax (CESTAT Mumbai)
The appellant is a works contractor. Demand was confirmed under “commercial or industrial construction” service, “works contract service”, “renting of immovable property” service and “business support service”.
The Hon’ble CESTAT, Mumbai set aside all demands holding: (i) demand prior to 01.07.2017 under “construction” service for works contract cannot survive. Follows Larsen and Toubro (SC); (ii) point of taxation (on accrual basis) cannot be ground to demand tax again once the tax has been paid on receipt basis, subject to verification; (iii) “consideration” as defined under the Indian contract Act is different from the said term as defined under the Finance Act. Consideration has to be for provision of service and not forfeiture. Remands matter to commissioner for verification. Allows appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT MUMBAI
This appeal is directed against Order-in-Original No. 24/ST-VII/RK/2015-16 dated 31.12.2015 of the Commissioner of Service Tax-VII, Mumbai. By the impugned order following has been held:
20.1 I confirm Service Tax demand of Rs. 7,22,68,684/- (Rupees Seven Crores Twenty Two Lakhs Sixty Eight Thousand Six Hundred Eighty Four only) and determine the same as Service Tax payable on Commercial or Industrial Construction services and Erection, Commissioning or Installation services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period 01.03.2006 to 31.05.2007, under the provisions of Section 73(2) of the Finance Act, 1994;
20.2. I confirm Service Tax demand of Rs. 3,10,33,081/- (Rupees Three Crores Ten Lakhs Thirty Three Thousand Eighty One only) and determine the same as Service Tax payable on Works Contract services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period 0.0022047 to 30.06.2010, under the provisions of Section 73(2) of the Finance Act, 1994;
20.3.I confirm Service Tax demand of Rs. 13,78,709/- (Rupees Thirteen Lakhs Seventy Eight thousand Five Hundred Nine only) and determine the same as Service Tax payable on Renting of Immovable Property services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period June 2007 to September 2009, under the provisions of Section 73(2) of the Finance Act,
30.4. I confirm Service Tax demand of Rs. 14,24,939/- (Rupees Fourteen Lakhs Twenty Four Thousand Nine Hundred Thirty Nine only) and determine the same as Service Tax payable on 1 Business Support services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period October 2006 to September 2009, under the provisions of Section 73(2) of the Finance Act, 1994;
20.5. I order appropriation of Rs. 2,42,57,514/- paid by M/s. Sankalpan Infrastructure Pvt. Ltd. against the Service Tax liability confirmed in para 20.1, 20.2, 20.3 and 20.4;
20.6. I order recovery of interest at appropriate rate on the amount of Service Tax demands confirmed at para 20.1, 20.2, 20.3 and 20.4 above, from M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, under the provisions of Section 75 of the Finance Act, 1994;
20.7. I impose penalty of Rs. 10,61,05,413/- (Rupees Ten Crores Sixty One Lakhs Five Thousand Four Hundred Thirteen only) on M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, under the provisions of Section 78 of the Finance Act, 1994;
20.8. I impose penalty of Rs. 10,000/- (Rupees Ten Thousand only) on M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, under the provisions of Section 77 of the Finance Act, 1994.”
1.2 The miscellaneous application filed by the appellant in terms Section 35B(7) of the Central Excise Act, 1944 read with Section 83 of the Finance Act, 1994 and under Rule 10 and 41 of CESTAT (Procedure) Rules, 1982 for urging additional ground was disposed vide order No. M/85549-85550/2021 dated 22.11.2021.
2.1 The appellant registered with the Service tax department, provides works contract services. Works contract service, inter alia, includes demolition of existing brickwork, RCC wall and granite counter, making opening in wall, electrical work, façade work including glazing, cladding, installation of safety security system.
2.2 Based on the scrutiny of the records and investigations undertaken, the revenue was of the view that-
i) although the Noticee had obtained Service Tax registration on 23-02-2005 under Commercial or Industrial Construction services and subsequently included other services in the registration, they had failed to pay Service Tax on the value of a) Commercial or Industrial Construction services/ Erection, Commissioning or Installation service, b) Works Contract service. c) Renting of Immovable Property service and d) Business Support services received during the period 01.03.2006 to 30.06.2010, and also failed to file ST-3 returns for the said period.
ii) although they had billed and collected Service Tax amount of Rs. 11,35,463/- for providing Renting of Immovable Property service and Rs. 11,35,463/- for providing Business Support service from M/s Adventity BPO, they had failed to deposit the said amount in the government account. Further it was also revealed that they had billed Service Tax @2%, @4% to the clients and collected the said tax from them but failed to deposit the said amount also in the government treasury,
iii) the said failure amounted not only suppression of fact about the taxable services having been rendered and taxable value having been collected but also amounted to violation of provisions of sections 66, 67, 68, 69.70 and 73A /FA, 1994, read with rules 4,6 and 7 of STR, 1994;
iv) The appellant vide letter dated 10.02.2011 informed that they had deposited an amount of Rs. 2,42,57,514 – (Rs. 2,40,42,308/- + Rs. 1,95.7891- + Rs. 19,4177-) towards their Service Tax liability and produced the copies of TR-6 challans.
2.3 Accordingly revenue opined that appellant contravened the provisions of Sections 66, 67, 68, 69, 70 and 73A of the FA, 1994 and Rules 6, 7 of the STR, 1994 in as much as they-
(i) failed to include the Business Support services in the Service tax registration as required under Section 69 of FA, 1994, read with Rule 4 of STR. 1994;
(ii) failed to pay service tax amounting to Rs 19,85,98,590/- in terms of Section 68 of FA, 1994 read with Rule 6 of STR, 1994, on the value of taxable services received by them against (a) Construction services in respect of Commercial or Industrial buildings and civil structures Erection, Commissioning and Installation service. (b) Works Contract service, : kenting of Immovable Property service and (d) Business Support services provided by them during the period;
(iii) failed to declare the value of aforesaid services provided by them, as required under section 67 of FA, 1994 with a deliberate intent to evade Service Tax;
(iv) failed to file half yearly returns in form ST -3 for the aforesaid services as required under Section 70 of FA, 1994, read with Rule 7 of STR, 1994, for the period from April 2006 to June 2010;
(v) failed to deposit Service Tax amount billed and collected/recovered from the clients from 01.03.2006 onwards on account of aforesaid services in the Government account, as required under Section 73 A of FA, 1994.
(vi) It appeared that the failure was intentional with a view to evade payment of Service Tax due from them. Therefore, it appeared that the extended period of limitation of time, as provided under the proviso to Section 73(1)/F A, 1994 is invokable for recovery of Service Tax amount of Rs. 19,85.98,590/- during the period 01.03.2006 to 30.06.2010. They appeared liable to pay interest at applicable rates under Section 75 ibid on the said Service Tax and also appeared liable to penalty under Sections 76, 77 and 78/F A. 1994.
2.4 Based on above a show cause notice dated 21.04.2011 was issued to the appellant asking them to show cause as to why:
a. Service Tax amounting to Rs. 7,22,68,684 – (Rupees Seven Crore Twenty Two Lakhs Sixty Eight Thousand Six Hundred Eighty Four only) payable on Commercial or Industrial buildings and civil structures services and Erection, Commissioning and Installation service during the period 01.03.2006 to 31.05.2007, should not be demanded and recovered from them under proviso to Section 73( 1 )/F A, 1994;
b. Service Tax amounting to Rs. 12.35,26.258/- (Rupees Twelve crore thirty five lakhs twenty six thousand two hundred fifty eight only) payable on Works Contract services during the period 01.06.2007 to 30.06.2010 should not be demanded and recovered from them under proviso to Section 73(1 )/F A, 1994;
c. Service Tax amounting to Rs. 13,78,709/- (Rupees Thirteen lakhs seventy eight thousand seven hundred and nine only) payable on Renting of Immovable Property services during the period 01.06.2007 to 30.09.2009 should not be demanded and recovered from them under proviso to Section 73( 1 )/F A. 1994:
d. Service Tax amounting to Rs. 14.24,9397- (Rupees Fourteen lakhs twenty four thousand nine hundred thirty nine only) payable on Business Support service during 16.10.2006 to 30.09.2009 should not be demanded and recovered from them under section 73(1)/F A, 1994, read with the proviso thereto;
e. The amount of Rs. 2,42,57,514/- deposited by the Noticee under various challans should not be appropriated at the Service Tax payable;
f. Interest at applicable rates should not be charged and recovered from them under Section 75 of the Finance Act, 1994;
g. Penalty should not be imposed on them under the provisions of Section 76 and 78 of the Finance Act, 1994; and
h. Penalty should not be imposed on them under Rule 7C of Service Tax Rules, 1994 and Section 77 of the Finance Act, 1994.
2.4 The show cause notice was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed this appeal.
3.1 We have heard Shri Bharat Raichandani, Advocate for the appellant and Shri Nitin M Tagade, Joint Commissioner, Authorized Representative for the revenue.
3.2 Arguing for the appellant learned counsel submits:
> Issue involved in respect of Commercial or industrial construction services for the period upto 1st July is squarely covered by the decision of the Hon’ble Supreme Court in the case of L & T, wherein Hon’ble Apex Court has held that when these services are provided along with the transfer of material then these services are more appropriately classifiable as Work Contract Services and could not have been taxed under these category. However as this decision of the Hon’ble Apex Court was rendered by the Hon’ble Apex Court after adjudication of this case this argument was not before the adjudicating authority. However being the legal submission on the basis of the decision rendered by the Hon’ble Apex Court, this argument should be allowed to be taken for which they have filed the Miscellaneous Application.
> Issue wise submission against each part of the demand is per the table below:
