Hospitech Management Consultants Pvt. Ltd Vs Commissioner of Service Tax (CESTAT Delhi)
CESTAT Delhi held that the extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax.
Facts- In the present case, the assessee mainly questioned that whether the extended period of limitation as contemplated under the proviso to section 73(1) of the Finance Act has been correctly invoked in the facts and circumstances of the case.
Conclusion- Decision of the Tribunal in Shiv-Vani Oil & Gas Exploration Services Ltd. vs. C. S. T., New Delhi, wherein the Tribunal after making reference to the decision of the Supreme Court in Cosmic Dye Chemical vs. CCE, Bombay, observed that there should be an intent to evade payment of service tax if the extended period of limitation has to be invoked.
Held that the extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax.
FULL TEXT OF THE CESTAT DELHI ORDER
The order dated 31.03.2014 passed by the Commissioner of Service Tax, Commissionerate, New Delhi1 has been assailed by M/s. Hospitech Management Consultants Pvt. Ltd.2 in this appeal. The order seeks to confirm the demand of service tax of Rs. 65,75,890/- towards service said to have been provided by a ‘management or business consultant’ and an amount of Rs. 4,63,343/- towards service said to have been provided by an ‘architect’, with interest and penalty by taking recourse to the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, 19943. The order also seeks to confirm the demand of CENVAT credit amounting to Rs. 12,360/- with penalty.
2. A show cause notice dated 22.10.2010 was issued to the appellant in regard to non-payment of service tax on the service provided by an ‘architect’ by alleging that the appellant had misclassified the services as ‘construction’ services and, accordingly, taken benefit of the exemption provided under a Circular dated 17.09.2004. The show cause notice also alleged out that the appellant had provided ‘management or business consultant’ service, but had mis-classified it as construction service and taken benefit of the exemption Circular dated 17.09.2004. The show cause notice also alleged that the appellant had wrongly utilized CENVAT credit.
3. The appellant filed a detailed reply to the show cause notice, but the Commissioner confirmed the demand and the observations made in the order are as follows:
”16.1 ***** From the above-stated statutory provisions and also the allegations made in the show cause notice, I note that the activities of the noticee include the services as providing Architectural, Engineering Design and Drawing work of construction, Consultancy Service for Construction of Medical Colleges and Hospitals, wherein their scope of work is confined to Architecture, preparation of detailed drawing and design including structural design calculation for proper execution of works and visit to project site periodically as mutually agreed to offer interpretation of drawing/specification, supervision of the project etc. I note that the Construction Services cover in its activities any services provided or to be provided in relation to construction of complex. Any person engaged in the activity of construction service is bound to have incurred some amount towards purchase of construction material and also receipt of payment for the construction activities undertaken. However, the show cause notice has alleged that the Annual Accounts of the noticee did not reflect expenditure on account of purchase of construction materials and payment received on account of construction services. In case no amount is found to has been incurred towards purchase of construction materials, it cannot be held that the services rendered were construction services.
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I find that the limbs of the definition of Architect Service are satisfied in the present case viz. provision of service, which the noticee have rendered like Architectural, Engineering Design and Drawing Work, Consultancy Services for construction of Medical College and Hospitals where the scope of work was confined to Architecture, preparation of detailed drawing and design including structural design calculation for proper execution of works and visit to project site periodically as mutually agreed to offer interpretation of drawing/specification, supervision of the project etc.
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16.2 The show cause notice has further proposed demand of service tax amounting to Rs. 5,20,612/- on the ground that the noticee had entered into agreements with their various clients to provide consultancy services for preparation of project report, interaction with the local Municipal corporation, submission of preliminary cost estimates and getting necessary approval from the clients/local Municipal corporation for the proposed construction of Dental/Medical College Building etc., preparation and submission of detailed architectural working, drawing, design and specification of building/structure for construction and release to site including getting approval from the client/local bodies. For these services the noticee had been charging consultancy fee from the clients which were inclusive of all the cost of manpower spent, computer, software applied, preparation of design and drawing, detailed calculations, recalculations, redesigning, all guarantees, visit to the sites, visit to Delhi office etc. It is the allegation in the show cause notice that these services did not appear to be classifiable under the service category of Construction Services, and the exemption benefit under Para 13.2 of Circular No. 90/10/2004-ST dated 17.09.2004 did not appear to be admissible to the noticee for providing such taxable services. *********
16.3 I note that the show cause notice has brought on record that the noticee had entered into agreements with their various clients to provide consultancy services for preparation of project report, interaction with the local Municipal corporation, submission of preliminary cost estimates and getting necessary approval from the clients/local Municipal corporation for the proposed construction of Dental/Medical College Building etc., preparation and submission of detailed architectural working, drawing, design and specification of building/structure suitable for construction and release to site including getting approval from the client/local bodies. The show cause notice has further brought on record that for these services the noticee had been charging consultancy fee from the clients which were inclusive of all the cost of manpower spent, computer, software applied, preparation of design and drawing, detailed calculations, recalculations, redesigning, all guarantees, visit to the sites, visit to Delhi office etc. From the description of activities detailed in the show cause notice I find that these qualify to be more appropriately under Section 65(65) read with Section 65(105)(r) of the Finance Act, 1994 under the category of „Management or Business Consultants Services‟ which covers in its ambit any services provided to any person by a management or business consultant in connection with the management of any organization or business. In any manner, which I find squarely cover the activities rendered by the noticee detailed above.”
(emphasis supplied)
4. Shri Prabhat Kumar, learned counsel for the appellant assisted by Shri Karan Kanwal, submitted that not only had the Commissioner committed an illegality in holding that the services provided by the appellant were not towards construction and were services provided either by an architect or by management or business consultant, but even otherwise the extended period of limitation could not have been invoked in the facts and circumstance of the case. Learned counsel, however, did not contest the order passed by the Commissioner to the extent it confirmed the demand of CENVAT credit amounting to 12,360/-.
5. Shri Harshvardhan, learned authorized representative appearing for the Department submitted that the order passed by the Commissioner does not suffer from any illegality.
6. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the Department have been considered.
7. The first issue that arises for consideration is whether the extended period of limitation could have been invoked in the facts and circumstances of the case in regard to the two services because if it is held that the extended period limitation could not have been invoked, it would not be necessary to examine the dispute on merits.
8. The appellant is a registered assessee and had been filing returns under section 73(6)(i) of the Finance Act. The relevant date for calculation of the limitation period is from the date on which the periodical return is to be filed. As per rule 7 of Service Tax Rules, 19944, every assessee has to file a half yearly return by the 25th of the month following the particular half-year.
9. The following chart would indicate whether the entire demand deals with the extended period of limitation or portion of it deals with the normal period in respect of both the services and it is reproduced below:
