Extended period of limitation cannot be invoked as issue involved interpretation of law

Bharat Electronics Limited Vs Commissioner of G.S.T. and Central Excise (CESTAT Chennai)

CESTAT Chennai held that invocation of extended period of limitation unjustified as issue was mired in litigation and interpretation of law. Further, appellant is public sector undertaking and hence there is no scope of suppression with an intention to evade tax.

Facts- During the audit of accounts of the assessee, it appeared to the Revenue that the appellant had received service charges from Heavy Vehicle Factory (HVF), Avadi for overhauling of parts of gun control stabilizer, for which appropriate Service Tax under Repair and Maintenance service carried out by them had not been paid.

Accordingly, a show cause notice was issued proposing demand of Service tax on the amounts received towards Repair and Maintenance service for the period from 2010-11 to 2014-15 and on the amounts received towards liquidated damages for the period from 2012-13 to 2014-15, apart from appropriate interest u/s. 75 of the Finance Act, 1994 and penalty u/s. 76, 77 and 78.

Conclusion- Here, admittedly, the alleged services of the appellant are provided to the Government, by way of repair / maintenance or alteration of of original works, but the same are definitely not consumed in a commerce, industry or any other business or profession, but exclusively for the Ministry of Defence and hence, we are prima facie satisfied that the scope of the alleged services gets covered under Sl. No. 12(a) ibid. itself.

Held that the repair and maintenance service, as provided by the appellant in the case on hand, to HVF, Avadi is not amenable to Service Tax under the said category and consequently, the demand to this extent cannot sustain.

Held that the issue was mired in litigation and interpretation of law; the undisputed fact is also that the appellant is a public sector undertaking and hence, there is no scope to allege suppression with an intention to evade tax. Therefore, we hold that the invoking of extended period of limitation is without any justification.

FULL TEXT OF THE CESTAT CHENNAI ORDER

Facts, as available in the impugned order, are that during the audit of accounts of the assessee, it appeared to the Revenue that the appellant had received service charges from Heavy Vehicle Factory (HVF), Avadi for overhauling of parts of gun control stabilizer, for which appropriate Service Tax under Repair and Maintenance service carried out by them had not been paid.

2.1 This prompted the Revenue to assume that the assessee had contravened provisions of the Finance Act, 1994 and the Service Tax Rules, 1994, which resulted in the issuance of Show Cause Notice dated 05.10.2015, inter alia, proposing to demand Service tax on the amounts received towards Repair and Maintenance service for the period from 2010-11 to 2014-15 and on the amounts received towards liquidated damages for the period from 2012-13 to 2014-15, apart from appropriate interest under Section 75 of the Finance Act, 1994 and penalty under Sections 76, 77 and 78 ibid.

2.2 For the subsequent period between April 2015 to March 2016, it appears that the assessee was issued with a Statement of Demand dated 17.05.2017 for the alleged non-payment of Service Tax on Repair and Maintenance service and liquidated damages.

3. It appears that the assessee filed its detailed replies dated 18.07.2016 and 12.02.2018 explaining its activities in detail and thereby explaining that their services were exempted since they are only rendering services to the Ministry of Defence, Government of India and that they are also exempted by Notification No. 25/2012-S.T. dated 20.06.2012, read with Section 102 of the Finance Act, 2016.

4.1 The Ld. Commissioner, having considered the explanation of the assessee, during adjudication proceedings, has, inter alia observed as under: –

(i) In terms of the service order between HVF and the assessee, the order has been mentioned to be a service order and income tax at the rate of 2% shall be deducted from the bills.

(ii) There is a separate clause in the agreement with regard to payment of excise duty and sales tax on the supplies effected by the assessee.

(iii) The assessee has thus not ascertained the true nature of the contract and discharged VAT on the service portion also.

(iv) Apart from overhauling of individual component / sub-assembly, which is carried out by the assessee, the assessee would perform a substantial service as reflected in the contract and hence, it has not ascertained the proper nature of the contract to discharge the applicable taxes and consequently, they have not paid the applicable Service Tax.

(v) With regard to the claim of exemption under Notification No. 25/2012-S.T. dated 20.06.2012, the assessee only performs a minuscule portion of re-engineering a sub-assembly of the battle tanks, which cannot be considered under the category mentioned in the exemption Notification. Further, it was also held that the same could in no way be considered as in the nature of erection / commissioning / installation of plant / machinery / equipment, as mentioned in the above exemption Notification. Hence, the argument that the sub-assembly of stabilizer is an equipment cannot be entertained.

(vi) It is also for the reason that the ‘equipment’ cited in the exemption Notification is a standalone equipment and not a sub-assembly component. The assessee only performs re-engineering of the stabilizer unit of the battle tank and clears it as exciseable / saleable product, by paying VAT.

(vii) Further, refurbishing of ‘original work’ is not the essence of the Notification and therefore the case of the assessee is not covered by the exemption Notification (supra). Moreover, in the instant case no new product emerges since what is done is just re-engineering which by no stretch of imagination could be considered as an activity of manufacture. The re-engineering of the stabilizer does not give rise to an article which is distinct from the source material in the name / character / use.

4.2 Insofar as valuation of the demand under Service Tax is concerned, the authority has held as under: –

(i) From the perusal of the Annexure to the Show Cause Notice, the amount has been quantified as Service Tax payable towards amount received for repair and maintenance which has been quantified. Hence, the same is required to be construed as service which is rendered under repair and maintenance.

(ii) Further, it is claimed that prior to 01.07.2012, it was performing manufacture and subsequent to that date, they were performing an exempted service, which clearly indicates that they are performing some sort of service similar to works contract, but now it has been claimed that they are doing erection / commissioning / installation of original works. But however, it is found that refurbished equipment of an original work cannot be an activity of manufacture.

(iii) The assessee has arrived at the apportionment of supply and service values and started paying Service Tax from September 2014 onwards and the apportionment adopted is 22% for the service portion and the rest for the supply portion; that the apportionment has a strong persuasive value. Their contract value admittedly has suffered VAT and hence this 22%, being service portion, is also VAT paid; but however, since the same comes under the domain of the Central Government being a service value, service portion cannot be left without levy of Service Tax as the service portion is leviable to a higher rate of tax. This also would fulfil the requirement of Explanation (c) to Rule 2A of the Service Tax (Determination of Value) Rules, 2006.

4.3 With regard to the demand of Service Tax on the liquidated damages, the Ld. Commissioner has, after analysing the agreement between HVF, Avadi and the appellant, referred to a clause relating to liquidated damages for delays in supply of stabilizer by them (per clause 6 C (b) of the terms and conditions appended to the supply order). In this regard, the lower authority has not accepted the contentions of the appellant that the liquidated damages collected were by way of compensation as per Section 73 of the Indian Contract Act for the damages suffered by them and that the same could not be considered as ‘consideration’ for the services and hence the same was not amenable to Service Tax. He has further proceeded to apply Sections 73 and 74 of the Indian Contract Act to hold that the liquidated damages were amenable to Service Tax, but however, vide paragraph 19.10 of the impugned order, has re-worked the tax liability.

4.4 With regard to invoking the extended period of limitation, the Ld. Commissioner has held that the proviso to Section 73(1) ibid. was correctly invoked, to demand Service Tax for the period 2012-13 to 2015-16. He has further elaborated that in the scheme of self-assessment, the Department would only come to know about the bare facts of service rendered and payment made during the scrutiny of the return and hence, the responsibility is more on the taxpayer. According to the Ld. Commissioner, the appellant had wilfully mis-stated the material facts by failing to disclose the service portion of the supply order with HVF, Avadi, with an intent to evade payment of tax. He has also held that going by the fact that from July 2014 onwards the appellant itself bifurcated the supply order into material and service portions, the appellant was aware of the service component in the supply order. Further, that the appellant had also not disclosed the recovery of liquidated damages from their suppliers during the period 2012-13 to 2015-16; these facts could not have been ascertained without the scrutiny of records during departmental investigation.

5. Hence, vide impugned Order-in-Original Nos. 9 & 10 / 2018 dated 27.02.2018, the lower authority has confirmed the demands as proposed in Show Cause Notice No. 03/2015-16 dated 05.10.2015 along with applicable interest and penalty but however, has chosen to drop further proceedings initiated in the above Show Cause Notice on demand of Service Tax on the repair and maintenance service for the period from September 2014 to March 2015. He also dropped the demand of Service Tax on repair and maintenance service for the period 2015-16 initiated vide Statement of Demand No. BEL/GLT1/Commr./ST/04/2017 dated 17.05.2017 dated 17.05.2017, but has confirmed the demand on the liquidated damages apart from confirming appropriate interest and penalty, as proposed.

6. It is against this order and the demands therein that the present appeals have been preferred before this forum.

7. Heard Shri Raghavan Ramabadran, Ld. Advocate and Shri Harendra Singh Pal, Ld. Assistant Commissioner.

8.1 The contentions of the Ld. Advocate are summarized below: –

• The appellant is a Navratna public sector undertaking under the Ministry of Defence and the main function of the assessee is to meet the specialised electronic needs of the Indian defence forces. It is engaged in manufacturing of parts of tanks and other armoured fighting vehicles classifiable under Chapter 87 of the Central Excise Tariff Act, 1985.
• It is their further case that the Heavy Vehicles Factory, Avadi produces Indian versions of the Soviet era second-generation T-72 Battle Tanks called ‘Ajeya’, which require overhauling due to usage for a number of years. The Indian Army would routinely send the above tanks requiring overhauling to HVF and the HVF, upon receiving the same, would dismantle the entire tank and send the sub­assemblies that require inspection and testing, to the assessee’s factory for overhauling.
• One of the such sub-assembly of the above tanks is the ‘gun control stabilizer’, which comprises of various additional sub-assemblies.
• Accordingly, the HVF executed supply orders on the appellant for overhauling of these gun control stabilizers as per which the appellant was required to inspect and test the sub-assemblies for their condition and performance and further, the appellant was to either overhaul or replace the entire sub-assembly.
• Further, those sub-assemblies which are replaced are either manufactured by it or procured from job workers, locally or imported from outside. There is no dispute that applicable excise duties and VAT are discharged on the sub-assemblies manufactured by the job workers at the time of clearance to the appellant. It is thus canvassed that the appellant was discharging applicable VAT on the entire transaction value throughout the period, and that the appellant had also remitted applicable Service Tax on repairs and maintenance. Though the entire transaction had suffered VAT, the Revenue felt that when their activity was actually a service liable to Service Tax, exemption under Notification No. 25/2012-S.T. was not available to the appellant since only a minuscule portion of the engineering of a sub-assembly of battle tank could not be considered as original work, for which reason exemption under Section 102 of the Finance Act, 2016 was not available to the appellant.
• The activities of re-engineering of sub-assembly of battle tanks were rendered wholly to the Government of India, VAT was discharged on the entire transaction, Service Tax liability was also discharged from September 2014 onwards, and that the issue involved interpretation of a legal statute. It is also a fact borne on record that upon receipt of the impugned Order-in-Original, the appellant paid the entire demand of Service Tax along with interest, under protest, along with 25% of the demand towards penalty.
• It is engaged in the manufacture and supply of parts of tanks and other armoured fighting vehicles, the entire activity was undertaken for the Ministry of Defence, Government of India, in respect of battle tanks deployed by the Indian Army.
• The activity of manufacture and overhauling of gun control stabilizer undertaken by the appellant was exempt from payment of Central excise tax, vide Notification No. 63/1995-CE dated 16.03.1995.
• The appellant, since is engaged exclusively in the activity of manufacture of defence equipment for the government of India, cannot be held liable under the guise of providing service.
• He would also contend that repairs and maintenance made to sub-assemblies of Ajeya tanks is not amenable to Service Tax in the light of the exemption made available under Sl. No. 12(a) of Notification No. 25/2012 read with Section 102 of the Finance Act inserted with effect from 14.05.2016 whereby retrospective exemption from payment of Service Tax was granted to any taxable service provided to the Government.
• The Ld. Advocate further contended that the Order-in-Original has not offered any substantial reasons for not treating the sub-assembly which are overhauled by the appellant as ‘equipment’ beyond a mere assertion that standalone equipment would only be eligible for exemption. Moreover, term equipment has not been defined under the Service Tax Act and the definition is not available anywhere, even in the Service Tax Rules. Hence, it is essential that common parlance test has to be applied based on the common understanding of the term equipment, as held by the Hon’ble Apex Court, in the case of Porritts & Spencer (Asia) Ltd. v. State of Haryana [(1979) 1 SCC 82]. It is thus argued that once this sub-assembly is understood as an equipment, then automatically the benefit of exemption should be extended to the appellant. In the impugned order, the authority has not at all considered all the factors, but however has gone tangentially to deny the exemption which is otherwise available. It is their case that the definition of original works would not qualify, that ‘equipment’ would refer only to ‘standalone equipment’ and that the same would not include parts of those equipment and in this regard the authority has given a complete go-by to the very intent and purpose of Notification No. 25/2012-S.T. dated 20.06.2012
• It is also argued that overhauling activity is exempt from payment of Service Tax for the period from 30.06.2012 to 31.08.2014 in terms of the very same Notification. The same also being exempt from Service Tax under Section 102 of the Finance Act, 2016 the demand for the impugned period would thus fail and, consequently, the entire demand of service tax raised against appellant would fail.
• Without prejudice to the above, it was also argued that prior to the insertion of section 65B vide Finance Act, 2012, on the basis of the definition of ‘works contract’ was provided under Explanation to section 65(105)(zzzza), that the definition of works contract does not include repairs and maintenance activity within its ambit unless the same is provided in relation to the activities as provided under clauses (b) and (c) of Explanation to section 65(105)(zzzza). In this regard, decision of the Hon’ble Supreme Court in the case of Commissioner of Central Excise and Customs, Kerala v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)] is relied upon by the Ld. Advocate.

8.2 With regard to the demand on the liquidated damages, the Ld. Advocate would contend that the said issue has already been settled by the following orders of the CESTAT, in favour of the taxpayer, wherein the Benches have inter alia held that liquidated damages could at no stretch of imagination be covered under the definition of ‘consideration’ within the meaning of Section 2(d) of the Indian Contract Act, 1872: –

i. Neyveli Lignite Corporation Ltd. v. Commissioner of Cus., C.Ex. & S.T. [2021 (53) G.S.T.L. 401 (Tri. – Chennai)]

ii. Steel Authority of India Ltd., Salem v. Commissioner [2021 (7) TMI 1092 – CESTAT, Chennai]

iii. South Eastern Coalfields Ltd. v. Commissioner of C.Ex. & S.T., Raipur [2021 (55) G.S.T.L. 549 (Tri. – )]

iv. M. P. Poorva Kshetra Vidyut Vitran Co. Ltd. v. Principal Commissioner [2021 (2) TMI 821 – CESTAT, New Delhi]

8.3 Without prejudice to the above contentions, he would also contend that the Revenue was not justified in invoking the larger period since, primarily, the issue involved was one of interpretation of complex legal provisions; the appellant being a public sector undertaking, there cannot be any motive on the part the appellant, to entertain a belief as to suppression, etc., with an intent to evade payment of tax. In this regard, he has relied on the decision of the Hon’ble Rajasthan High Court in the case of Commissioner of Central Excise, Jaipur-I v. M/s. Rajasthan Renewable Energy Corporation Ltd. [2018 (15) G.S.T.L. 661 (Raj.)]. He has also placed reliance on the following orders of various CESTAT Benches: –

i. Mackintosh Burn Ltd. v. Commissioner of Service Tax, Kolkata [2020 (35) G.S.T.L. 409 (Tri. – )]

ii. Commissioner of C.Ex., Indore v. NEPA Ltd. [2013 (298) E.L.T. 225 (Tri. – )]

iii. Indian Oil Corporation Ltd. v. Commissioner of C.Ex., Delhi-II [2017 (4) G.S.T.L. 190 (Tri. – )]

iv. Karnataka State Tourism Dev. Corporation Ltd. v. Commissioner of Service Tax, Bangalore [2011 (21) S.T.R. 518 (Tri. – )]

v. Tamil Nadu State Transport Corporation (Coimbatore) Ltd. v. Commissioner of Cus., C.Ex. & S.T., Coimbatore [2019 (28) G.S.T.L. 225 (Tri. – Chennai)]

vi. Commissioner of Customs & Central Excise, Hyderabad-II v. Bharat Petroleum Corporation Ltd. [2016 (344) E.L.T. 657 (Tri. – )]

9. Per contra, the Ld. Assistant Commissioner supported the findings in the impugned Order-in-Original.

10. After hearing both sides, we find that the issues to be decided by us are: –

(1) Whether the demand under Repair and Maintenance service which is in the nature of works contract is sustainable?

(2) Whether the demand on the liquidated damages is sustainable? and

(3) Whether the extended period of limitation is invokable?

11. We have considered the rival contentions and we have perused the documents placed on record. We have also considered the decisions / orders relied upon during the course of arguments. The period of dispute is from April 2010 to March 2016 and admittedly, there is no dispute as to the following particulars of demand confirmed in the impugned order: –

Sl. No.	Particulars of demand of Service Tax	Period	Tax demand (INR)
SCN No. 03/2015-16 dtd. 05.10.2015
1.	Demand on ‘overhauling charges’, received for repair and maintenance services rendered to the Ministry of Defence	April 2010 to August 2014	2,13,45,117/-
2.	Demand on liquidated damages collected due to delayed supplies by job workers	July 2012 to March 2015	16,79,343/-
SOD No. BEL/GLT1/Commr./ST/04/2017 dtd. 17.05.2017
3.	Demand on liquidated damages collected due to delayed supplies by job workers	April 2015 to March 2016	14,78,844/-
TOTAL		April 2010 to March 2016	2,45,03,304/-

12. We find from the impugned Order-in-Original that there is no dispute as regards facts are concerned: the appellant’s activity of re-engineering of sub-assembly of battle tanks being rendered wholly to the Government of India has been duly acknowledged vide paragraph 17.0 of the impugned Order-in-Original. There is no dispute that the appellant has even discharged the VAT, as applicable, on the entire transaction, as acknowledged vide paragraph 18.2 of the impugned order and there is also no dispute about the discharging of Service Tax liability from September 2014 onwards, as could be seen from paragraph 18.5 of the impugned order.

13.1 Admittedly, the appellant is engaged in the manufacture and supply of parts of tanks and other armoured fighting vehicles for the Ministry of Defence, Government of India, in respect of battle tanks deployed by the Indian Army. The appellant has taken shelter under Notification No. 63/1995-C.E. (Goods for defence purposes or other projects) dated 16.03.1995 and contended that its activity of manufacture and overhauling of gun control stabilizer is exempt from payment of excise duty. Further, they have placed reliance on exemption Notification No. 25/2012-S.T. dated 20.06.2012 [Sl. No. 12(a)] dated 20.06.2012 and also on Section 102 which was inserted with effect from 14.05.2016 vide the Finance Act, 2016 granting special retrospective exemption from payment of Service Tax to taxable services provided to the Government of India. But however, it is an admitted position, as recorded at paragraph 18.5 of the impugned Order-in-Original, that the appellant has been paying Service Tax on the service portion of the supply order in respect of overhauling charges from September 2014 onwards. The same has been recorded in the Order-in-Original and the Ld. Commissioner has dropped the demand for the period 2015-16 proposed in the Statement of Demand. In view of the above factual position, Section 102 will have no impact.

13.2 The relevant part of Notification No. 25/2012-S.T. dated 20.06.2012 i.e., Sl. No. 12(a), as was prevailing, reads as under: –

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

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

(Emphasis supplied)

Admittedly, the term ‘equipment’ has not been defined anywhere in the said Notification.

13.3 The adjudicating authority has held that the appellant performs a minuscule portion of re-engineering of sub-assemblies of battle tanks, which could not be considered as under the categories mentioned in the exemption Notification (supra). Whereas the appellant has contended that the said Notification borrows the definition of ‘original works’, as provided in Rule 2A of the Service Tax (Determination of Value) Rules, 2006 (‘Valuation Rules’).

14.1 Sl. No. 12(a) of the Notification, which is extracted hereinabove, according to us, reveals the following: –

• services provided to the Government;
• by way of construction …. repair, maintenance … or alteration of;
• a civil structure or any other original works;
• predominantly for use other than for commerce, industry or any other business or profession.
• The meaning of ‘original works’ as per Rule 2A of the Service Tax (Determination of Value) Rules, 2006 includes commissioning of equipment.

14.2 From the above, what emerges is that a service, to be exempted, should be provided to the Government, even by way of repair, maintenance or alteration of, inter alia, any other original works and such service should not be consumed in a commerce, industry or any other business or profession. Here, admittedly, the alleged services of the appellant are provided to the Government, by way of repair / maintenance or alteration of of original works, but the same are definitely not consumed in a commerce, industry or any other business or profession, but exclusively for the Ministry of Defence and hence, we are prima facie satisfied that the scope of the alleged services gets covered under Sl. No. 12(a) ibid. itself.

14.3 The lower authority has rejected the claim of the appellant on the grounds, inter alia, that what was performed by the appellant was only a minuscule portion, which was nothing but refurbishing the equipment, which could not be considered as an original work. Sl. No. 12(a) of the Notification (supra) is clear inasmuch as the same covers inter alia repair, maintenance or alteration of civil structure or any other original works. Also, it does not specify as to the magnitude of such service.

14.4 For the period prior to 01.07.2012, we find that the reliance placed by the appellant on the decision in the case of M/s. Larsen & Toubro Ltd. (S.C.) (supra) is apt since works contract is involved and that portion of supply of goods has been undeniably subjected to VAT.

14.5 For the period subsequent to 01.07.2012, the original authority has apparently accepted (vide paragraph 18.2 of the Order-in-Original) the apportionment of supply and service value since the valuation of works contract service is required to be done by adopting the Service Tax (Determination of Value) Rules, 2006. He finds that the apportionment has been adopted at 22% for the service portion for the period post September 2014 and hence, has proceeded to hold the same apportionment for the period from 01.07.2012 to 2014-15 (up to 31.08.2014).

14.6 It is the case of the appellant that: –

• Mutual exclusivity of the Centre and the States is required to be maintained and the Centre cannot levy tax on objects on which Sales Tax has been levied and deposited.
• In direct contravention of the above, the impugned order has sought to levy Service Tax on the same transaction which is already VAT paid.
• On the strength of the above, the appellant had been of the bona fide belief that no Service Tax was liable to be paid on the transaction and hence, had not discharged Service Tax and consequently, the bona fide of the appellant for not discharging tax until August 2014 was adequately established.
• For the period post 01.07.2012, going by the very decision in the case of M/s. Larsen & Toubro Ltd. (supra) wherein it has been categorically held that works contract service is a separate species by itself, the leviability of Service Tax on works contract service per se is valid since admittedly, there is both supply of goods as well as service. Hence, the demand of Service Tax under works contract service for the period from 01.07.2012 to 31.08.2014 is justified.

14.7 In view of the above, we are of the view that the repair and maintenance service, as provided by the appellant in the case on hand, to HVF, Avadi is not amenable to Service Tax under the said category and consequently, the demand to this extent cannot sustain.

15.1 The second issue is the demand of Service Tax on the liquidated damages. We have gone through the following orders of various Benches of the CESTAT wherein the said issue has been settled in favour of the taxpayer: –

i. Neyveli Lignite Corporation Ltd. v. Commissioner of Cus., C.Ex. & S.T. [2021 (53) G.S.T.L. 401 (Tri. – Chennai)]

ii. Steel Authority of India Ltd., Salem v. Commissioner [2021 (7) TMI 1092 – CESTAT, Chennai]

iii. South Eastern Coalfields Ltd. v. Commissioner of C.Ex. & S.T., Raipur [2021 (55) G.S.T.L. 549 (Tri. – )]

iv. M. P. Poorva Kshetra Vidyut Vitran Co. Ltd. v. Principal Commissioner [2021 (2) TMI 821 – CESTAT, New Delhi]

v. Bharat Heavy Electricals Ltd. v. Commissioner of G.S.T. & C.Ex., Tiruchirappalli [2023 (4) TMI 1196 – CESTAT, Chennai] (Final Order No. 40311 of 2023 dated 26.04.2023 – Service Tax Appeal No. 41500 of 2019 – CESTAT, Chennai)

vi. GM (Finance), BHEL v. Commissioner of Cus. & C.Ex., Bhopal [2022 (9) TMI 1005 – CESTAT, New Delhi] (Final Order No. 50879 of 2022 dated 20.09.2022 – Service Tax Appeal No. 50080 of 2019 – CESTAT, New Delhi)

vii. Bharat Heavy Electricals Ltd., Pswr v. Commissioner of C.Ex. & S.T., Nagpur [2023 (5) TMI 11 – CESTAT, Mumbai] (Final Order No. A/85628/2023 dated 26.04.2023 – Service Tax Appeal No. 85781 of 2019 – CESTAT, Mumbai)

15.2 We also note that vide Circular No. 214/1/2023-Service Tax dated 28.02.2023, apparently, the Board has accepted the views of the CESTAT and thereby clarified that the Board has decided not to pursue the Civil Appeals filed against those orders before the Hon’ble Supreme Court. Hence, the demand on this cannot sustain.

16.1 Admittedly, the appellant is a Government of India undertaking and the disputed service in the case on hand is to the other wing of the Government. The original authority has held that for the period from July 2012 to August 2014, the appellant had wilfully mis-stated material facts to the Department by failing to disclose the service portion of the supply order with HVF, Avadi, with an intent to evade payment of Service Tax.

16.2 We will now consider the fact that the appellant had failed to inform the Department regarding recovery of liquidated damages from their suppliers and disclose the same in their S.T.-3 returns, which facts could not have been ascertained without the scrutiny of records. According to the original authority, the suppression stood established, for which reason invoking the extended period of limitation has been held to be justified.

16.3 It is the case of the appellant that the issue involved interpretation of statutory provisions and hence, the allegation as to mala fides, that too with an intent to evade payment of Service Tax, could not be levelled against the appellant. In this regard, they had relied on the following decisions / orders: –

i. Commissioner of C.Ex., Chennai-I v. Chennai Petroleum Corporation Ltd. [2007 (211) E.L.T. 193 (S.C.)]

ii. Commissioner of C.Ex., Indore v. NEPA Ltd. [2013 (298) E.L.T. 225 (Tri. – )]

iii. Hindustan Insecticides Ltd. v. Commissioner of C.Ex., Delhi-I [2017 (6) G.S.T.L. 218 (Tri. – )]

iv. Indian Oil Corporation Ltd. v. Commissioner of C.Ex., Delhi-II [2017 (4) G.S.T.L. 190 (Tri. – )]

v. Rajasthan State Warehousing Corporation v. Commissioner of C.Ex., Jaipur [2011 (23) S.T.R. 385 (Tri. – )]

vi Bharat Yantra Nigam Ltd. v. Commissioner of C.Ex., Allahabad [2014 (36) S.T.R. 554 (Tri. – )]

vii. Commissioner of C.Ex., Bhopal v. Western Coalfields Ltd. [2016 (45) S.T.R. 78 (Tri. – )]

17. We agree with the contentions of the appellant that the issue was mired in litigation and interpretation of law; the undisputed fact is also that the appellant is a public sector undertaking and hence, there is no scope to allege suppression with an intention to evade tax. Therefore, we hold that the invoking of extended period of limitation is without any justification.

18. In view of the foregoing, we hold as under: –

(1) The demand on repair and maintenance / overhauling charges for the period from April 2010 to August 2014 is set aside.

(2) The demand on liquidated damages for the periods from July 2012 to March 2015 and April 2015 to March 2016 is also set aside.

(3) The invocation of extended period of limitation is held to be not in order.

19. Resultantly, the impugned order is set aside and the appeals are allowed on the above terms, with consequential benefits, if any, as per law.

(Order pronounced in the open court on 15.09.2023)