Case Law Details
SPL Developers Pvt. Ltd. Vs Commissioner of Customs (CESTAT Bangalore)
CESTAT Bangalore held that as service actually falls under works contract service, then mere registration under ‘construction of a new residential complex’ and payment of service tax thereon, wouldn’t hold that services was rendered under ‘construction of a new residential complex’.
Facts- SPL Developers Pvt. Ltd. has filed this appeal to assail the order dated 30.04.2012 passed by the Commissioner of Service Tax, Bangalore confirming the demand of service tax by taking recourse to the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act 1994. The Commissioner also disallowed CENVAT credit of Rs. 1.73 crores holding that the appellant had irregularly availed it and confirmed the demand of CENVAT credit of Rs. 1.23 crores a became taxable w.e.f. 01.06.2007. The Commissioner has recorded a finding that since the appellant had got itself registered under the category of ‘construction of complex’ service and had filed the service tax returns also under ‘construction of complex’ service, it would not be open to the appellant to contend that the services should appropriately be classified under works contract service. This is what has also been contended by the learned authorised representative for the department. This submission cannot be accepted. Mere registration under a particular category and filing service tax returns under the said category would not mean that the appellant has provided service under that category, for in each case it has to be actually ascertained, if a dispute is raised, under which particular category the service would fall. If the service actually falls under works contract service, then mere registration under a different category and payment of service tax under that category would not be sufficient to hold that the service was actually rendered under that category. The reasoning adopted by the Commissioner, therefore, cannot be sustained. The demand of service tax, therefore, would not sustain.
FULL TEXT OF THE CESTAT BANGALORE ORDER
SPL Developers Pvt. Ltd. 1 has filed this appeal to assail the order dated 30.04.2012 passed by the Commissioner of Service Tax, Bangalore2 confirming the demand of service tax by taking recourse to the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act 19943. The Commissioner also disallowed CENVAT credit of Rs. 1.73 crores holding that the appellant had irregularly availed it and confirmed the demand of CENVAT credit of Rs. 1.23 crores wrongly utilized by the appellant. The Commissioner also appropriated an amount of Rs. 48.84 lacs deposited by the appellant. Penalty and interest have also been imposed upon the appellant.
2. The order was passed by the Commissioner pursuant to the issue of a show cause notice dated 05.05.2011 for the period November 2006 to September 2010. The show cause notice mentions that though the appellant was engaged in the activity of construction of residential apartments classified under the taxable category of „construction of a new residential complex‟, as defined under section 65(30a)(a) of the Finance Act and made taxable under section 65(105)(zzzh) of the Finance Act, but the appellant did not discharge the service tax liability under this category and had also irregularly availed CENVAT credit.
3. The appellant filed a reply to the show cause notice contending that the services rendered by the appellant would not be classifiable under „construction of a new residential complex‟ as defined under section 65(30a)(a) of the Finance Act and in any case the service would fall under works contract service, which become taxable w.e.f. 06.2007 and the appellant had discharged service tax liability under this category. In this regard the appellant placed reliance on a Circular dated 24.08.2010 issued by the Board. The appellant also pointed out that it had not irregularly availed CENVAT credit. Paragraphs 3.6.1 and 3.6.2 of the reply are reproduced below:
3.6 The company had not availed any irregular CENVAT credit.
3.6.1 It is alleged in para 12 of the Show Cause Notice that the Company irregularly availed CENVAT credit to the tune of Rs. 1,73,85,377/- and the same is proposed to be disallowed. It is further alleged that an amount of Rs. 1,22,53,815/- was utilized by the Company and the same is proposed to be recovered with interest. This allegation is based on surmises and conjunctures and not based on the facts of the case. This allegation is made only based on the fact that the Company did not produce the copies of the invoices and bills on which CENVAT credit was availed. It is a matter of fact that a statement containing the details of the CENVAT credit availed by the Company and the CENVAT credit ledger account were furnished to the investigating team. Further, the Company had also furnished the copies of tax invoices issued by M/s. Nagarjuna Construction Company Ltd., which covers the major portion of the CENVAT credit. These facts have been acknowledged in para 5 of the Show Cause Notice. The allegation therefore, is purely based on the fact that the invoices were not produced. A non production of invoice perse, will not make the CENVAT credit as an irregular availment.
3.6.2 A statement containing the details of CENVAT credit along with the copies of the invoinces is enclosed as Annexure-5. From the same, it can be seen that there was no irregular availment of CENVAT credit by the Company. Therefore, it is submitted that the amount of Rs. 1,73,85,377/- being the CENVAT credit availed by the company is regular and the same can not be reversed. Further, the amount of Rs. 1,22,53,815/- utilized by the Company is also regular and cannot be recovered in cash.”
4. The Commissioner, however, by order dated 30.04.2012 confirmed the demand of service tax, disallowed the CENVAT credit of Rs. 1.73 crores and confirmed the demand of CENVAT credit of Rs. 1.22 crores with interest and penalty.
5. The relevant findings contained in the order passed by the Commissioner in connection with the confirmation of demand of service tax, are as follows:
67. In the present case M/s. SPLDEV had registered themselves under the category of Construction of Complex Service, made payment under the same accounting head through GAR-7 Challan and filed the returns also under Construction of Complex Service only. Therefore, Noticees contention of classifying their services under Works Contract Service at a later date is against the stipulated norms on the basis of the above discussions.
68. in view of the above, it is clear the M/s. SPLDEV was engaged in construction of a residential complex which was classifiable under the category of Construction of Residential Complex Service defined under Section 65(30a) of the Finance Act, 1994. Further, the nature of work between the prospective buyer and the developers was taxable under Section 65(105)(zzzh) of the Finance Act, 1994.
69. The worksheets furnished by the Noticee revealed that, M/s. SPLDEV had provided the construction of residential complex service and had received an amount of Rs. 51, 17, 02,914/- during the period covered in the show cause notice. The service tax liability on this value works out to Rs. 5,56,15,882/-.”
(emphasis supplied)
6. In regard to the CENVAT credit irregularly availed and utilized, the Commissioner recoded the following findings:
79. I find that as per Rule 9 of CENVAT Credit Rules, 2004, CENVAT Credit can be taken/availed based on the Invoice/bills received from the service provider once the payment is made. The department has asked M/s. SPLDEV produce the details of CENVAT Credit availed along with copies of the Invoices/bills on the strength of which they availed CENVAT Credit.
But, M/s. SPLDEV have not produced the copies of the Invoices/bills on which they have availed CENVAT Credit. The notice had irregularly availed CENVAT Credit. But M/s. SPLDEV have not produced the copies of the Invoices/bills on which they have availed CENVAT Credit. The noticee had irregularly availed CENVAT Credit of Rs. 1,73,85,377/- which requires to be demanded and recovered from them in terms of proviso to Section 73(1) of the Act read with Rule 14 of the CENVAT Credit Rules, 2004.
80. Further, the irregular availment of CENVAT Credit by M/s. SPLDEV had resulted in wrong utilization of CENVAT Credit of Rs. 1,22,53,815/-. The same was required to be demanded and recovered from them in cash in terms of the proviso to Seciton 73(1) of the Act.
81. in view of my forgoing findings on the facts and circumstances of the case (i) the Cenvat credit wrongly availed without producing the vald documents to the tune of Rs. 1,73,85,377/- requires denial and recovery as per Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 73 of the Finance Act, 1994. (ii) the Cenvat credit recovery in cash in terms of Rule 14 of the Cenvat Credit Rules, 2004 read with proviso to Section 73 of the Finance Act, 1994.”
(emphasis supplied)
7. The period of dispute is from November 2006 to September 2007. During this period, the appellant developed a project called „Shriram Symphony‟ at Bangalore comprising of 228 residential apartments on a land owned by the appellant. The project commenced from November 2007 and the appellant classified the services rendered by it under „works contract‟ service and discharged the service tax liability under the composition scheme framed in this regard. The appellant claims that the entire tax liability on the taxable value was discharged by it in cash and by utilization of CENVAT credit. The ST-3 returns were also filed for the relevant period.
8. The show cause notice, as noticed above, proposed to classify services rendered by the appellant under „construction of a new residential complex‟ as defined under section 65(30a)(a) of the Finance Act and made taxable under section 65(105)(zzzh) of the Finance Act. The demand was also confirmed by the Commissioner under the said category of service.
9. The order passed by the Commissioner was assailed by the appellant in this appeal and earlier, the Tribunal, by a decision dated 12.2013, set aside the order dated 30.04.2012 passed by the Commissioner and allowed the appeal. The Tribunal recorded a finding that w.e.f. 01.06.2007 the nature of service provided by the appellant would be leviable to service tax under works contract service even though the appellant may have obtained registration under „construction of complex service‟ and deposited the tax under the said category. The confirmation of demand of service tax was, accordingly, set aside and the appeal was allowed.
10. The department filed Civil Appeal before the Supreme Court, being Civil Appeal No. 2931 of 2015 (Commissioner of Service Tax Bangalore vs. SPL Developers Pvt. Ltd.). This appeal was allowed by the Supreme Court by judgment and order dated 10.08.2022 and the matter has been remanded to the Tribunal to decide the appeal afresh within a period of six months from the date of receipt of the order. The order was received by the Tribunal on 30.08.2022. The order passed by the Supreme Court is reproduced below:
7. At the outset, it is required to be noted that the dispute is primarily/mainly for the period post 2007. It is not disputed by the assessee that the services rendered by the assessee and the contract entered into by the assessee be treated as Works Contract and therefore, the assessee is liable to pay the service tax.
8. Having heard learned counsel appearing for the respective parties and considering the Order-inoriginal and even the impugned order passed by the learned Tribunal, it appears that the dispute was also with respect to irregular availment/wrong utilization of the CENVAT credit by the assessee. From the impugned order passed by the Tribunal, it appears that though the learned Tribunal has touched the aspect of wrong/irregular availment/ utilization of CENVAT credit while narrating the facts, however, thereafter there is no further discussion at all on irregular/wrong utilization/availment of the CENVAT credit. It was the specific case on behalf of the Revenue that, without producing any invoices and/or other documentary evidences, the assessee was not justified in utilizing and/or availing the CENVAT credit. When a specific plea was raised and even the Adjudicating Authority specifically disallowed the availment or utilization of CENVAT credit, the learned Tribunal ought to have decided the said issue, which, as such, was the main controversy and even when a specific finding was given by the Adjudicating Authority while passing the Order-in-original.”
(emphasis supplied)
11. Shri S. Ananthan, learned representative appearing for the appellant made the following submissions:
(i) The Commissioner could not have confirmed the demand of service tax under „construction of a new residential complex‟ as the service provided by the appellant was correctly classifiable only under works contract service, for which the appellant had paid the entire service tax after availing the benefit of the composition scheme;
(ii) The appellant had not irregularly availed CENVAT credit to the extent of Rs. 1,73,85,377/- and the statement recorded in the impugned order that the appellant had not produced copies of the invoices and bills on which CENVAT credit was availed is incorrect as the statement containing the details of the CENVAT credit availed by the appellant and the CENVAT credit ledger account were furnished by the appellant and the appellant had also furnished copies of tax invoices issued by M/s. Construction Company Limited Najarjuna, which covered major portion of the CENVAT credit. In reply to the show cause notice, the appellant also enclosed, as Annexure-5, a statement containing details of the CENVAT credit taken along with the copies of the invoices which clearly demonstrate that CENVAT credit had not been irregularly availed by the appellant;
(iii) The appellant had correctly utilized CENVAT credit of 1,22,53,815/-; and
(iv) There is no suppression of facts with intent to evade payment of service tax and so neither the extended period of limitation could have been invoked nor penalty could have been imposed. In this connection, learned representative pointed out that since the show cause notice was issued on 05.05.2011 covering the period from 01.11.2026 to 30.09.2010, the period upto 31.03.2010 is more than one year from the date of issuance of the show cause notice ST/1977/2012 and, therefore, part of the demand that has been confirmed is barred by limitation.
12. Ms. D. S. Sangeetha, learned authorised representative appearing for the department, however, made the following submissions:
(i) The appellant is not entitled to the benefit of the composition scheme as the required procedure was not followed;
(ii) Without producing any invoice and/or other documentary evidences, the assessee was not justified in availing and utilizing the CENVAT credit;
(iii) An affidavit had been filed on behalf of the department that copies of bills/invoices were not In the submissions by the appellant, only a statement was provided containing details of CENVAT credit taken, though rule 9 of the CENVAT Credit Rules 20044 requires production of documents on the strength of which CENVAT credit is taken; and
(iv) Letters dated 25.03.2011 and 11.04.2011 sent by the department seeking copies of invoices/bills before the issue of show cause notice only reinforces the fact that the department was not in possession of the complete set of required documents.
13. The submissions advanced by learned representative for the appellant and the learned authorised representative appearing for the department have been considered.
14. It is seen from the records that the nature of service provided by the appellant would fall under the works contract service which became taxable w.e.f. 01.06.2007. The Commissioner has recorded a finding that since the appellant had got itself registered under the category of „construction of complex‟ service and had filed the service tax returns also under „construction of complex‟ service, it would not be open to the appellant to contend that the services should appropriately be classified under works contract service. This is what has also been contended by the learned authorised representative for the department. This submission cannot be accepted. Mere registration under a particular category and filing service tax returns under the said category would not mean that the appellant has provided service under that category, for in each case it has to be actually ascertained, if a dispute is raised, under which particular category the service would fall. If the service actually falls under works contract service, then mere registration under a different category and payment of service tax under that category would not be sufficient to hold that the service was actually rendered under that category. The reasoning adopted by the Commissioner, therefore, cannot be sustained. The demand of service tax, therefore, would not sustain.
15. The next issue that requires to be considered is as to whether the appellant had correctly availed CENVAT credit of Rs. 1.73 crores.
16. In this connection, it needs to be noted that in the reply filed to the show cause notice, the appellant had categorically stated that the allegation made that it had not produced copies of invoices and bills on which CENVAT credit was availed was not correct. The appellant specifically stated that the statement containing details of the CENVAT credit availed and the CENVAT credit ledger account were furnished to the investigating team prior to the issue of the show cause notice. The appellant also specifically stated that it had also furnished copies of the tax invoices issued by M/s. Najarjuna Construction Company Limited, which invoices covered major portion of the CENVAT credit. According to the appellant, this fact has been acknowledged in paragraph 5 of the show cause notice. In reply to the show cause notice, the appellant also submitted a statement containing details of CENVAT credit with copies of the invoices as Annexure-5 and according to the appellant the said Annexure would show that the appellant had correctly availed CENVAT credit to the extent of Rs. 1,73,85,377/-.
17. It also transpires that when the matter was earlier heard by the Tribunal, an order dated 24.05.2013 was passed by the Tribunal directing the department to file an affidavit to clarify whether the relevant materials including invoices had been presented by the appellant before the adjudicating authority. In response to this direction, the Commissioner of Service Tax filed an affidavit setting therein:
5. It is stated in the reply filed the assessee to the show cause notice that the invoices were enclosed with the statement containing details of CENVAT credit availed vide Annexure-5 as indicated in the Para 3.6.2 of the reply appended to the show cause notice. On verification by this office, it is observed that the said Annexure-5 containing the statement of CENVAT credit availed along with the invoices is not available in the adjudication file.
6. Further on examination of „Annexure-5‟ as submitted by the assessee before the Tribunal, a copy of which have been received by department as part of the appeal memorandum, it is seen that same is summary of CENVAT credit availed during the period from March 2008 to August 2010 indicating the numbers and dates of relevant invoices, without enclosing any invoice as such.
7. In view of the fact that the assessee had not produced relevant invoices before the adjudicating authority and considering submissions made by the assessee in their defence (Para 77 of OIO), the adjudicating authority has referred to rule 9 of the CENVAT Credit rules 2004 (para 79 of OIO) to reach a conclusion that the CENVAT credit availed by them is irregular and needs to be recovered in terms of proviso to section 73(1) of the Finance Act 1994 read with rule 14 of CENVAT Credit Rules 2004.”
18. All that has been stated in this affidavit is that the said Annexure-5 containing the statement of CENVAT credit availed along with the invoices is not available in the adjudication file. The affidavit does not state that the said Annexure was not enclosed by the appellant in reply to the show cause notice. The said affidavit also states the Annexure-5 enclosed by the appellant before the Tribunal only contains a summary of the CENVAT credit availed during the period from March 2008 and August 2010 and the numbers and dates of the relevant invoices without enclosing the invoices.
19. From these facts stated in the affidavit, it has been contended by the learned authorised representative appearing for the department that the appellant had not produced the relevant invoices before the adjudicating authority.
20. According to the learned representative for the appellant, the invoices were infact supplied to the department with Annexure-5, as is clear from the reply submitted by the appellant. Learned representative pointed out that these invoices have not been enclosed in the Appeal Memo as they are very bulky.
21. What is relevant to point out is that a Certificate dated 23.05.2013 was also issued by the Chartered Accountant. The said Certificate mentions that the appellant had availed CENVAT credit as per rule 7 of the 2004 Rules and that the CENVAT credit had been availed basis the input service invoices issued by the input service providers. The Certificate also contained a Chart containing a summary of the CENVAT credit of Rs. 1,73,86,230/- availed and Rs. 1,22,53,815/- CENVAT credit utilized. The enclosure to the Certificate also provided details of the invoices and party wise CENVAT credit statement. The said Certificate is reproduced below:
CERTIFICATE
“This is to certify that a verification of the input service invoices, payment vouchers and mode of payment has been carried out on M/s. SPL Developers Pvt. Ltd., a company registered under the Companies Act, 1956 having its registered office at No. 40/43, Nagashree Chambers, 8th Main, 4th Cross, Sadashivnagar, Bangalore 560080 with Service Tax Registration No AAKCS3577KST001 for the period Apr‟08 to Sep‟10 to ascertain the correctness of the CENVAT Credit availment & utilization by them.
Based on the above verification, it is certified that:
> The Company has availed the CENVAT Credit as per Rule 7 of CENVAT Credit Rules, 2004.
> The Company has availed the CENVAT Credit based on the input service invoices issued by the input service providers.
The summary of CENVAT credit availed and utilized for the above period is as follows:
| Period | CENVAT Credit (Amount in INR) | |
| Availed | Utilised* | |
| 2008-09 | 20,99,910 | 20,99,057 |
| 2009-10 | 68,33,379 | 52,20,674 |
| Apr 10 to Sep10 | 84,52,914 | 49,34,084 |
| Total | 1,73,86,230 | 1,22,53,815 |
The detailed invoice wise, party wise CENVAT Credit statement is enclosed as Annexure-1 to this certificate.
For Ganesh & Co. Chartered Accountants”
22. Learned representative appearing for the appellant also submitted that most of the invoices are available with the appellant and in case an opportunity is now provided to the appellant, it can satisfy the department that it had correctly availed CENVAT credit on the bases of the invoices.
23. The availment of CENVAT credit by the appellant requires a proper examination by the adjudicating authority afresh and the claim of the appellant cannot be brushed aside merely on the statement made in the affidavit filed by the department that Annexure-5 containing the statement of CENVAT credit availed is not available in the adjudication file. From the facts available on record, it does appear that the appellant had furnished the documents as also the Certificate of the Chartered Accountant. It would, therefore, be necessary to remit the matter to the adjudicating authority to determine this issue regarding availment of CENVAT credit afresh, for which purpose the department shall provide an opportunity to the appellant to furnish the documents.
24. In the result, the confirmation of demand of service tax in the impugned order dated 30.04.2012 passed by the Commissioner is set aside. In regard to the availment of CENVAT credit by the appellant, the matter is remitted to the adjudicating authority to take a decision on this issue afresh after providing an opportunity to the appellant to furnish documents. Such documents may be furnished by the appellant within six weeks from today before the adjudicating authority and the adjudicating authority, after providing an opportunity of hearing to the appellant, shall decide the issue afresh. The appeal is allowed to the extent indicated above. The order passed by the Commissioner on this issue shall abide by the order to be passed on remand.
Noted:
1. the appellant
2. the Commissioner
3. the Finance Act
4. the 2004 Rules
Author Bio
