Case Law Details
Brief facts
(a) The appellant was registered for providing Works Contract Service, taxable under Section 65 (105) (zzzza) of the Act ;
(b) Information was gathered by the Anti-Evasion Branch, Delhi which revealed that the appellant was engaged in providing taxable services to other clients but was not remitting the service tax due ;
(c) Investigation was therefore initiated and several letters were addressed to the appellant seeking copies of transactional documents and other relevant correspondence such as letters and agreements entered into in relation to Common Wealth Games Projects, copies of interim and final bills raised for providing services in relation to CWG projects and other documents such as audited financial statements and the like;
(d) The appellant failed to respond; thereupon reminder letters were issued; the appellant vide his letter dated 17/6/11 furnished certain documents including copies of its registration certificate, balance sheets from 2005-2006 to 2009-2010, service tax returns with challans, copies of award letters received from DDA/CPWD etc. and information of having received Rs. 375.16 lakhs for CWG works and had intimated that pending amount would approximately Rs. 53 lakhs ; that the appellant submitted copies of 28 letters in respect of works executed (details of which were set out in a table in para 5 of the show cause notice);
(e) Further investigation and summons ensued; and from scrutiny of the documents submitted by the appellant and the investigation, the appellant is seen to have filed nil ST-3 returns except for 2007-2008 and to have remitted service tax of a mere Rs. 998/-; and from the award letters submitted, appellant appears to have rendered taxable services but failed to remit the tax due.
Revenue observes that the appellant failed to provide detailed contractual documents for ascertaining the exact nature of the works executed and that on the basis of the facts and documents on record, a best judgment assessment method, provided under Section 72 of the Act is being pursued for valuation of the tax liability for the year 2010-2011, on account of absence of audited balance sheets for this period. In para 11, the quantum of liability to service tax is set out while noting that since the required documents/information was not provided by the appellant, income having a probability of classification under the Act is being taken as the value of the taxable services.
The revenue in its order provided that Whereas from the documents submitted by the party it appears that they have rendered the taxable services which may either be classified under Management, Maintenance or Repair service or Erection, Installation and Commissioning services and other construction linked services as defined under the Finance Act, 1994
Thus the revenue itself was not clear about the classification of the service. However it adjudicated service tax liability of Rs. 1,53,14,782/- for the period 2006-2007 to 2010-2011 apart from interest under Section 75 and penalties under Section 77 and 78.
Assessee’s contention
Assessee contended that all contracts executed by it were registered as works contracts which are also assessable to VAT; that since the contracts were works contracts involving deemed sale of goods, exclusion of the value of the goods, either under Notification No. 12/03 dated 20th June, 2003 or abatement of 67% of the value, under Notification No. 01/06 dated 1/3/06 or under the composition scheme provided in Works Contract Composition Scheme Rules, 2007 should be granted; that a substantial number of the works executed were non-commercial and non-industrial in nature and therefore fall outside the ambit of commercial or industrial construction service. Appellant also pleaded that Section 98 of the Act with retrospective effect exempted levy and collection of service tax in relation to Management, Maintenance and Repair services provided for non-commercial Government buildings during the period 16/6/05, till the Negative Tax Regime.
Revenue Contention
Assessee is a registered service provider providing taxable services without remitting service tax due on that services. Assessee is willfully suppressing the fact that he is receiving taxable income and withholding information leading to tax evasion.
Court’s Order
1. In the entirety of the show cause notice there is not a single assertion proposing to levy and collect service tax on the basis of any specified taxable services allegedly rendered by the appellant except the several alternative taxable services speculated to have been provided.
2. Revenue abruptly jumps to the conclusion, without any preceding analysis nor a finding as to the specific taxable services provided by the appellant, that service tax of Rs. 1,53,14,782/- is recoverable under the proviso to Section 73 (1) of the Act alongwith interest.
3. It is a axiomatic that a best judgment assessment under Section 72 could only be for ascertaining the quantum of the tax liability, in a context where the actual extent of liability cannot be determined with methematical precision on account of non-availability of relevant documents or financial records. There cannot be a best judgment assessment regarding the specific taxable service provided. There can be no best judgment, for instance as to whether the tax liability is for income tax, sales tax, excise duty, customs duty, service tax or professional tax. A conclusion as to the taxable event and the liability to tax under the appropriate fiscal legislation authorizing the levy and collection of such tax is a matter for determination with precision and clarity and not by a process of guess-work or speculation.
4. Neither the show cause notice dated 21/10/11 nor the impugned adjudication order dated 18/1/13 record any assertion/ conclusion whatsoever as to which particular or specific taxable service the appellant had provided. In the absence of an allegation of having provided a specific taxable service in the show cause notice and in view of the failure in the adjudication order as well, neither the show cause notice nor the consequent adjudication order could be sustained.
5. Shri Amresh Jain, learned DR would strenuously contend that Revenue was handicapped and crippled by the total non-cooperative of the attitude of the appellant which failed to respond in time to the several notices issued, failed to furnish the relevant transactional documents and to assist the adjudication process in its efforts to identify the specific taxable service provided by the appellant.
6. We have noticed earlier that the show cause notice itself adverts to the fact that the appellant had provided copies of 20 work orders executed in relation to CWG Projects, particulars of which are set out in a tabular form in para 5 of the show cause notice. From the description of the works in this table, officers could have classified the several works into the appropriate taxable service which may appropriately govern rendition of these services. In any event officers are not handicapped and the Act provides ample powers including of search under Section 82 of the Act to obtain information necessary to pass a proper, disciplined and legally sustainable adjudication order. The disinclination to employ the ample investigatorial powers conferred by the Act is illustrative of gross Departmental failure and cannot afford justification for passing an incoherent and vague adjudication order. The failure to gather relevant facts for issuing a proper show cause notice cannot provide justification for a vague and incoherent show cause notice which has resulted in a serious transgression of the due process of law.
7. For the aforesaid reasons, the show cause notice dated 21/10/11 and the consequent impugned adjudication order dated 18/1/13 held to be unsustainable and quashed.
