Jyoti Sarup Mittal Vs Commissioner of Central Tax (CESTAT Delhi)
Introduction: The case of Jyoti Sarup Mittal vs Commissioner of Central Tax (CESTAT Delhi) delves into the nuanced realm of works contracts, tax statutes, and exemptions. This article analyzes key aspects such as auditorium construction, works contract services, exemptions for governmental authorities, arbitration awards, and the role of Form 26AS entries.
1. Interpretation of Tax Statute: Auditorium Construction Exempted Pre-2012; Strict Construction Advocated:
For the period from 1.6.2007 up to 2012, works contracts could be taxed only if they fell under clause 65 (105)(zzzza) and only under this clause. The scope of this clause was limited and it did not include all composite works contracts involving supply or deemed supply of goods and rendering services but only some such services. Insofar as the construction of a building or structure is concerned, this clause applies to findings for commercial purposes. We do not agree with the contention of the Revenue that the auditorium constructed in the university should be considered as a commercial structure. Even if the reasoning of the Commissioner, that it can also be used for commercial purposes is accepted, the essential nature of the building is not commercial. Therefore, it does not fall under section 65(105)(zzzza). The charging section of a tax statute must be strictly constructed and in case of any doubt, the benefit of doubt must go in favour of the assessee and against the Revenue.
As far as the demand for the period after 2012 (post negative list period) is concerned, as submitted by the learned consultant, inter alia, the following services were exempted by notification no. 25/2012:
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;
(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(c) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment;
(d) canal, dam or other irrigation works;……..
MDU is a university created by an Act of state legislature and is meant to provide education. Hence, we find that the service of construction of the auditorium in MDU is exempted during after 2012 also.
2. Works Contract Service: Abatement for Goods Used; Scope Beyond Service Tax:
The undisputed fact is that this contract was a works contract requiring the rendering of service and also transfer or deemed transfer of goods. The demand has also been confirmed under works contract service. Therefore, the appellant will be entitled to abatement towards the materials used in the contract. No service tax can be levied on the value of the goods transferred or deemed transferred while rendering the service because it falls outside the scope of service tax and falls within the scope of the sales tax/VAT levied by the State. It is immaterial whether the VAT was leviable or not, whether it was levied or not and whether it was paid or not. If VAT was payable and not paid, it is for the state authorities to take action. If it was exempted, of course, the appellant does not have to pay it. Under no circumstances can the service tax be levied on the value of the goods transferred. In case of indivisible works contracts where abatement is available towards the value of the goods used, such abatement cannot be denied on the ground that there is no evidence that VAT has been paid. We, therefore, find that the appellant was liable to pay service tax after abatement on the services rendered under this contract.
3. Exemption for Governmental Authority: EIL’s Subcontractor Status and Income Tax Building:
Notification no. 25/2012-ST (S.No. 12A) exempts services rendered to a governmental authority on civil structures other than those meant for commerce, industry or any other business or profession. The building in this case is Income Tax building and it squarely falls under this definition. Therefore, EIL, as a contractor, will get exemption under S. 12A. Further, as per S.No. 29 (h) of the same notification, the appellant as a sub-contractor of EIL will get exempted. Therefore, no demand of service tax can be sustained on the services rendered in this contract.
4. Arbitration Award and Service Consideration: Commissioner’s Lack of Evidence Critique:
Addressing a demand based on an amount received from CPWD, this section challenges the Commissioner’s decision, emphasizing the department’s responsibility to prove that the received amount was consideration for a service. It argues that the decision is unsustainable and calls for setting aside the demand on this ground.4. The demand at S.No (4) is on an amount which the appellant claims to have received from CPWD not for any service which it rendered but as an award in an arbitration proceedings. This contention was not accepted by the Commissioner on the ground that the appellant had not produced any evidence. Such a decision is not sustainable because it is for the department to prove that the appellant had received consideration for a service and it is not open to the department to charge service tax on any amount received by the assessee if it cannot establish that the amount was received as a consideration for a service which it had rendered. Therefore, the demand on this ground needs to be set aside.
5. Form 26AS Entries: Demanding Consideration for Taxable Service:
The demand at S.No. (5) is on the basis that as per Form 26AS of the appellant, it had received some amounts. Unless the amounts so received are a consideration for a taxable service rendered, no service tax can be levied. Therefore, the demand needs to be set aside.
Conclusion: The CESTAT Delhi’s verdict in the Jyoti Sarup Mittal case brings forth significant insights into the taxation landscape concerning works contracts. As the analysis unfolds, it becomes evident that a meticulous understanding of tax statutes, exemptions, and burdens of proof is crucial for navigating the intricacies of service tax assessments.
FULL TEXT OF THE CESTAT DELHI ORDER
M/s. Jyoti Sarup Mittal, Lajpat Nagar1 filed these five appeals to assail the orders passed by the Commissioner. All these appeals deal with the same issues and hence they have been heard and are being disposed of together. The details are as follows:
Service Tax Appeal no. 50097 of 2022
