2015 (11) TMI 907 - AT - Service Tax

Demand of service tax under various categories, by vivisecting the works contract - port services - benefit of abatement to the extent of 60% - benefit of CENVAT credit - Held that - Whereas the appellant may have a prima facie case in respect of various issues raised by the learned advocate, but it cannot be said at this stage that no tax liability would be fastened on them, whether under the category on which the Commissioner has adjudicated or under any other category of services. - services were required to be assessed to the tax under the works contract after 01/06/2007 as also by appreciating the fact that the works contract has been held to be vivisectable prior to 01/06/2007 as per the Tribunal s Larger Bench decision, as also by appreciating the fact that the services in the two show-cause notices falling within the limitation period may not be strictly port services and if the same are held to be works contract services, the same would be entitled to exemption notification as also by appreciating the fact that the appellant has not pleaded any financial hardship and taking into account the decision of the Hon ble Rajasthan High Court in the case of Arjun Industries referred 2015 (6) TMI 110 - RAJASTHAN HIGH COURT , we deem it to accept the offer made by the learned advocate as fair and just and accordingly we direct them to deposit an amount of ₹ 10 crores - stay granted partly.

Summary

Issues involved:
Service tax demand under various categories, penalties imposed, vivisection of works contract, demand under port services category, applicability of notifications, existence of port prior to construction, knowledge of tax liabilities, financial hardship plea, Section 35F of Central Excise Act, 1944 applicability to stay applications, predeposit amount determination, compliance verification, final decision date.

Analysis:

1. Service Tax Demand Under Various Categories:
The judgment involves two matters where service tax demands of around Rs. 241 crores were confirmed against the applicant, along with penalties imposed. The appellant was engaged in engineering, procurement, and construction of a port with a company. The demands were raised under different categories through show-cause notices covering various periods. The appellant argued that vivisection of the works contract was necessary, especially before and after the introduction of works contract services. The appellant also highlighted the benefit of abatement and CENVAT credit under works contract services, which the Commissioner did not quantify. The appellant emphasized that certain notifications exempted construction of the port from service tax liability, which the Commissioner did not consider.

2. Demand Under Port Services Category:
The demand under the port services category was contested by the appellant, who argued that the services provided were related to the construction of the port and not services within an existing port. The appellant claimed exemption under specific notifications related to repair, renovation, and construction of ports, which the adjudication authority did not grant. The Revenue countered by stating that the port was in existence before the construction by the appellant, and thus, the appellant's argument lacked merit.

3. Knowledge of Tax Liabilities and Financial Hardship:
The Revenue argued that the appellant, being a registered service tax payer for other services, should have been aware of their tax liabilities for the disputed services. The Revenue claimed that the appellant's failure to disclose this reflected mala fides, justifying the longer period of limitation invoked. The appellant did not plead financial hardship, but offered to deposit a specific amount under Section 35F of the Central Excise Act, 1944, which the Revenue contested based on the timing of the stay petition.

4. Predeposit Amount Determination and Compliance Verification:
The appellant offered to deposit Rs. 10 crores, citing the ceiling amount under Section 35F. The Revenue argued against the applicability of Section 35F to pending stay applications. The appellant referred to a High Court decision to support their predeposit offer. The Tribunal accepted the appellant's offer and directed the deposit within a specified period, with a compliance verification scheduled.

5. Final Decision Date:
Due to the significant amount involved, the appeals were set for a final decision on a specific date, subject to compliance verification. The predeposit of the balance tax amount, interest, and penalties was dispensed with upon the directed deposit. The recoveries were stayed pending compliance verification.

This detailed analysis covers the key issues addressed in the judgment, including the arguments presented by both parties and the Tribunal's decisions on each issue.