2017 (11) TMI 1777 - Commission - Service Tax

Non-payment of service tax - Mining and Civil Construction Services - April, 2013 to March, 2015 - Idle Charges - Declared Services in terms of 66E of the Act - Point of Taxation Rules, 2011 - Held that - The applicant paid ₹ 4,16,69,933/- (Rs. 3,39,16,856/- through Cenvat credit and ₹ 77,53,077/- through cash) before issuance of show cause notice and the Service Tax of ₹ 61,64,541/- demanded on Idle Charges subsequently. The applicant also paid ₹ 10,64,578/- towards interest for the delayed payment of Service Tax. Non-receipt of consideration could not be a ground for non-payment of Service Tax after the advent of the system of payment of Service Tax on Accrual Basis in terms of Point of Taxation Rules, 2011. Hence, the applicant is liable to pay Service Tax of ₹ 61,64,541/- on Idle Charges with appropriate interest - However, as the jurisdictional Commissioner, in his report dated 17-10-2017, had reiterated his earlier stand with regard to taxability of Idle Charges , which had already been addressed by the applicant during the personal hearing, it was not felt necessary to provide the copy of Commissioner s report dated 17-10-2017 since no new point has been put forth by the Commissioner. Further, as regards eligibility to Cenvat credit for adjustment towards the demanded amount, the Commissioner had conceded to the point of the applicant and consequently, the interest liability is lessened, which is discussed separately in this order. Therefore, the total Service Tax liability is settled at ₹ 4,78,34,474/-, as demanded in the show cause notice. The applicant having paid this amount, no further payment of Service Tax is required. Liability of Interest - Held that - The department, having accepted the contention of the applicant after verification, that the applicant is entitled to set off his liability of ₹ 3,39,16,856/- from out of his Cenvat Credit Account, the consequent interest liability of ₹ 52,89,585/- on this score is extinguished - Further, the applicant, in his submission on 12-9-2017, had also contended that there was an error in computation of interest liability in the department s working with reference to the number of days for 30% slab rate - Therefore, the applicant is required to work out the interest liability afresh in line with the above findings and to the satisfaction of the jurisdictional Commissioner. The sum of ₹ 10,64,578/- already paid by the applicant towards interest shall be adjusted against the total interest liability. Penalty - Held that - This is a case of non-payment of Service Tax on Mining and Civil Construction Services. The applicant contested the demand of Service Tax on Idle Charges alone and accepted the remaining liability. However, the applicant had paid the entire demanded amount of ₹ 4,78,34,474/- including Service Tax on Idle Charges - Financial constraints could not be accepted as a reason for non-payment of fiscal liabilities and non-filing of returns within the prescribed time. Hence, the applicant is liable to penalties as proposed in the show cause notice - The eligibility of Cenvat credit to the applicant for adjustment towards the admitted liability had also been accepted by the jurisdictional Commissioner and consequently, the interest liability is also reduced to the extent of Cenvat credit - the Bench is inclined to grant partial relief to the applicant with regard to penalty. The Bench considers it a fit case for grant of immunity from prosecution to the applicant. The immunities are granted in terms of Section 32K of the Central Excise Act, 1944, as made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994. If the applicant fails to pay the sum ordered as above, the immunities granted shall stand withdrawn.

Issues Involved:
1. Non-payment of Service Tax on mining and civil construction services.
2. Service Tax liability on "Idle Charges."
3. Calculation of interest on delayed payment of Service Tax.
4. Imposition of penalties and prosecution.

Issue-wise Detailed Analysis:

1. Non-payment of Service Tax on mining and civil construction services:
The applicant, registered for various services including "Real Estate Agent Service" and "Mining of mineral, Oil or Gas Service," was investigated for non-payment of Service Tax on mining and civil construction services provided to M/s. TBAPL. The investigation revealed that the applicant had not paid Service Tax amounting to ?4,16,69,933/- for the period from April 2013 to March 2015. The applicant admitted the liability and paid the amount before the issuance of the show cause notice. The applicant cited financial constraints as the reason for the delay in payment, stating that the Service Tax payable was reflected in the financial statements, and there was no intent to evade tax.

2. Service Tax liability on "Idle Charges":
The dispute centered on the Service Tax liability of ?61,64,541/- on "Idle Charges" billed to M/s. TBAPL. The applicant argued that "Idle Charges" were damages/losses due to machinery being idle and not permitted to be taken out by M/s. TBAPL. The applicant contended that no Service Tax was leviable on these charges. However, the department maintained that the "Idle Charges" were taxable as "Declared Services" under Section 66E of the Finance Act, 1994, and the applicant was liable to pay Service Tax upon raising the invoice. The Bench agreed with the department, stating that Service Tax must be paid when the invoice is issued, regardless of whether payment is received from the service receiver.

3. Calculation of interest on delayed payment of Service Tax:
The interest liability was contested by the applicant, who claimed that the interest payable was only ?9,17,691/-, while the department calculated it to be ?91,24,149/-. The difference arose due to the applicant's non-admission of Service Tax liability on "Idle Charges" and the department's initial objection to the applicant's eligibility for Cenvat credit. The Bench settled that the applicant is liable for interest on the "Idle Charges" and acknowledged the eligibility of Cenvat credit, reducing the interest liability. The applicant was directed to recalculate the interest liability to the satisfaction of the jurisdictional Commissioner and pay the amount within thirty days.

4. Imposition of penalties and prosecution:
The applicant was found liable for penalties due to non-payment of Service Tax and non-filing of returns within the prescribed time. However, considering the applicant's cooperation and payment of the entire demanded amount, the Bench granted partial relief on penalties. The Bench imposed a penalty of ?10,00,000/- and granted immunity from prosecution, subject to the payment of the ordered amounts within thirty days.

Order:
1. The additional Service Tax amount is settled at ?4,78,34,474/-, which has already been paid and is appropriated towards Service Tax liability.
2. The applicant is directed to work out the interest liability afresh and pay it within thirty days.
3. A penalty of ?10,00,000/- is imposed on the applicant.
4. Immunity from prosecution is granted, subject to the payment of the ordered amounts within thirty days.
5. The immunities granted are liable to be withdrawn if any material particulars are found to be withheld or false evidence is given.

The Bench's decision ensures compliance with the tax laws while providing some relief to the applicant in terms of penalties and prosecution.

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