2019 (2) TMI 1856 - AT - Service Tax

Extended period of limitation - works contract - Repair Maintenance Services - contract indicated the value of the services as also the value of the goods separately, appellant discharged service tax liability only on the value of the service - demand of service tax on value of goods as well - bonafide belief or not - demand raised on the basis of extended period of limitation - HELD THAT - An identical issue was the subject matter of the Tribunal in M/S. ELECTROTEC CONTROLS, M/S. KAVERI CONSTRUCTIONS CO., M/S. HEENA ENTERPRISES, M/S. SCIENTECS PROCESS CRONTROL VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, ALLAHABAD 2018 (9) TMI 1380 - CESTAT ALLAHABAD wherein identical services were being provided to another Thermal Power Station, Tribunal in the said order observed that appellant were duly registered with the department and were filing the ST-3 returns by showing payment of Service Tax on the value of the services as indicated in the contracts entered by them with the said Public Sector Undertaking. In such a scenario the appellant was entertaining a bona fide belief and there was no mala fide on their part so as to justifiably invoke the longer period of limitation. The demand is barred on limitation and the matter remanded to Original Adjudicating Authority to re-quantify the demand falling within the limitation period, if any. The appellant is also at liberty to raise the issue of payment of VAT in respect of the demand falling within the normal period - appeal allowed by way of remand.

Summary

Issues:
- Request for adjournment by the appellant
- Correct valuation of services and goods for service tax liability
- Invocation of longer period of limitation by the Revenue
- Entitlement to abatement and payment of VAT
- Demand being barred by limitation
- Applicability of penalties

Analysis:

The judgment by the Appellate Tribunal CESTAT ALLAHABAD involved various critical issues. Firstly, the Tribunal rejected the appellant's request for adjournment and proceeded to decide the appeal concerning the correct valuation of services and goods for service tax liability. The appellant had entered into a contract with a power station for repair and maintenance services, where the value of services and goods was separately indicated. The appellant was discharging service tax liability only on the value of the service, leading to a dispute with the Revenue.

The Revenue contended that the gross value should be considered, initiating proceedings against the appellant by invoking a longer period of limitation. The appellant claimed entitlement to abatement by paying VAT on the goods used in services, but failed to provide evidence before the Original Adjudicating Authority. The issue of demand being barred by limitation was raised, with the Lower Authorities invoking a longer period due to the appellant's failure to correctly disclose the service tax amount.

In a significant reference to a previous Tribunal order, it was noted that the appellant was registered and filing ST-3 returns in good faith based on the service value indicated in contracts. The Tribunal held that the Revenue could not justify invoking the longer period of limitation due to the appellant's bona fide belief. Consequently, the demand was held to be barred by limitation, and the matter was remanded to re-quantify the demand falling within the limitation period. Penalties imposed on the appellant were set aside due to the absence of mala fide intent.

In conclusion, the Tribunal disposed of the appeal by holding the demand as barred by limitation, remanding the matter for re-quantification within the limitation period, and allowing the appellant to raise the issue of VAT payment. The penalties imposed on the appellant were entirely set aside based on the findings of no mala fide intent.