2019 (6) TMI 1540 - AT - Service Tax

Erection Commissioning and Installation service - Construction Services other than residential complex (including commercial/industrial building or civil structure and Management Maintenance or Repair Services - VCES Declaration - demand for the period 2008-09 to 2012-13 on the basis of Income Tax returns and Form AS 26 - benefit of abatement in terms of Notification No. 1/2006-S.T. dated 1-3-2006 - HELD THAT - All the services have duly been explained with the respective amount received qua the same. Hence it cannot be presumed that sufficient evidence would not have been provided by the Appellant. Adjudicating authority has talked about going through the contract which again corroborates absence of relevant evidence as has been taken a ground for confirming the demand irrespective to a lesser extent than it was proposed. The Learned Commissioner has failed to appreciate the honesty of the appellant that wherever the value of services were not inclusive of material used or consumed appellant declared the tax payable at full applicable rate (without abatement) and where the value charged was inclusive of material used and consumed in rendering the services abatement was claimed. There is no doubt that the work orders were for up-keeping of lawns parks with material i.e. supply of manures (goat difng/compost khad) pesticides insecticides flower pots in different sizes grass cutting machine plastic pipes plants etc. These are the items on which no sales tax is payable however the Thermal Power Station deducted TDS under Works Contract Tax (WCT) as per Sales Tax/VAT Rules thus the abatement was claimed only on the value of services on which TDS under WCT Rules was deducted. Copies of work orders etc. in relation to maintenance and up-keeping of lawns parks. The demand of 22, 36, 44/ has been confirmed without appreciating the relevant documents and rather in self despite the adjudicating as is discussed above. The adjudicating authority has also observed that the difference in Tax liability is mostly on account of calculation by availing abatement whereas it was not admissible to them. The mistake of the Appellant for short declaration of tax liability is rather held to be a bona fide mistake on the part of the Appellant. The declaration is denied to be a false declaration. The confirmation of penalty still under Section 78 of Finance Act 1994 therefore is held to be contradictory to the said observations. Matter remanded back to the adjudicating authority for de novo adjudication of the entire demand however keeping in view impugned adjudication after due consideration of the documents on record specifically the certificate and other documents for the abatements as well w.r.t. as the threshold limit of the preceding year - Appeal allowed by way of remand.

Issues Involved:
1. Validity of VCES declaration.
2. Eligibility for exemptions and abatements.
3. Calculation of taxable value and service tax liability.
4. Imposition of interest and penalties.

Detailed Analysis:

1. Validity of VCES Declaration:
The Appellant filed a declaration under the Service Tax Voluntary Compliance Encouragement Scheme (VCES), declaring tax dues of ?5,27,916/- for the period 2010-11 to December. The department scrutinized this declaration and concluded that the Appellant was liable to pay ?21,98,813/- for the period 2008-09 to 2012-13. The adjudicating authority did not reject the VCES declaration but confirmed a demand of ?2,23,644/- along with penalties and interest. The Appellant argued that their VCES declaration was accurate and that the services provided to local authorities were not liable to tax.

2. Eligibility for Exemptions and Abatements:
The Appellant contended that they were entitled to various exemptions and abatements, including:
- Exemption for services provided to local authorities.
- Abatement for services rendered for finishing services like white-washing and painting.
- Exemption for the construction of single residential units.
The adjudicating authority partially accepted these claims but denied certain abatements and exemptions due to the lack of documentary evidence. Specifically, the authority denied the 67% abatement under Notification No. 1/2006-S.T. and the threshold exemption limit of ?10 lakhs for the preceding year 2007-08.

3. Calculation of Taxable Value and Service Tax Liability:
The adjudicating authority calculated the Appellant's service tax liability based on the gross receipts from various services. The Appellant argued that the authority erred in considering the threshold limit of ?10 lakhs for the year 2007-08 and failed to consider the CE certificate for construction of private residential units. The authority denied the abatement for maintenance and up-keeping of lawns and parks, stating that the Appellant did not provide separate values for materials used. The Appellant provided evidence that the materials used were included in the contract value and that TDS under Works Contract Tax (WCT) was deducted.

4. Imposition of Interest and Penalties:
The adjudicating authority imposed penalties under Section 78 and interest under Section 75 of the Finance Act, 1994. The Appellant argued that the confirmation of ?2,23,644/- was unsustainable as they had already deposited more than their tax liability. The Tribunal observed that the adjudicating authority failed to appreciate the relevant documents and that the short declaration of tax liability was a bona fide mistake. The Tribunal held that the imposition of penalties was contradictory to the authority's observations and remanded the matter for de novo adjudication, considering the documents on record.

Conclusion:
The Tribunal allowed the appeal by way of remand, directing the adjudicating authority to re-examine the entire demand, considering the documents for abatements and threshold limits. The issue of interest and penalties was also to be decided afresh.

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