2018 (4) TMI 1166 - Commission - Service Tax

Maintainability of application before Settlement Commission - VCES declaration - works contract service - Composition Scheme - whether Settlement Commission is the right forum to decide the issue involved in the appeal? - Held that - though the applicant has not challenged the classification of services rendered, per se, it is apparent that the applicant having paid Service Tax under particular category at the full rate without any concession or exemption now seeks to admit a lesser tax liability for major portion of SCN period by opting for Composition Scheme leading to claim of excess payment of tax during the period from October, 2007 to March, 2012 - para 9.7 of Board s clarification dated 22-5-2007 that under the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 notified under Notification No. 32/2007-S.T., dated 22-5-2007 the Service Provider has to exercise an option prior to payment of Service Tax which is mandatory and clearly not a procedural lapse as claimed by the applicant. The Bench is of the considered view that Settlement Commission is not the right forum to decide upon contentious issues, by evaluating the evidences let in by the rival parties to the proceedings. Such an act would tantamount to the Settlement Commission adjudicating upon the notice, based on the submissions made by the rival parties to the proceedings. Further, in view of the complexities involved in the case, where there seems to be no convergence of views on the correct rate of tax, value on which tax is to be paid for determination of the correct tax liability, a detailed appreciation of all the facts and evidences is required, which could be best done only in departmental adjudication - It is now a well settled proposition that the Settlement Commission is not an adjudicating authority. It is only an arbitration forum where a dispute is settled in the interest of both the parties within the framework of law. The Bench, by virtue of the powers vested in it in terms of Section 32L of the Central Excise Act, 1944, made applicable to Service Tax matters under Section 83 of the Finance Act, 1994 sends the case back to the Adjudicating Authority for adjudication in accordance with the provisions of the law - matter on adjudication.

Issues Involved:
1. Demand of Service Tax for the period 10/2007 to 12/2012.
2. Appropriation of Service Tax paid under VCES.
3. Demand for interest on Service Tax.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
5. Eligibility for immunity from penalty and interest under VCES, 2013.
6. Classification of services under "Works Contract Service" and eligibility for concessional rate under Composition Scheme.

Issue-wise Analysis:

1. Demand of Service Tax for the period 10/2007 to 12/2012:
The Show Cause Notice (SCN) demanded Service Tax of ?20,01,441/- for the period 10/2007 to 12/2012. The applicant admitted a Service Tax liability of ?5,28,146/- and interest of ?4,07,976/-. The applicant accepted the demand of ?98,266/- for Renting of Immovable Property but contested the remaining demand of ?19,03,175/- for Labour Charges/Service Charges/AMC, accepting only ?4,29,880/-. The applicant argued that they were engaged in Erection, Commissioning, and Installation services, which involved the supply of materials, and claimed eligibility for the concessional rate under the Works Contract Service.

2. Appropriation of Service Tax paid under VCES:
The SCN proposed the appropriation of ?1,86,280/- paid by the applicant under VCES. The applicant had declared a Service Tax liability of ?1,86,280/- in their VCES-I declaration, which was found to be substantially false as they had not fully declared their Service Tax liability for the period 10/2007 to 12/2012. The applicant's suppression of substantial tax liability in the VCES-I application rendered them ineligible for immunity from penalty and interest under VCES, 2013.

3. Demand for interest on Service Tax:
The SCN demanded interest on the Service Tax paid under Section 75 of the Finance Act, 1994. The applicant admitted and paid interest of ?4,07,976/- along with the Service Tax liability of ?5,28,146/-.

4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The SCN proposed the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The applicant prayed for total immunity from the imposition of penalty and prosecution, citing their mental agony and hardship. They also requested a waiver of the late fee for the belated filing of ST-3 returns due to extreme financial trouble.

5. Eligibility for immunity from penalty and interest under VCES, 2013:
The applicant's VCES-I declaration was found to be substantially false, and they had not made a true and full disclosure of their Service Tax liability. Consequently, they were deemed ineligible for immunity from penalty and interest under VCES, 2013.

6. Classification of services under "Works Contract Service" and eligibility for concessional rate under Composition Scheme:
The applicant claimed that their services should be classified under "Works Contract Service" and that they were eligible for the concessional rate under the Composition Scheme in terms of Notification No. 32/2007-ST, dated 22-5-2007. The jurisdictional Commissioner contended that the applicant had not produced sufficient evidence to prove that they were rendering "Works Contract Services" and had not exercised the option for the Composition Scheme before paying Service Tax at the full rate. The Bench found that the applicant had not made any additional disclosure of Service Tax liability and had only sought to reduce their tax liability by belatedly exercising the option under the Composition Scheme, which should have been done at the time of payment of Service Tax.

Findings and Decision of the Bench:
The Bench observed that the applicant had not made a true and full disclosure of their correct tax liability and that the case involved disputed questions of fact and law. The Bench concluded that the Settlement Commission is not the right forum to decide upon such contentious issues and that the case should be adjudicated by the Proper Officer after a detailed appreciation of all the facts and evidence. Accordingly, the Bench ordered the case to be sent back to the Adjudicating Authority for adjudication in accordance with the provisions of the law.

Order:
The Bench, by virtue of the powers vested in it under Section 32L of the Central Excise Act, 1944, made applicable to Service Tax matters under Section 83 of the Finance Act, 1994, sent the case back to the Adjudicating Authority for adjudication. The adjudicating authority was directed to decide the case as if no application for settlement had been filed by the applicant.

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