2018 (8) TMI 485 - AT - Service Tax

Classification of services - the appellant is rendered by various services, which the Revenue is attempting to classify under the Builders Special Services classifiable under Chapter Heading 65(105)(zzzu) of the Finance Act,1994 - Principles of Natural Justice - Held that - On going through the various documents enclosed in the appeal memorandum, as such, agreement of sale, bank statement, bills provided by the various vendors, it is found that the appellant has returned excess amount to the flat owners after collection of various fees, as such, Association formation deposit, Common meter deposit, common maintenance deposit, common electricity charges etc. The same has been rendered after collection of actual amount spent for payment of this deposit/fees/base area on behalf of 120 flat owners - thus, this payments are only actual charges paid to the various statutory bodies and for electricity maintenance in common area and the same is therefore, not liable to service tax and if so, abatement is available to them under the Service Tax Law. Principles of Natural Justice - Held that - The adjudicating authority has passed not speaking order without discussing the submissions made by the Appellant and passed very cryptic order and has not quantified the demand in respect of penalty imposed under Sections 75, 77 of the Act and Rule 15 of Cenvat Credit Rules, 2004 - the Commissioner (Appeals) has also imposed penalty on the appellant, which was not specified by the lower adjudicating authority without affording an opportunity by way of issuance of show-cause notice before imposition of such penalty. Its itself amount to violation of principle of natural justice and the order is liable to be set aside on this count also. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of service tax as a service provider and recipient
2. Wrong availing of Cenvat credit
3. Classification of services under Builders Special Services
4. Imposition of penalty under Sections 75, 77 of the Act and Rule 15 of Cenvat Credit Rules, 2004
5. Violation of principles of natural justice in imposing penalty

Analysis:

1. Liability of service tax as a service provider and recipient:
The appellant was alleged to have failed in discharging service tax liability as a service provider, leading to a demand of ?4,51,936. The Department contended that the appellant did not include certain amounts in the service tax calculation related to services provided under different heads. However, the Tribunal found that the appellant had discharged the service tax liability on the total sale price but not on specific amounts received under different heads. The Tribunal concluded that the amounts collected were for actual charges paid to statutory bodies and for electricity maintenance, which were not liable to service tax.

2. Wrong availing of Cenvat credit:
The appellant was accused of wrongly availing and utilizing Cenvat credit of ?46,814 in contravention of the Cenvat Credit Rules, 2004. The Tribunal noted that the adjudicating authority's order lacked specificity and failed to quantify the demand for penalties correctly. The Commissioner of Appeals imposed penalties without affording the appellant an opportunity through a show-cause notice, violating the principles of natural justice. The Tribunal set aside the penalties imposed under Sections 75, 77 of the Act, and Rule 15 of the Cenvat Credit Rules, 2004.

3. Classification of services under Builders Special Services:
The Revenue attempted to classify the services under Builders Special Services, but the Tribunal found that the appellant had returned excess amounts to flat owners after collecting various fees. These fees included Association formation deposit, common meter deposit, common maintenance deposit, and common electricity charges. The Tribunal determined that these payments were actual charges paid to statutory bodies and were not liable to service tax. The appellant was found not liable to pay service tax on the amounts indicated by the lower adjudicating authority.

4. Violation of principles of natural justice in imposing penalty:
The Tribunal criticized the lower adjudicating authority for passing a non-speaking order without discussing the appellant's submissions. The lack of quantification of penalties and imposition without a show-cause notice violated the principles of natural justice. The Tribunal set aside the penalties imposed by the Commissioner of Appeals due to this procedural flaw.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and ruling in favor of the appellant on all the contested issues.