2018 (8) TMI 1458 - AT - Service Tax

Supply of Tangible Goods Service - Extended period of Limitation - additional consideration received on account of receipt of HSD at concessional rate - proviso to Section 73(1) of the Finance Act, 1994 - demand of Service Tax with Interest and penalty. Quantification of demand - benefit of cum tax value as gross value - Held that - In respect of M/s Kala Mines and Minerals they have charged taxable value on the basis of the statement of machinery working hours after deducting the TDS and HSD supplied at concessional rate. Thus, the liability of payment of service tax is not in dispute - the Noticee is liable to pay Service Tax of ₹ 88,49,572/- on the gross payment of ₹ 8,05,22,947/- received by them during the period May 2008 to March 2013. Invocation of extended period - Penalty - Held that - The fact about receipt of payment from KMM is not in dispute. They have also during the relevant period failed to file the ST-3 returns in the manner as prescribed thereby contravening the provisions of Section 70 of Chapter V of Finance Act read with Rule 7 of the Service Tax Rules, 994. They have also suppressed the fact about provision of taxable service and value of taxable service so provided by them with the intention to evade payment of Service Tax - extended period of limitation as provided by proviso to Section 73(1) of Finance Act 1994 has been correctly invoked in the present case - Also since all the ingredients for imposing penalty under section 78 are present in the matter the imposition of penalty equivalent to the quantum of tax evaded cannot be faulted with. Demand of Service Tax on concessional supply of HSD to the Appellant - Held that - The issue in this aspect is squarely covered by the decision of larger bench in case of Bhayana Builders 2013 (9) TMI 294 - CESTAT NEW DELHI (LB) , where it was held that The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994 - the demand of tax in respect of such concessional supply of HSD is dropped and also the penalty amount received to that extent. Appeal allowed in part.

Summary

Issues:
1. Demand of service tax for "Supply of Tangible Goods Service" and additional consideration received on account of HSD supply.
2. Appellant's challenge against the order in original on three counts: invoking the extended period for demanding service tax, arbitrary determination of taxable service value, and demand of service tax on HSD supply at concessional rate.

Analysis:
1. The order confirmed the demand for service tax on the "Supply of Tangible Goods Service" and additional consideration received on HSD supply, invoking Section 73(1) of the Finance Act, 1994. The appellant was found to have collected service tax from clients but failed to deposit it, leading to evasion. The order imposed penalties under Sections 77 and 78, with a reduction option if the service tax was paid within 30 days.

2. The appellant challenged the order on three grounds. Firstly, contesting the invocation of the extended period for demanding service tax. The appellant argued that the extended period conditions were not met. Secondly, disputing the arbitrary determination of the taxable service value, claiming it was exaggerated. Lastly, objecting to the demand for service tax on HSD supply at a concessional rate.

3. The appellant's representative argued that the appellant had paid a significant amount before investigations began and should not be penalized based on those payments. They also cited precedents to support their contentions regarding the HSD supply and cum tax value calculation.

4. The revenue's representative supported the order, emphasizing the appellant's breach of trust by collecting but not depositing service tax. They argued that the appellant's actions warranted penalties under Section 78 due to non-payment and non-filing of returns.

5. The Tribunal considered submissions from both sides and reviewed the records. It noted the appellant's collection of service tax from clients but failure to deposit it. The Tribunal upheld the demand for service tax on the gross taxable value received by the appellant, rejecting the appellant's arguments regarding cum tax value calculation.

6. The Tribunal also rejected the appellant's challenge against the invocation of the extended period, citing the appellant's failure to file returns and suppress information. The penalty under Section 78 was deemed justified based on the appellant's conduct. However, the demand for service tax on concessional HSD supply was dropped, following a precedent decision.

7. Ultimately, the Tribunal dismissed the appeal except for the demand related to the concessional HSD supply and the consequential penalty. The decision was pronounced in court, concluding the legal proceedings.