2018 (9) TMI 913 - AT - Service Tax

Liability of Service tax - Commercial and Industrial Construction Service - Business Auxiliary Service - Man Power Recruitment and Supply Agency Service etc - It appeared to the department that the appellant had not taken out service tax registration on such services in time and had not paid appropriate service tax on the taxable value of service rendered by him, on the presumption that services rendered by him would not attract service tax. Commercial & Industrial Construction Service - Held that - For the period from 10.09.2004 to 30.04.2006, in view of the law laid down by the Hon ble Apex Court in the judgment on L & T Ltd. 2015 (8) TMI 749 - SUPREME COURT , there cannot be any service tax liability on this activity - demand set aside. Demand raised under BAS for the period 16.06.2005 to 30.09.2006 - Held that - If job work done is not amounting to manufacture, then service tax is leviable on such job-work activities - the original authority in para-21 of the adjudication order has clearly brought out that the work carried out by the appellant are welding, framing and turning works on metal products which do not amount to manufacture and hence such services are correctly classifiable under BAS and liable for payment of service tax - demand upheld. Penalties - Held that - More than half of the confirmed demand amounting to ₹ 1,64,607/- under CICS has been found as unsustainable - Further, even in respect of taxability on job work, there was indeed some confusion in the matter especially and whether process itself amounted to manufacture was in dispute - penalties unjustified. Appeal allowed in part.

Summary

Issues:
1. Service tax liability under Commercial and Industrial Construction Service (CICS) and Business Auxiliary Service (BAS).
2. Suppression of facts and invocation of longer period of limitation.
3. Applicability of service tax on job work as an intermediate process in the manufacture of goods.
4. Penalties imposed under Sections 76, 77, and 78 of the Act.

Analysis:

Issue 1: Service tax liability under CICS and BAS
The appellant was providing taxable services under CICS, BAS, and other categories. The department alleged non-payment of service tax under CICS and BAS due to the appellant's failure to register and pay service tax on time. A show-cause notice (SCN) was issued, proposing a service tax demand along with penalties. The original authority and Commissioner (Appeals) upheld the demand. The appellant challenged this decision.

Issue 2: Suppression of facts and limitation period
During the hearing, the appellant's counsel argued against the suppression of facts and the invocation of a longer limitation period. Citing a judgment by the Hon'ble Apex Court, the counsel contended that no service tax liability existed under CICS for the relevant period.

Issue 3: Applicability of service tax on job work
The appellant's counsel argued that job work done by the appellant, which involved manufacturing processes subject to excise duty, did not attract service tax. The counsel highlighted that the appellant paid service tax post an amendment covering "persons" as service providers.

Issue 4: Penalties under Sections 76, 77, and 78
The penalties imposed by the adjudicating authority were upheld by the lower appellate authority. However, the Tribunal found that a significant portion of the demand under CICS was unsustainable, justifying the set-aside of penalties. Regarding the taxability of job work, the confusion surrounding whether the process amounted to manufacture led the Tribunal to conclude that penalties were unjustified. As a result, the penalties were set aside.

In conclusion, the Tribunal partly allowed the appeal by setting aside the demand under CICS and penalties while upholding the demand under BAS for the relevant period.