2018 (9) TMI 1500 - AT - Service Tax

Classification of services - activity involved supply of soil excavation of soil installation and operation of bores for dewatering hiring of dewatering pumps with complete installation commissioning and maintenance at different projects providing dewatering etc. for various construction companies - whether classifiable under Commercial Construction Services or under Site Formation Clearance and other services? - demand raised invoking extended period of limitation. Held that - There is no dispute that the appellants were duly registered and were filing ST-3 return there is no suppression or misstatement on the part of the appellant with an intention to evade payment of duty can be alleged so as to justifiably invoke the longer period of limitation. It seems to be a change of opinion of the revenue as regards the classification of the services and there is actually no evidence to reflect that the tax was being paid under the construction services with any malafide intention. All the facts were in knowledge of the revenue - the extended period is not available to the revenue. As the appeal is allowed on limitation merits of case have not gone through - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services provided by the appellant-assessee under the category of "Site Formation, Clearance" for service tax purposes.
2. Invocation of longer period of limitation for demand raised against the appellant.
3. Imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994.

Analysis:

Issue 1: Classification of Services
The appellant was engaged in providing Commercial Construction Services and was registered with the Department. Initially, they were paying service tax after availing a 67% abatement and filing ST-3 returns. However, the revenue later contended that the services provided by the appellant also included activities like supply of soil, excavation, installation of bores for dewatering, etc., falling under "Site Formation, Clearance" services without abatement. A show cause notice was issued demanding around ?2.17 crores, with a balance of ?94,34,660/- confirmed against the appellant. The appellant challenged this classification and demand on merits and limitation.

Issue 2: Longer Period of Limitation
The revenue invoked the longer period of limitation for the demand raised against the appellant for the period from 01.10.2006 to 31.03.2011. The appellant argued that the demand was time-barred, emphasizing that they were registered under Commercial and Industrial Construction Services, paying taxes accordingly, and filing returns. The Tribunal found no suppression or misstatement by the appellant to evade duty payment, attributing the revenue's change in opinion on service classification as the reason for the demand. Consequently, the appeal was allowed on the point of limitation.

Issue 3: Imposition of Penalty
The revenue appealed against the imposition of penalty under Section 76, 77 & 78 of the Finance Act, 1994. However, since the appellant's appeal was allowed on limitation grounds and the demand and penalty were set aside, the revenue's appeal on penalty became infructuous and was rejected. Both appeals were disposed of accordingly, with no examination of the merits of the case due to the limitation issue being determinative.

This judgment highlights the importance of correctly classifying services for tax purposes, the significance of adhering to limitation periods for raising demands, and the necessity of evidence to support allegations of duty evasion.