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2019 (3) TMI 1232 - AT - Service TaxLiability of service tax with interest - construction services provided to L&T for On-shore Terminal Project - Held that - Although appellants therein had urged various contentions on facts and in law seeking to distinguish the ratio of the Afcons Infrastructure (supra) the Tribunal in para-15 has made it clear that they were not dealing with the issue as the matter is being remanded. In the circumstances, there cannot be any proposition that Tribunal in L&T (supra) have departed from the ratio laid down in Afcons (supra) or that they have differed from it. Even though the Tribunal has remanded the matter to the adjudicating authority to determine the classification, Tribunal has also directed the adjudicating authority to take into account CESTAT Mumbai decision in AFCONS INFRASTRUCTURE LTD. VERSUS COMMISSIONER 2016 (2) TMI 1223 - BOMBAY HIGH COURT - there is no ground for remand as prayed by the Ld. Advocate - there is also no infirmity in the demand of ₹ 2,49,31,259/- with interest and equal penalty imposed under Section 78 of the Act. Imposition of penalty u/s 78 - Held that - This apart, the very fact that the issue has been mired in litigation for quite some time and only by the Afcons decision (supra) has it been decided by the Tribunal that OT is not a transport terminal for the purposes of Section 65 (25b) of the Finance Act, 1994, and appeal against the Afcons decision has been admitted by the Hon ble High Court of Bombay 2016 (2) TMI 1223 - BOMBAY HIGH COURT , there is a case for setting aside penalties imposed on the appellant in respect of this demand - penalties set aside. Penalty u/s 78 in respect of delayed payment of service tax in respect of contracts other than to L&T - Held that - Considering that the related demand itself may have been put to question in view the Hon ble Supreme Court judgment in L&T 2015 (8) TMI 749 - SUPREME COURT which was pronounced by the Apex Court in October 2015, the imposition of penalty under Section of the Act is unjustified and requires to be set aside Liability of service tax - interest on the value of goods and materials supplied by clients / customers to the appellants free of cost - Held that - Consequent to the ratio laid down by the Hon ble Apex Court in the case of CST Vs Bhayana Builders (P) Ltd. 2018 (2) TMI 1325 - SUPREME COURT OF INDIA , the value which is not part of the contract between service provider and the service recipient has no relevance in the determination of the value of taxable service provided by the service provider - demand set aside. Appeal disposed off
Issues Involved:
1. Service tax liability of ?2,49,31,259/- for construction services provided to L&T for On-shore Terminal Project. 2. Penalty of ?2,49,31,259/- imposed by the adjudicating authority. 3. Penalty of ?1,59,53,404/- imposed under Section 78 for delayed payment of service tax. 4. Service tax liability of ?45,28,683/- with interest on the value of goods and materials supplied free of cost. 5. Rejection of refund claim of ?23,74,026/-. 6. Rejection of refund claim of ?53,42,006/-. Issue-wise Detailed Analysis: Issue I: Service tax liability of ?2,49,31,259/- for construction services provided to L&T for On-shore Terminal Project. The appellants contended that the On-shore Terminal (OT) should be considered a transport terminal and thus exempt from service tax under Section 65 (25b) of the Finance Act, 1994. However, the Tribunal referenced the decision in Afcons Infrastructure Ltd. Vs CST Mumbai-II – 2015 (37) STR 850 (Tri.-Mumbai), which held that an Onshore Terminal cannot be termed as a transport terminal. Despite a recent decision by CESTAT Hyderabad in a similar L&T case, the Tribunal upheld the demand of ?2,49,31,259/- with interest, noting that the Afcons decision remains binding and has not been stayed by the High Court. Issue II: Penalty of ?2,49,31,259/- imposed by the adjudicating authority. The appellants argued they were under a bona fide impression that the OT would be exempt as a transport terminal. The Tribunal acknowledged the prolonged litigation and the fact that L&T only paid the tax in 2016 after persistent follow-up. Given the legal uncertainties and the pending appeal in the High Court, the Tribunal set aside the penalty imposed under Section 78, allowing the appeal with consequential benefits. Issue III: Penalty of ?1,59,53,404/- imposed under Section 78 for delayed payment of service tax. This penalty related to composite contracts other than those with L&T. The appellants paid the tax liability belatedly with interest. The Tribunal noted that the related demand might be questionable in light of the Supreme Court judgment in L&T Ltd. [2015 (39) STR 913 (SC)]. Consequently, the penalty under Section 78 was deemed unjustified and was set aside, allowing the appeal with consequential benefits. Issue IV: Service tax liability of ?45,28,683/- with interest on the value of goods and materials supplied free of cost. The liability arose from including the value of free supplies in the taxable value. The Tribunal referenced the Supreme Court decision in CST Vs Bhayana Builders (P) Ltd. - 2018 (10) G.S.T.L. 118 (SC), which held that free supplies should not be included in the taxable value. Therefore, the demand of ?45,28,683/- with interest and the equal penalty were set aside, allowing the appeal with consequential benefits. Issue V: Rejection of refund claim of ?23,74,026/-. This refund related to the OT project of L&T. Given the Tribunal's decision to uphold the service tax liability for the OT project, the refund claim was rejected, and the appeal was dismissed. Issue VI: Rejection of refund claim of ?53,42,006/-. This refund included service tax and interest paid on free supplies. The Tribunal applied the Bhayana Builders (P) Ltd. decision, setting aside the rejection of the refund claim and allowing the appeal with consequential benefits. Summary: (A) Appeal ST/27/2011: - Service tax demand of ?2,49,31,259/- with interest is upheld. - Penalty of ?2,49,31,259/- under Section 78 is set aside. - Penalty of ?1,59,53,404/- under Section 78 is set aside. - Demand of ?45,28,653/- with interest and equal penalty is set aside. Appeal is partly allowed. (B) Appeal ST/40435/2014: - Rejection of refund of ?23,74,026/- is upheld. Appeal is dismissed. (C) Appeal ST/40436/2014: - Rejection of refund of ?53,42,006/- is set aside. Appeal is allowed with consequential benefits.
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