2019 (5) TMI 225 - AT - Service Tax

Erection, commissioning and installation services - Non-payment of service tax - period Oct 2004 to April 2008 and from January 2009 to March 2009 - HELD THAT - On both the claims relating to services rendered to SEZ as well as claim of abatement, the adjudicating authority has held that no documentary evidence have been produced by the assessee in support of the said contentions. The matter is remanded to the adjudicating authority for the limited purpose of considering these contentions of the appellants and once again determining the net tax liability that would be required to be paid up by the appellant in such de novo proceedings. Time limitation - HELD THAT - The SCN has been issued on 20.04.2010 quite proximate to the conduct of audit. It is only due to audit, that the apparent non-payment of the disputed tax liability has surfaced - the invocation of extended period for limitation is fully justified in the matter. Penalty - HELD THAT - It is well settled law that penalty cannot be imposed under both these sections. The penalty under Section 76 ibid is set aside - the penalty under Section 78 ibid will be commensurate with the final tax liability that may be arrived at by the adjudicating authority in the de novo proceedings ordered. However, the benefit of option of paying 25% of the penalty as per the provisions in force at the relevant time should be extended to the appellants. Penalty u/s 77 upheld. Appeal allowed in part and part matter on remand.

Issues Involved:
1. Change of cause title due to GST introduction.
2. Non-discharge of service tax liability.
3. Incorrect service tax calculation.
4. Liability of sub-contractors to pay service tax.
5. Allegations of non-filing of ST-3 returns.
6. Allegations of suppression of facts.
7. Claim for abatement and services provided to SEZ.
8. Invocation of extended period for limitation.
9. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Change of Cause Title Due to GST Introduction:
The department’s motion for change of cause title following the introduction of GST and the resultant jurisdiction change was allowed.

2. Non-Discharge of Service Tax Liability:
The appellants were engaged in erection, commissioning, and installation services. An audit revealed that they had not discharged service tax liability of ?1,29,66,601/- for the periods from October 2004 to April 2008 and January 2009 to March 2009, except for an amount of ?25,17,440/- during May 2008 to December 2008. A show cause notice (SCN) dated 20.04.2010 was issued, proposing the demand and imposition of penalties.

3. Incorrect Service Tax Calculation:
The appellant contended that the service tax calculation was incorrect as it included an excess amount of ?70,79,737/-, which inflated the service tax payable. They argued that after allowing a 67% abatement, the correct taxable value would be ?3,41,44,620/-, with a corresponding service tax of ?42,78,979/-. After deducting the already paid amount of ?27,74,558/-, the balance duty payable would be ?15,04,421/-, which they claimed was time-barred.

4. Liability of Sub-Contractors to Pay Service Tax:
The appellants argued that as sub-contractors, they were not liable to pay service tax up to 23.08.2007. They cited several judgments to support their claim, including *Sunil Hi-Tech Engineering Ltd. vs. Commissioner of Central Excise Nagpur* and *Urvi Construction vs. Commissioner of Service Tax Ahmedabad*.

5. Allegations of Non-Filing of ST-3 Returns:
The appellants contended that they had filed the ST-3 returns periodically and therefore, the allegation of non-filing was not sustainable.

6. Allegations of Suppression of Facts:
The appellants argued that they had reflected all their income in the balance sheet periodically, thus the question of suppression did not arise. They cited several judgments, including *Saurin Investments (P) Ltd. vs. Commissioner of Service Tax Ahmedabad* and *Aditya College of Competitive Exam vs. C.C.E., Vishakapatnam*, to support their claim that the demand was time-barred.

7. Claim for Abatement and Services Provided to SEZ:
The appellants claimed that part of the amount related to services provided for SEZ projects, which were exempted from service tax. They also sought abatement of 67%. The adjudicating authority had rejected these claims due to lack of documentary evidence. The tribunal remanded the matter to the adjudicating authority for reconsideration, allowing the appellants to produce necessary evidence.

8. Invocation of Extended Period for Limitation:
The tribunal upheld the invocation of the extended period for limitation, agreeing with the adjudicating authority’s analysis that the non-payment of the disputed tax liability surfaced only due to the audit.

9. Imposition of Penalties:
The tribunal found that imposing equal penalties under both Sections 76 and 78 of the Finance Act, 1994, was incorrect. It set aside the penalty under Section 76 but upheld the penalty under Section 78, which would be commensurate with the final tax liability determined in the de novo proceedings. The penalty of ?5000/- under Section 77 was not interfered with.

Conclusion:
The appeal was partly allowed and partly remanded for reconsideration of the appellants' claims regarding services provided to SEZ and abatement. The tribunal upheld the invocation of the extended period for limitation but corrected the imposition of penalties.

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