2019 (11) TMI 1274 - HC - Service Tax

Commercial construction activities - Benefit of abatement of 67% on value available vide Notification No.18/2005/ST dated 7.6.2005 - composite contract or mere service contract - Demand of service tax education cess - HELD THAT - Appellant though entered into contract with ISL and received huge amount against the service provided by him, he deliberately did not submit the contract agreement before the authority concerned. Submission of learned counsel for the appellant with regard to composite contract, can be verified from the contract agreement executed between the appellant and the ISL, which the appellant failed to bring on record - In absence of contract agreement on record, the claim of the appellant that he is entitled for abatement of 67% on value available as per Notification dated 1.3.2006 is not sustainable. There was no material before the authorities to accept the submissions of appellant that the contract entered between him and the ISL was a composite contract. Similarly, the appellant has not produced any document before the Adjudicating Authority to substantiate his submissions. The authorities below have rightly held that no material has been placed on record by the appellant to bifurcate value and nature of work and therefore tax has been imposed on the gross value, which cannot be said to be erroneous - The burden to proof that which part of his work amounts to 'service' and which not, was upon the appellant and not on the revenue, which the appellant utterly failed to discharge. The work cannot be artificially split. As the appellant has not produced any document even to prove the facts pleaded in reply to show cause notice, therefore, no question of law much less any substantial question of law is involved in this case warranting interference by this Court in exercise of its appellate jurisdiction - appeal dismissed.

Summary

Issues Involved:
1. Validity of the demand for service tax and education cess.
2. Classification of services provided by the appellant.
3. Entitlement to abatement under Notification No.18/2005/ST.
4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
5. Applicability of the extended period for demand under Section 73(1) of the Finance Act, 1994.
6. Grant of immunity from penalty under Section 80 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Validity of the Demand for Service Tax and Education Cess:
The appellant contested the demand for service tax and education cess raised by the revenue department. The appellant argued that the services provided did not fall under the taxable category as per the Finance Act, 1994. However, the adjudicating authority concluded that the services rendered by the appellant were classifiable under 'commercial or industrial construction service' and thus taxable. The appellant's failure to submit necessary documents and information to the authorities further weakened their case.

2. Classification of Services Provided by the Appellant:
The core issue was whether the services provided by the appellant were taxable under 'commercial or industrial construction service'. The adjudicating authority and subsequent appellate authorities held that the services provided were indeed taxable under this category. The appellant's argument that the contract was a composite one and not solely for taxable services was rejected due to the lack of supporting documents.

3. Entitlement to Abatement under Notification No.18/2005/ST:
The appellant claimed entitlement to a 67% abatement on the value of services under Notification No.18/2005/ST. However, the authorities found that the appellant failed to provide documents showing the cost of construction materials included in the contract. Therefore, the gross value received was made taxable, and the claim for abatement was denied.

4. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The adjudicating authority imposed penalties for late payment of service tax and for willful suppression of facts regarding taxable activities. The appellate authority upheld these penalties, noting that the appellant had intentionally avoided disclosing taxable values and had surrendered their service tax registration to evade tax payments. The authorities found no reasonable cause to grant immunity from penalties.

5. Applicability of the Extended Period for Demand under Section 73(1) of the Finance Act, 1994:
The authorities invoked the extended period of five years for demanding service tax, citing willful suppression of facts by the appellant. The appellant's failure to submit relevant documents and disclose taxable activities justified the invocation of the extended period.

6. Grant of Immunity from Penalty under Section 80 of the Finance Act, 1994:
The appellant sought immunity from penalties under Section 80, claiming a bona fide belief about their tax liability. However, the authorities rejected this claim, noting that the appellant had not approached the department for clarification and had suppressed vital facts. Consequently, immunity from penalties was denied.

Conclusion:
The court found no illegality or infirmity in the orders passed by the authorities below. The appellant's failure to produce documents to substantiate their claims led to the dismissal of the appeal. The court held that no substantial question of law was involved, and the appeal was dismissed accordingly.