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2021 (3) TMI 209 - AT - Service TaxEvasion of Service tax - repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Business auxiliary services - period April 2005 to March 2010 - Goods Transport Agency Services - period January 2005 to July 2009 - penalties. Repair and maintenance of roads - period 16.6.2005 to 26.07.2009 - Appellant submit that repair and maintenance of roads was not chargeable to service tax as per their understanding - HELD THAT - The demand in respect of repair and maintenance of roads is undisputedly covered by the retrospective exemption provided by way of Section 97 of Chapter V of the Finance Act 1994. Therefore the demand on this account needs to be set aside. Goods Transport Agency Services - period January 2005 to July 2009 - HELD THAT - The appellant has already paid the amount along with interest and is not contesting the same. Therefore the demand to this extent needs to be upheld. Business auxiliary services - period April 2005 to March 2010 - amount in question was wrongly shown in their books of accounts as commission but in fact it is their TDS amount only - service rendered to the subcontractors or not - HELD THAT - There is no force whatsoever in the argument of the learned counsel that the amount shown as commission in their books of account is actually tax deducted at source (TDS). Learned counsel tried to convince us that this is TDS amount by saying that the amount shown as commission matches with the amount deducted as TDS from their payment by the Govt Department. These figures match because both are only 2% of the contract value. For instance if 100/- is the value of the contract the Govt department pays the appellant 98/- and deducts 2/- as TDS. A credit for this 2/- also comes to the appellant which they can use to set off against their tax liability. In other words the appellant has got the entire 100/-. In the second leg of transaction the appellant is required to pay 100/- to the sub-contractor to whom he outsourced the work on back to back basis. He did so after deducting 2% as commission and paid only 98 to the sub-contractor. This 2 has been reflected in their books of account correctly as commission. In fact a perusal of the profit and loss statements of the appellant during the relevant period shows that the amounts have been recorded on the income side as commission and there is no corresponding TO TDS on the expenditure side. The net profit has been calculated after subtracting the expenses and depreciation from the income including the commission. This net income has been duly reflected in their income tax returns - as a matter of fact that the appellant has received commission of 2% of the contract value in contracts which they have outsourced to their subcontractors. Whether the commission so received is chargeable to service tax under the Head Business Auxiliary Services ? - Revenue argues that the appellant is promoting and marketing the services of the sub-contractor - HELD THAT - This is not a promotion or marketing of the services of the sub-contractors but actually outsourcing some of their work to the subcontractors. Although their assertion is that the contract is on back to back basis with no commission whatsoever they were in fact deducting 2% as their own commission. Regardless of how much commission they deduct or whether they sub-contract for the same amount as they receive or for a much lower amount this outsourcing arrangement does not amount to promoting or marketing the service of the sub-contractors to whom the work is outsourced. In view of the above we find that no service tax can be charged from the appellant under the head business auxiliary services. Penalties - HELD THAT - As bulk of the demands in the impugned order are already set aside exercising the powers under Section 80 of the Finance Act 1994 all the penalties imposed upon the appellant is set aside. The impugned order is set aside except to the extent of confirmation of demand and interest on GTA services which they have already paid - Appeal allowed in part.
Issues Involved:
1. Demand for service tax on Repair & Maintenance of Roads. 2. Demand for service tax on Business Auxiliary Services. 3. Demand for service tax on Goods Transport Agency (GTA) Services. 4. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. Issue-wise Detailed Analysis: 1. Demand for Service Tax on Repair & Maintenance of Roads: The appellant argued that repair and maintenance of roads were not chargeable to service tax based on their understanding. A retrospective amendment to the Finance Act, 1994, by inserting Section 97, confirmed that no service tax shall be levied or collected for management, maintenance, or repair of roads from June 16, 2005, to July 26, 2009. The demand in question was for this period, making it non-sustainable. The Tribunal agreed, setting aside the demand. 2. Demand for Service Tax on Business Auxiliary Services: The appellant contended that the 2% amount shown as commission in their books was actually TDS deducted by the government department and not commission received from subcontractors. They argued that no service was rendered to subcontractors, and hence no service tax could be levied. The Tribunal found that the amounts shown as commission were indeed commissions and not TDS, as the figures matched due to both being 2% of the contract value. However, the Tribunal concluded that the appellant was not promoting or marketing the subcontractors' services but merely outsourcing work, thus no service tax could be charged under Business Auxiliary Services. 3. Demand for Service Tax on Goods Transport Agency (GTA) Services: The appellant had already paid the service tax demanded under GTA services along with interest during the investigation. They did not contest this demand. The Tribunal upheld this demand and noted that the amount had already been appropriated in the impugned order. 4. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994: Given that the major demands were set aside, the Tribunal exercised its powers under Section 80 of the Finance Act, 1994, to set aside all penalties imposed on the appellant. The penalties were initially proposed for failure to pay service tax by the due date, not registering for certain services, not filing ST-3 returns, and non-payment of service tax due to suppression of facts. Conclusion: The Tribunal set aside the demands for service tax on Repair & Maintenance of Roads and Business Auxiliary Services. The demand for service tax on GTA services was upheld as the appellant had already paid it. Consequently, all penalties imposed were also set aside. The appeal was allowed, and the impugned order was set aside except for the confirmation of demand and interest on GTA services, which had been paid.
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