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2021 (12) TMI 182 - AT - Service TaxClassification of services - Appellant s activities relating to Horizontal Directional Drilling (HDD) works - classifiable under Site Preparation Clearance Service or under Works Contract Service? - denial of benefit of lower rate of tax vide Notification No. 32/2007 dated 22.05.2007 - Pipeline construction charges - Supply of Tangible Goods Service - Time Limitation - HELD THAT - The subject SCN only raised a classification dispute alleging that the Appellant s activities relating to Horizontal Directional Drilling (HDD) works were appropriately classifiable under Site Preparation Clearance Service and not Works Contract Service . The SCN never alleged that the Appellant failed to fulfill any of the conditions of Notification No. 32/2007 dated 22.05.2007 relating to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. This aspect is also not disputed by the Learned Authorized Representative for the Respondent Revenue. It is settled law that the Show Cause Notice is the foundation in the matter of levy and recovery of duty, penalty and interest and if there is no invocation of a provision in the Show Cause Notice, it would not be open to the adjudicating authority to invoke the said provision later on. The learned Commissioner has erred in adjudicating the issues not raised in the SCN. Further it cannot be said, as contended by the learned Authorized Representative, that issue of non-fulfillment of the conditions of Notification No.32/2007 dated 22.05.2007 relating to Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was consequential to the classification issue. The issue of non-fulfillment of the conditions of Notification No.32/2007 is a separate and distinct issue and there has to be a specific allegation regarding the same considering the facts and circumstances of a particular case. This has indisputably not been done in the instant case. Pipeline construction charges - HELD THAT - The same had been reflected in the relevant service tax returns for FY 2007-08 under the category of Site Preparation Clearance Services . There cannot arise any question of further including the said amount and paying service tax of ₹ 53,06,663/- under the category of Commercial Industrial Construction Service . The said position is borne out from the documents annexed in the appeal paper book and is further supported by the CA certificate. Hence, we hold that the demand of ₹ 53,06,663/- in relation to pipeline construction charges cannot be sustained and is set aside. Supply of Tangible Goods Service - HELD THAT - The department has adduced no evidence to show how the subject service falls under the head Supply of Tangible Goods Service within the meaning of Section 65 (105) (zzzzj) of the Finance Act. The said demand is based on presumptions and assumptions and is unsustainable in law and hence set aside. Time Limitation - HELD THAT - The impugned issues relate to pure questions of law and classification. The learned Commissioner has also held in favour of the Appellant on the said classification issue and also on another issue relating to CENVAT credit. The SCN raised legal issues based upon comparison of documents such as the appellant s work orders, contracts, audited financial statements, service tax returns. In the said facts and circumstances, allegation of suppression of facts with the intention to evade payment of tax cannot be upheld and as such extended period of limitation cannot be invoked. The Appellant is entitled to consequential refund of duties and interest deposited during the course of the instant proceeding - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Classification of services provided by the Appellant. 2. Demand of service tax under the category of "Commercial or Industrial Construction Service". 3. Demand of service tax under the category of "Supply of Tangible Goods Service". 4. Invocation of extended period of limitation and imposition of penalties. Detailed Analysis: 1. Classification of Services Provided by the Appellant: The primary issue was whether the Appellant's activities relating to Horizontal Directional Drilling (HDD) works should be classified under 'Site Preparation & Clearance Service' or 'Works Contract Service'. The Show Cause Notice (SCN) alleged misclassification under 'Site Preparation & Clearance Service'. However, the Commissioner of Service Tax found that the Appellant’s activities conformed to 'Works Contract Services', rendering the allegation of misclassification unsustainable. The Tribunal upheld this finding, emphasizing that the SCN did not allege non-fulfillment of conditions under Notification No. 32/2007. It was reinforced that a Show Cause Notice is foundational for levy and recovery of duty, penalty, and interest, and any provision not invoked in the SCN cannot be invoked later. The Tribunal cited Supreme Court precedents to support this view, including Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. (2007) 215 ELT 489 (SC) and Commissioner of Customs, Mumbai v. Toyo Engineering India Ltd. (2006) 201 ELT 513 (SC). 2. Demand of Service Tax under "Commercial or Industrial Construction Service": The SCN included a demand of ?53,06,663/- under 'Commercial or Industrial Construction Service' for pipeline construction charges. The Appellant argued that these charges were already reflected in their service tax returns under 'Site Preparation & Clearance Services'. The Tribunal found that the Appellant had indeed accounted for the pipeline construction charges in the relevant returns, negating the need for additional tax under a different category. This was supported by documentation and a CA certificate, leading to the demand being set aside. 3. Demand of Service Tax under "Supply of Tangible Goods Service": The SCN also demanded ?43,355/- under 'Supply of Tangible Goods Service' for machinery hire. The Appellant contended that no such service was provided, and the income in question was actually demurrage charges for delays by clients. The Tribunal found no evidence from the department to prove the service fell under the alleged category, deeming the demand as based on presumptions and assumptions, and thus unsustainable. 4. Invocation of Extended Period of Limitation and Imposition of Penalties: The Tribunal examined whether the extended period of limitation and penalties were justified. Given that the issues were primarily legal and related to service classification, and considering the Commissioner’s favorable findings on classification and CENVAT credit, the Tribunal found no grounds for alleging suppression of facts with intent to evade tax. Consequently, the invocation of the extended period of limitation and the imposition of penalties were deemed inappropriate. Conclusion: The Tribunal allowed the appeal, setting aside the demands and penalties. The Appellant was entitled to a refund of duties and interest paid during the proceedings. The order was pronounced on 03 December 2021.
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