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2022 (8) TMI 644 - AT - Service TaxLevy of Service Tax - Commercial or Industrial construction services provided to Railways - Appellant have provided the services to Western Railway, which is a part of Ministry of Railway i.e. Government - extended period of limitation - HELD THAT - There is no dispute on the facts on either side that Appellant have provided services to Western Railway, which is a part of the Ministry of Railway i.e. Government and that Appellant has not provided services to any person except Railways. It is also noted that after issuance of SCN dated 21-09-2020, Appellant has also participated in the adjudication proceedings conducted and have made submissions along with documents of Income Tax Returns, their work orders issued by Indian Railways and their other financial records including profit loss accounts etc with a prayer to drop the Service Tax demand in this case, issued unduly invoking extended period for demand. It is settled that Service Tax demand cannot be raised only on the basis of any such assessment made by the Income Tax Authorities. Information or data or documents relied upon loses its evidentiary value in absence of any independent inquiry which was mandatorily required to have been conducted by concerned officers of Central Excise department at Bhavnagar, before issuance of the Show Cause Notice dated 21-09-2020 - In this case, provisions of Section 36A and Section 36B does not appear satisfied as conditions imposed does not appear followed by Central Excise department. Hence, shared data by Income Tax department cannot be used against Appellant without independent inquiry/investigation carried by the Revenue. Therefore, demand of Service Tax confirmed with interest and Penalty by the adjudicating authority also deserves to be set aside on this ground. The provisions of Section 65A of Finance Act 1994 provides for classification of taxable services. It is settled law that activity shall be classified of a service which gives a service essential character, as per section 65A ibid as it is applicable. The activity of maintenance, repairs are distinct and separate taxable services listed under Sr. No. 12 of Notification No. 25/2012-ST. Hence, O-I-O is not in accordance with provisions of Finance Act 1994. Sr. No 12 of Notification 25/2012-ST allows exemption in respect of repair and maintenance of a civil structure. Therefore, services of Appellant were to Railways (Western), for Repairs and Maintenance is eligible for the above exemption. In catena of cases that Tribunal being a final fact finding authority can admit any fresh evidence and also argument. This issue has been considered by the Hon ble Supreme Court (Three Judges Bench), in the case of NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX 1996 (12) TMI 7 - SUPREME COURT , which is to the effect that the Tribunal has jurisdiction to examine question of law which arises on facts, as found by authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before lower authorities nor in appeal before Tribunal, but sought to be added later as additional ground by separate letter - In DEVANGERE COTTON MILLS LTD. VERSUS COMMISSIONER OF C. EX., BELGAUM 2006 (4) TMI 134 - SUPREME COURT , the Hon ble Supreme Court has held that Tribunal has got wide power to hear and consider a new ground and decide appeal. There are no necessity to go into further details of the other points raised against Order-in-Original by Appellant like time limitation for demand invoking extended period not sustainable in this case, computing Cum-Tax-Value for Service Tax demand, though such points may have substantial force in favour of Appellant, when demand of Service Tax is not sustained on merits in the facts of this case. The impugned order confirming the demand of Service Tax with interest and imposing penalties on appellant is unsustainable and liable to be set aside - Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Sustainability of the Service Tax demand based on data shared by Income Tax authorities. 2. Validity of the Order-in-Original (O-I-O) beyond the scope of the Show Cause Notice (SCN). 3. Eligibility for Service Tax exemption under Notification No. 25/2012-ST. 4. Classification of services provided by the Appellant. 5. Invocation of extended period for demand. 6. Imposition of penalties on the Appellant. Detailed Analysis: 1. Sustainability of the Service Tax demand based on data shared by Income Tax authorities: The Appellant argued that the demand was unsustainable as it was based solely on data shared by Income Tax authorities without any independent inquiry by the Central Excise department. The Tribunal agreed, emphasizing that Service Tax demand cannot be raised solely on the basis of assessments by Income Tax Authorities. The Tribunal cited several decisions, including Synergy Audio Visual Workshop Pvt Ltd v. C.S.T. and Calvin Wooding Consulting Ltd. v. CCE, which established that amounts shown in Income Tax returns or Balance Sheets are not liable for Service Tax without independent verification. Therefore, the Tribunal concluded that the demand of Service Tax confirmed with interest and penalties by the adjudicating authority deserved to be set aside on this ground alone. 2. Validity of the Order-in-Original (O-I-O) beyond the scope of the Show Cause Notice (SCN): The Appellant contended that the O-I-O confirmed the Service Tax demand under specific activity heads not mentioned in the SCN, violating the principle that the SCN is the foundation of any case by Revenue. The Tribunal upheld this argument, stating that orders beyond the scope of the SCN are not sustainable in law. The Tribunal referenced several case laws, including CC v. Toyo Engineering India Ltd. and CCE v. Ballarpur Industries Ltd., which support the view that the Department cannot travel beyond the SCN. Thus, the Tribunal found that the O-I-O was beyond the scope of the SCN and deserved to be set aside on this ground as well. 3. Eligibility for Service Tax exemption under Notification No. 25/2012-ST: The Tribunal examined whether the services provided by the Appellant to the Railways were eligible for exemption under Notification No. 25/2012-ST. The Tribunal found that the services, including maintenance of unmanned railway crossings, permanent way maintenance, cleaning of stations, and grinding flash butt welding, were indeed maintenance services exempted under Sr. No. 12 of the said Notification. The Tribunal noted that the adjudicating authority had incorrectly denied the exemption by not recognizing these services as maintenance activities. Therefore, the Tribunal concluded that the demand of Service Tax for these activities was not sustainable. 4. Classification of services provided by the Appellant: The Tribunal emphasized the importance of correctly classifying the services provided by the Appellant. It found that the activities performed by the Appellant were maintenance services, which are distinct and separate taxable services listed under Sr. No. 12 of Notification No. 25/2012-ST. The Tribunal held that the adjudicating authority had failed to correctly classify the services, leading to an erroneous confirmation of the Service Tax demand. 5. Invocation of extended period for demand: The Appellant argued that the extended period for demand was invoked without evidence of mala fide intention to evade Service Tax. The Tribunal did not delve deeply into this issue, as the demand was not sustainable on merits. However, it acknowledged that the points raised by the Appellant regarding the invocation of the extended period had substantial force. 6. Imposition of penalties on the Appellant: The Appellant contended that the penalties imposed were unjustified in the absence of mala fide intentions. The Tribunal agreed, noting that no clinching positive evidence of mala fide intention to evade Service Tax was brought on record by the Revenue. Consequently, the Tribunal found that the imposition of penalties was not justified. Conclusion: The Tribunal concluded that the impugned order confirming the demand of Service Tax with interest and imposing penalties on the Appellant was unsustainable and liable to be set aside. Accordingly, the Service Tax Appeal filed by the Appellant was allowed, with consequential relief in accordance with the law.
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