2023 (2) TMI 613 - HC - Service Tax

Taxability - Works Contract Service or Construction of Complex service? - construction activities for development of residential complexes and flats in southern India - invocation of extended period of limitation - suppression of facts or not - Whether the proviso to Section 73(1) of the Act was applicable on account of any wilful mis-statement or suppression of facts? - HELD THAT - There was no suppression as to the activities being carried out by the respondent. It is also relevant to note that the respondent s contention that its services were covered under the Works Contract Services is not insubstantial. In cases where another interpretation is plausible and an assessee proceeds to file a return on that basis, it would not be apposite to conclude that the assessee has made any mis-statement or suppressed any fact merely because the Revenue interprets the statutory provision differently. This is notwithstanding that the Revenue may finally prevail in its interpretation of the statutory provisions and the assessee may not. Mis-statement and suppression of facts must necessarily be examined from the perspective of sufficient disclosure or statements of facts and not contentious interpretations of statutory provisions. Once an assessee has truly disclosed the facts, it would not be apposite to invoke the provisions of Section 73(1) of the Act only on the ground that the assessee has classified its services under a head which the revenue considers erroneous. However, if such classification is, ex facie, untenable and done with the intent of evading any liability, the provisio to section 73(1) of the Act, would be applicable. In Pushpam Pharmaceutical Company v. Collector of Central Excise, Bombay 1995 (3) TMI 100 - SUPREME COURT , the Supreme Court had interpreted the proviso to Section 11A of the Central Excise Act, 1944, which was similarly worded as the proviso to Section 73(1) of the Act, and held that Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression. In view of the authoritative decisions rendered by the Supreme Court, the learned Tribunal held that the Commissioner had erred in holding that the respondent had suppressed information from the Department regarding payment of service tax. Thus, in the given facts, the proviso to Section 73(1) of the Act could not be applied. The respondent had filed its return of service tax on the basis that its services were taxable as Works Contract Services. It had availed the Cenvat Credit to the extent of ₹2,44,48,095/- and had paid the balance amount in cash in discharge of the liability, which was computed on the aforesaid basis. There is no allegation that the respondent had concealed that it was carrying on the activity of construction and selling residential flats. Appeal of Revenue dismissed.

Issues Involved:
1. Whether the availment of Cenvat credit and its utilization for payment of service tax on construction of flats for sale to buyers contravenes the provisions of the Cenvat Credit Rules, 2004.
2. Whether the extended period of limitation is correctly invokable.
3. Whether service tax collected on exempted services and not deposited with the government justifies invoking the extended period of limitation.
4. Whether the non-disclosure of collected service tax on exempted services in ST returns justifies invoking the extended period of limitation.
5. Whether the Tribunal erred in ignoring findings that the respondent collected service tax on exempted services and did not deposit the same in cash.

Detailed Analysis:

1. Availment of Cenvat Credit and Utilization for Payment of Service Tax:
The respondent claimed that the services rendered fell within the scope of 'Works Contract' Service under Section 65(105)(zzzza) of the Finance Act, 1994, which was taxable from 01.06.2007. The Revenue contended that the services fell under 'Construction of Complex' Service, taxable from 01.07.2010, thus making the Cenvat Credit claimed inadmissible. The Tribunal noted that if the services were not taxable, no Cenvat Credit could be claimed. However, since the proceedings under Section 73A of the Act were dropped and not appealed by the Revenue, no demand could be raised under this section.

2. Extended Period of Limitation:
The Tribunal found that the show cause notice issued by the Commissioner was beyond the prescribed period under Section 73(1) of the Act. The Commissioner's order was based on the extended period of limitation due to alleged suppression of facts or willful mis-statement. However, the Tribunal held that the extended period of limitation was not applicable as there was no suppression of facts or intention to evade tax by the respondent.

3. Collection of Service Tax on Exempted Services:
The Revenue argued that the respondent collected service tax on exempted services and did not deposit it with the government, thus invoking the extended period of limitation under Section 73(1) of the Act. The Tribunal rejected this contention, noting that the Commissioner had dropped proceedings under Section 73A, and the Revenue did not appeal against this decision. Therefore, no demand could be confirmed under Section 73A.

4. Non-Disclosure in ST Returns:
The Tribunal found that the respondent had disclosed its activities and filed returns under the belief that its services were taxable as 'Works Contract' Services. The Tribunal concluded that mere non-disclosure in ST returns, without intent to evade tax, did not justify invoking the extended period of limitation.

5. Ignoring Findings of Collected Service Tax on Exempted Services:
The Tribunal noted that the Commissioner's findings were based on the erroneous application of the extended period of limitation. The Tribunal held that the respondent's interpretation of the statutory provisions was reasonable and there was no deliberate suppression of facts. Therefore, the Tribunal did not err in ignoring the Commissioner's findings.

Conclusion:
The Tribunal's decision was upheld, finding no infirmity in its view that the extended period of limitation was not applicable and the respondent had not suppressed facts or willfully misstated information. The appeal by the Revenue was dismissed, and all pending applications were disposed of.

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