2023 (4) TMI 768 - AT - Service Tax

Classification of services - Management, Maintenance Repair Service - Board s circular No. B1/16/2007-TRU dated 22.5.2007 - appellant s first contention is that the department could not have charged service tax without first identifying which services were rendered and if they were taxable during the relevant period - HELD THAT - When the appellant was asked for details of his business activity, he said that he did not have any ledger or balance sheets and that his invoices were destroyed. He, however, provided Form 26AS issued by the Income tax department. Since most of his clients were large, organized firms, they would deduct tax at source and issue Forms 16A with the income tax which shows how much amount has been paid and how much was deducted as tax. The data from these Forms is consolidated by the income tax system in Form 26AS. The Superintendent, then wrote to the clients and all but one provided Forms 16A which showed how much they had paid to the appellant. In this situation, when the appellant had not done anything which he was required to under service tax law, collected service tax of Rs. 15 lakhs from its clients and had not deposited it in the Government exchequer, had not provided the details of the services provided by him, claimed that the invoices were destroyed and that he had no balance sheet or ledger, the Superintendent did what could best be done based on the available information- viz., the Form 26AS provided by the appellant and the Forms 16A provided by the clients of the appellant. The appellant cannot now cry foul and claim that the department failed to classify the service. The second contention of the appellant is that some of the services rendered were in the nature of Works Contract Service and its claim for classification under Works Contract Service was rejected - It is found that this plea was taken by the appellant in respect of some contracts before the adjudicating authority. However, the adjudicating authority did not agree with this contention holding that unless VAT was paid on the goods which were transferred, it will not amount to Works Contract Service. There is no actual sale of goods but there is deemed sale of the goods which have been used while rendering the service. The deemed sale of the goods is exigible to VAT but it is not necessary that VAT has to be charged or must be chargeable in every such transaction. No VAT may be payable on some goods under the state laws but that does not convert the Works Contract Service into a pure service contract. Conversely, if no service tax is payable on the service portion of some types of works contracts, they do not automatically become contracts for sale of goods. The nature of the contract has to be examined and if it involves supply or deemed supply of goods and rendering service, it will be a Works Contract Service regardless of whether or not VAT or Service tax is payable. The appellant s contention that some of the contracts were Works Contracts must be examined by the original authority. The third main contention of the appellant is that no reason has been given for confirming demand after 1.7.2012. We find that all services were taxable from 1.7.2012 except those that fall in the negative list. If the appellant can show that its service fall under the negative list, it will be eligible to the exemption and not otherwise. Matter remanded to the original authority to re-adjudicate the case as follows. a) Any amounts collected by the appellant as representing service tax must be deposited in the Government exchequer whether or not the services which were rendered were actually exigible to service tax. b) The appellant s services may be classified as far as possible based on the work orders, invoices or other information which the appellant may provide. To the extent they are not provided, the adjudicating authority should exercise his/her best judgment.

Issues Involved:
1. Classification and Taxability of Services
2. Failure to Deposit Collected Service Tax
3. Eligibility for Works Contract Service Classification
4. Confirmation of Demand Post 1.7.2012
5. Eligibility for Exemption Notification

Summary:

1. Classification and Taxability of Services:
The appellant argued that the Show Cause Notice (SCN) failed to classify the services rendered under Management, Maintenance & Repair Service (MRS), Erection Commissioning and Installation Service (ECIS), and Manpower Recruitment and Supply Service (MSS), making the demand vague. The Tribunal found that the SCN was issued based on the best available information, including Form 26AS and Forms 16A provided by clients, as the appellant failed to maintain ledgers, balance sheets, or invoices. The appellant's claim of ignorance of service tax provisions was dismissed, emphasizing that ignorance of law is not an excuse.

2. Failure to Deposit Collected Service Tax:
The appellant admitted to collecting approximately Rs. 15 lakhs as service tax from clients but did not deposit it with the Government. The Tribunal highlighted that any amount collected as representing service tax must be deposited in the Government exchequer, regardless of whether the services rendered were taxable.

3. Eligibility for Works Contract Service Classification:
The appellant contended that some services were Works Contract Services. The adjudicating authority had rejected this claim, stating that VAT/Sales tax must be paid for a contract to qualify as Works Contract Service. The Tribunal found this reasoning flawed, clarifying that a contract involving both supply of goods and services qualifies as Works Contract Service, regardless of VAT payment. The original authority was directed to re-examine the appellant's claim.

4. Confirmation of Demand Post 1.7.2012:
The appellant argued that no reason was provided for confirming the demand after 1.7.2012. The Tribunal noted that all services were taxable from 1.7.2012 unless they fell under the negative list. The appellant was given the opportunity to demonstrate if their services fell under the negative list.

5. Eligibility for Exemption Notification:
The appellant's claim for exemption under notification No. 1.3.2006 was to be examined by the original authority.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter to the original authority for re-adjudication. The original authority was instructed to classify services based on available information, ensure any collected service tax is deposited, and re-examine the claims regarding Works Contract Service and eligibility for exemption. The appeal was allowed by way of remand.

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