2023 (6) TMI 193 - AT - Service Tax

Recovery of service tax alongwith interest and penalty - suppression of value of freight paid, hire charges, warranty charges and site formation and clearance services - benefit of exemption under Notification No. 17/2005-S.T. dated 07.06.2005 - extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT - There cannot be any dispute that the first Show Cause Notice, which was issued based on the audit objections, did consider all the relevant facts and thus, the concerned authority of the Department was very much aware of the relevant facts. Hence, while issuing the second Show Cause Notice, the very same facts could not be held as suppression of facts by the appellant as these facts were very much in the possession / knowledge of the authorities. The decision of the Hon ble Apex Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP 2006 (4) TMI 127 - SUPREME COURT is apt - It was held the said case that Allegation of suppression of facts against the appellant cannot be sustained. When the first SCN was issued all the relevant facts were in the knowledge of the authorities. Later on, while issuing the second and third show cause notices the same/similar facts could not be taken as suppression of facts on the part of the assessee as these facts were already in the knowledge of the authorities. Thus there was no suppression of facts on the part of the assessee/appellant - the above ruling squarely applies to the facts of the case on hand. It is also a fact borne on record that other than the audit observations, no other material facts have been brought on record by the Revenue. Hence, the allegation of suppression of facts made by the Revenue should fail and therefore, the impugned orders cannot sustain. Merits of the case - HELD THAT - The initial work essentially required the formation of service roads, which was essential for carrying the men and material / equipment and other accessories to the site of work and only thereafter could the clearance of jungle in and around the GTS level get started - the appellant did construct road, which was clearly essential in order to reach the place of work. Further, we also note that the contract belonged to a unit of the Government i.e., the Indian Navy, the scope of work was awarded initially to another Government Organization i.e., ECIL, and hence, the service of site formation and clearance, excavation and earth moving and demolition and other similar activities, were rendered to a Government organization, which is also exempt from the purview of Service Tax. The appellant has claimed, rightly so, that it did construct roads as well as provide site formation and clearance, excavation and earth moving and demolition service and has thus, claimed the benefit of Notification No. 17/2005 ibid - the appellant is entitled to the benefit of the exemption Notification No. 17/2005 ibid. The impugned demand cannot sustain for the reasons i.e., (i) the service was rendered to a Government organization and (ii) the same is also covered under the exemption Notification No. 17/2005 ibid., and therefore, the impugned demand cannot sustain. The impugned orders on both the counts set aside - appeal allowed.

Summary

Issues Involved:
1. Entitlement to the benefit of exemption under Notification No. 17/2005-S.T. dated 07.06.2005.
2. Whether the demand proposed and confirmed is barred by limitation.
3. Correctness of tax liability on the amount claimed to have not been received by the appellant.

Summary:

1. Entitlement to the Benefit of Exemption under Notification No. 17/2005-S.T. dated 07.06.2005:
The appellant provided services of "management, maintenance or repair service" and "transportation of goods by road" and received amounts towards hire charges and contract billing for services provided towards 'site formation and clearance services'. The appellant contended that the services related to the construction of roads for the Indian Navy and claimed exemption under Notification No. 17/2005-S.T. The tribunal found that the appellant did construct roads which were essential for reaching the place of work and that the services were rendered to a Government organization, thus qualifying for the exemption.

2. Whether the Demand Proposed and Confirmed is Barred by Limitation:
The tribunal noted that the first Show Cause Notice (SCN) issued on 05.08.2010 considered all relevant facts, and the Revenue was aware of these facts. The second SCN issued on 06.03.2012, based on the same audit objections and facts, could not be held as 'suppression of facts' by the appellant. The tribunal relied on the decision of the Hon'ble Apex Court in M/s. Nizam Sugar Factory v. Collector of Central Excise, A.P. [2006 (197) E.L.T. 465 (S.C.)], which held that facts already in the knowledge of the authorities could not be treated as suppression for invoking the extended period of limitation. Thus, the tribunal found the second SCN to be time-barred.

3. Correctness of Tax Liability on the Amount Claimed to Have Not Been Received by the Appellant:
The appellant argued that the demand was made on the entire contract value, a part of which was never received. The tribunal considered the appellant's ledger account and found that the amount received was significantly less than the billed amount. The tribunal concluded that the demand on the unreceived amount could not be sustained.

Conclusion:
The tribunal set aside the impugned orders on the grounds that the service was rendered to a Government organization and was covered under the exemption Notification No. 17/2005-S.T. Additionally, the demand was barred by limitation, and the tax liability on the unreceived amount was incorrect. The appeals were allowed with consequential benefits as per law.