2023 (7) TMI 61 - AT - Service Tax

Demand of Service Tax and imposition of penalties - eligibility for availing the benefit of Notification No. 1/2006-ST dated 01.03.2006 and Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 - invocation of extended period of limitation - HELD THAT - The appellant has executed construction works as a contractor/sub-contractor during the impugned period of the notices and consideration received for their services was accounted as contract receipts in their financial statements. In many contracts executed, as investigation has revealed, materials like cement, steel, etc., were supplied by the customers of the appellant. On the scrutiny of the Show Cause Notices and the Order-in-Original and related appeal papers indicate that the contracts entered into are contracts simpliciter - the contractors/sub-contractors are liable for payment of Service Tax as held in the case of SEW CONSTRUCTION LTD. VERSUS COMMISSIONER OF C. EX., RAIPUR 2010 (11) TMI 469 - CESTAT, NEW DELHI , wherein in the CESTAT, Delhi Bench has held that there is no immunity to the sub-contractors from levy of Service Tax when taxable services are provided by them. The benefit of Notification No. 1/2006-ST dated 01.03.2006 and Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was not extended in computation of Service Tax payable apparently as the appellant has not included the value of the materials supplied by its customers to arrive at the gross value of the services rendered. One of the important conditions that has to be satisfied to be eligible for the abatement of the above Notification and the benefit of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 is that the gross value of the services provided shall include the value of goods and materials supplied or provided or used for providing taxable service by the service provider - To be eligible for abatement under Notification No. 1/2006-ST dated 01.03.2006, it is essential that the value of free supply materials by the developer/main contractor, have to be included to arrive at the gross value of services or else computation of tax on contract receipts is as per the law, since the conditions of Notification and Rules are not fulfilled. Extended period of limitation - HELD THAT - The impugned period in the first Show Cause Notice is from March 2006 to September 2010. The appellant has not filed ST-3 returns for this taxable services rendered from March 2006 to March 2010. It was noticed that the appellant has paid Service Tax of Rs.55,41,139/- for the period from 2006 to 2007 which was prior to initiating investigation. It is evident that Service Tax liability was not worked out or paid in many commercial projects and in all their residential projects justifing invoking extended period. The provisions of proviso to Section 73 (1) of Finance Act, 1994 are pari pasu and pari materia to the provisions of proviso to Section 11A of the Central Excise Act, 1994. The intention to evade payment of tax is clearly manifest and articulated by the non-disclosure of the details of the provision of services and receipt of consideration. Non-filing of ST-3 returns for such a long period i.e, from March 2006 to March 2010 will make the intent to evade tax obvious. So invocation of extended period is justified, consequently, the imposition of penalty are also required to be upheld. Appeal dismissed.

Summary

Issues Involved:
1. Demand of Service Tax and imposition of penalties.
2. Eligibility for availing the benefit of Notification No. 1/2006-ST dated 01.03.2006 and Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007.
3. Invocation of extended period for the demand of Service Tax.

Summary:

1. Demand of Service Tax and Imposition of Penalties:
The appellants, engaged in construction services, were found to have collected but not paid Service Tax, and failed to file Service Tax returns from March 2006 onwards. The adjudicating authority confirmed that contractors/sub-contractors are liable for Service Tax, referencing Tribunal judgments such as Sew Construction Limited Vs. CCE, Raipur. The appellant's argument against double taxation was dismissed as irrelevant in this context. The Tribunal upheld the demand and penalties, concurring with the adjudicating authority's findings.

2. Eligibility for Notification No. 1/2006-ST and Works Contract Rules:
The benefit of Notification No. 1/2006-ST and Works Contract Rules was denied because the appellants did not include the value of materials supplied by customers in their gross receipts. The adjudicating authority noted the lack of documentary evidence to substantiate the value of free issue materials, thus justifying the denial of abatement. The Tribunal agreed, emphasizing that the conditions for availing the benefits were not met.

3. Invocation of Extended Period for Demand:
The extended period of limitation was invoked due to the appellant's failure to file returns and disclose taxable services, indicating intent to evade tax. The adjudicating authority's reliance on decisions such as Dharmapal Satyapal Vs. Commissioner of Central Excise, New Delhi supported this invocation. The Tribunal found the invocation justified, noting the appellant's non-compliance and lack of evidence to prove bonafide belief or Revenue neutrality.

Conclusion:
The appeals were rejected, upholding the demand of Service Tax, denial of Notification benefits, and invocation of the extended period, along with the imposition of penalties. The judgment emphasized that the appellants failed to substantiate their claims and comply with legal provisions, leading to the confirmation of the adjudicating authority's order.