2023 (7) TMI 197 - AT - Service Tax

Levy of penalty upon the Director of appellant s company and upon Head of Finance and Accounts of the appellants company and upon the company itself - Works Contract Service - contravention of the provisions of Section 67 of the Finance Act, 1994 and also contrary to Service Tax (Determination of Value) Rules, 2006 - HELD THAT - It has been submitted on behalf of the appellants that company was regularly audited without any objections as taken in impugned SCN. It has nowhere been denied by the department. There is no denial about regular filing of regular ST-3 returns. In light of these admissions, based on the subsequent audit, the objection which could be raised during previous audit, SCN cannot be issued that too after invoking extended period of limitation. Shri Anil Mohan Pokhriyal, admittedly, is not the Director of the company, he was a senior employee acting on the mandate of the directors. Otherwise also except his own statement, there is no incriminating evidence against him to prove that he had willfully suppressed the facts with an intention to evade the payment. He being the employee, question of him being the beneficiary of alleged evasion does not at all arises. Once there is absence of motive, in the light of criminal jurisprudence, mens rea cannot be attributed. The adjudicating authority has been unreasonable while imposing penalty on Shri Anil Mohan Pokhriyal. Similarly there appears no evidence of any positive act on part of Retd. Col. Swarn Kumar Makin and even of the company that there was any intentional mala fide suppression. Except that there is uncorroborated statement of auditor Shri Satnam Singh, same cannot be looked into especially when the penalty on the said auditor of appellant company was done away. Penalties upon Shri Anil Mohan Pokhriyal and Retd. Col. Swarn Kumar Makin and on the company are held as liable to be set aside. The order under challenge is held as liable to be set aside on this score only. Works contracts pertaining to Industrial or Commercial Construction Services - HELD THAT - The relevant service i.e. Commercial or Industrial Construction too was in existence till 30.06.12 and the party was classifying it as such in their ST-3 returns. Abatement is also held to have been rightly availed. Also that the SCN had proposed a demand running into crores but the original adjudicating authority after appreciating and accepting the contentions of the appellant has held that options of Rule 2A of Service Tax (Determination of Value) Rules, 2006 lies with the assesse and department cannot force the assessee to calculate in accordance of one of the said option. Based on these findings that major portion of demand of interest even on mobilization advance has also been dropped. Despite these findings still some demand under challenge with interest and penalty has been confirmed - In the light of the fact that department raised the demand based on compelling appellant for one option calculate despite that other available options were to be adopted as per choice of assessee and that never earlier any such objection was raised, the demand confirmed along with interest penalties against M/s. Makin Developers Pvt. Ltd. is liable to be set aside. The SCN is held time-barred. Findings of adjudicating authority are held unreasonable. Hence, the orders under challenge confirming demand with interest against company and imposing penalty on company, its director and its financial head are hereby set aside - Appeal allowed.

Summary

Issues Involved:
1. Imposition of penalty on the Director, Head of Finance and Accounts, and the company itself.
2. Classification of services and the applicability of extended period of limitation.
3. Determination of service tax liability and abatement claims.

Summary:

1. Imposition of Penalty:
The common issue in the appeals is the imposition of penalties on the Director, Retd. Col. Swarn Kumar Makin, and Head of Finance and Accounts, Shri Anil Mohan Pokhriyal, as well as on the company. The appellants argued that the company was regularly audited without objections as stated in the SCN. The Tribunal held that since there was no denial of regular filing of ST-3 returns and no incriminating evidence against Shri Anil Mohan Pokhriyal, the penalties imposed were unreasonable. The SCN was held to be barred by time, and penalties on the company and its representatives were set aside.

2. Classification of Services and Extended Period of Limitation:
The appellants contended that they were registered under 'Construction Services other than residential complex' and were paying service tax after claiming abatement of 67% from gross value. The Tribunal observed that the company was regularly audited, and no objections were raised during previous audits. Therefore, invoking the extended period of limitation was not justified. The Tribunal supported its decision with precedents, holding that the SCN could not be issued based on subsequent audits for objections that could have been raised earlier.

3. Determination of Service Tax Liability and Abatement Claims:
The Tribunal noted that the adjudicating authority had already dropped a major portion of the demand. It was observed that the classification of services was correctly done by the appellant, and abatement was rightly availed. The Tribunal held that the department could not compel the appellant to adopt a specific calculation method when other options were available. Consequently, the demand confirmed along with interest and penalties against the company was set aside.

Conclusion:
The Tribunal found the SCN to be time-barred and the findings of the adjudicating authority unreasonable. The orders confirming the demand with interest against the company and imposing penalties on the company, its director, and its financial head were set aside. All three appeals were allowed.