2023 (10) TMI 291 - HC - Service Tax

Extended period of limitation - Petitioner s liability for payment of the service tax on works contracts executed during the period of 2014-15 to 2017-18 - It is the petitioner s case that in terms of Section 129 of the Finance (No. 2) Act, 2019, no proceedings can be initiated in respect of service tax for the period 2014-15 to 2017-18 and no further demands can be raised - HELD THAT - The contention that the subject matter of the impugned show cause notice and the show cause notice dated 23.04.2019 is different, is also unpersuasive. There is no dispute that the subject matter of both the show cause notices is the petitioner s service tax liability during the period 2014-15 to 2017-18. The Revenue Authorities had commenced an investigation to ascertain the petitioner s correct tax liability for the said period by invoking the extended period of limitation as provided under Section 73 of the Finance Act. The show cause notice dated 23.04.2019 indicates that the investigation covered the extent of services rendered by the petitioner. Summons were also issued by the Revenue Authorities to various entities for whom the petitioner had executed the construction works. The Revenue Authorities had also collected bills and invoices from the said entities. Merely because one of the entities had not furnished the bills which would have enabled the Revenue Authorities to verify the petitioner s liability does not in any manner render the subject matter of the show cause notice dated 23.04.2019 any different from subject matter of the impugned show cause notice. There are merit in the petitioner s contention that the impugned show cause notice is not sustainable and is liable to be set aside. The Discharge Certificate issued to the petitioner is conclusive of the subject matter of the impugned show cause notice - impugned show cause notice is liable to be set aside. Clearly, the assumption that the petitioner is liable to pay tax on FOC material supplied by M/s Charms India Pvt Ltd. is ex facie erroneous. The said issue is covered by the decision of the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT . The Supreme Court in the said judgment held that on first principle, the value of free supply items, which are not a part of the contract between the service provider and the service recipient has no relevance in determination of the value of taxable services. The Revenue has proceeded on an ex-facie erroneous premise that NOIDA is not a body corporate on the basis that NOIDA had explained that it was neither a company registered under the Companies Act, 1996 nor a business entity registered as a body corporate. NOIDA does not require to be registered under any Act as a body corporate, as it has been constituted by the Uttar Pradesh Industrial Area Development Act, 1976 as a body corporate. Thus, clearly the Revenue has misunderstood the response received from NOIDA as is reflected in the impugned show cause notice. The petition is allowed and the impugned show cause notice is set aside.

Summary

Issues Involved:
1. Validity of the impugned show cause notice dated 10.07.2020.
2. Applicability of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
3. Liability of the petitioner for service tax on free of cost (FOC) material.
4. Determination of NOIDA's status as a body corporate.

Summary:

1. Validity of the Impugned Show Cause Notice:
The petitioner challenged the show cause notice dated 10.07.2020, which demanded service tax of Rs. 2,67,26,113/- for the period 2014-15 to 2017-18. The notice was based on the assertion that the petitioner had issued FOC material invoices and misrepresented facts about the running bills. Additionally, it claimed the petitioner wrongly assumed NOIDA as a body corporate, affecting tax liability. The court found the notice unsustainable, stating that the Discharge Certificate issued under the Sabka Vishwas Scheme conclusively settled the matter for the specified period.

2. Applicability of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019:
The petitioner had availed the Scheme, paying 50% of the proposed tax demand, and received a Discharge Certificate. The court held that the petitioner's declaration under the category of 'Litigation' was valid, and the Discharge Certificate conclusively resolved the tax liability for the period in question. The court rejected the Revenue's argument that Section 129(2)(c) of the Finance (No. 2) Act, 2019, applied, as the petitioner's declaration was not a 'Voluntary Disclosure.'

3. Liability for Service Tax on FOC Material:
The court referred to the Supreme Court's decision in Commissioner of Service Tax & Ors v. Bhayana Builders Private Limited & Ors., which stated that the value of free supply items not part of the contract is irrelevant in determining taxable service value. Therefore, the assumption that the petitioner was liable for tax on FOC material was deemed erroneous.

4. Determination of NOIDA's Status as a Body Corporate:
The court clarified that NOIDA is a body corporate as per Section 3 of the Uttar Pradesh Industrial Area Development Act, 1976. The Revenue's claim that NOIDA was not a body corporate was based on a misunderstanding. The court highlighted that NOIDA's status as a body corporate is explicitly stated in the statute, and the Revenue's contrary assumption was fundamentally flawed.

Conclusion:
The court allowed the petition, setting aside the impugned show cause notice. The Discharge Certificate was deemed conclusive for the matter and period covered, and the assumptions regarding FOC material and NOIDA's status were found to be erroneous. The pending applications were also disposed of.