2023 (12) TMI 680 - AT - Service Tax

Levy of service tax - activity of construction of Mechanised fertiliser handling and bagging facility on the land leased out - invocation of extended period of limitation - HELD THAT - Admittedly, the Mechanized fertilizer handling and bagging facility have been constructed at berth No. 6 and its backup area of the Kakinada Deepwater Port. Admittedly, the construction of the said baggage handling facility have enhanced the capacity of the port, which shall further enhance the revenue from the operations in the port - it is further found that the agreement between KSPL and SCCPL provides to establish fertilizer and FRM handling system for unloading, bagging and rail/Road dispatch in the said port, for enhancing the port capacity with respect to fertilizer cargo. Further, both KSPL and SCCPL are obligated to market the said facility for attracting fertilizer cargo and also to jointly coordinate on matters pertaining to railway movement and allotment of the railway rakes in co-ordination with the Indian Railways - the revenue generated from the facility so created is also shareable by the port authority of the State government under the concessionaire agreement. Admittedly, the Appellants were awarded work by SCCPL for civil work concerning Mechanized fertilizer handling bagging facility. Extended period of Limitation - HELD THAT - The extended period of limitation is not invokable by the Revenue as no sufficient evidence and grounds have been brought on record for invoking extended period. Admittedly, SCN dated 25.08.2018 has been issued after the end of 40 months, as calculated from April 2015. The normal limitation during the period was 30 months, as substituted for 18 months vide Finance Act, 2016. Accordingly, SCN is hit by limitation, as extended period is not available to the Revenue in the admitted facts and circumstances. Since, on the grounds of limitation itself, the SCN is not sustainable, the case on merit as to whether or not the Appellants were eligible for the benefit of Notification No.25/2012-ST, is not examined in the facts of the case. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Liability to pay service tax on the construction of 'Mechanised fertiliser handling and bagging facility.'
2. Invocation of the extended period of limitation.

Summary:

Issue 1: Liability to Pay Service Tax

The Appellant, Vijay Nirman Company Private Limited, provided works contract services for constructing a 'mechanised fertiliser handling and bagging facility' on land leased by Kakinada Seaports Limited (KSPL) to Sarat Chatterjee & Co (Visakhapatnam) Pvt Ltd (SCCPL). The Department argued that this activity was not part of port infrastructure and thus not eligible for exemption under S.No.14(a) of Notification No.25/2012-ST dated 20.06.2012. The Appellant contended that the activity amounted to port construction and was exempt. The adjudicating authority denied the exemption, leading to a demand of Rs. 4,58,56,748/- in service tax, along with interest and penalties under sections 76, 77, and 78 of the Act.

Issue 2: Invocation of Extended Period of Limitation

The Revenue invoked the extended period of limitation, alleging suppression and misstatement of facts by the Appellant. The Appellant argued that they believed the activity was exempt from service tax, as indicated in their bills and agreements. The Tribunal found no deliberate attempt to evade tax, noting that the Appellant maintained proper books of accounts, regularly audited and filed returns. The Tribunal held that the issue was interpretational and not a case of suppression or fraud.

Tribunal's Findings:

1. The Tribunal noted that the construction of the fertiliser handling and bagging facility at berth No. 6 and its backup area of the Kakinada Deepwater Port enhanced the port's capacity and revenue.
2. The Tribunal found that the Appellant had not charged or collected service tax based on their understanding that the activity was exempt and had informed their principal that service tax, if applicable, would be charged separately.
3. The Tribunal held that there was no cogent evidence of deliberate suppression or misstatement by the Appellant.
4. The Tribunal concluded that the extended period of limitation was not invokable as no sufficient evidence was brought on record. The SCN dated 25.08.2018 was issued after 40 months, beyond the normal limitation period of 30 months.

Conclusion:

The Tribunal allowed the Appeals, set aside the Impugned Order, and held that the SCN was hit by limitation. Consequently, the Tribunal did not examine the merits of the case regarding the eligibility for exemption under Notification No.25/2012-ST. The Appellants were entitled to consequential benefits in accordance with the law.