2024 (1) TMI 1163 - AT - Service Tax

Failure to discharge Service Tax liability - Works Contract service - Bus Shelters for construction BRTS, Ahmedabad and other for construction of a Conventional Centre, Auditorium and Exhibition Hall for Gujarat University - contravention of provision of Section 68 read with Rule 6 of the Service Tax Rules, 1994 - failure to apply for registration with service tax department - failure to assess the tax due on the services provided and failure to furnish ST 3 returns - failure to pay the interest leviable on the service tax not paid - Recovery alongwith interest and penalty - extended period of limitation - HELD THAT - On going through the order in original, it is found that the learned commissioner of the view the services are covered under works contract service but no elaboration was given as regards the exemption, valuation and ingredients of the service i.e. works contract service. In the said service, the main ingredients are that of construction BRTS, Ahmedabad and other for construction of a Conventional Centre, Auditorium and Exhibition Hall for Gujarat University. However, the learned Commissioner has not given clear findings why the services are not exempted on basis of valuation. These are the main factor which decide whether the service is taxable or not. Therefore, this aspect needs to be reconsidered. It is found that although the show cause notice refer to the charge of intention to evade payment of tax on the part of the appellant, no concrete evidence is forthcoming to substantiate this charge against the appellant. This aspect has not been fully examined and discussed in any of the orders passed by the authorities below. It is, therefore, necessary that in the interest of justice, the matter needs to be remanded to the Commissioner (Appeals) keeping all the issues open. Appeal allowed by way of remand.

Summary

Issues involved: Service Tax liability, failure to discharge tax liability, failure to apply for registration, failure to assess tax due, failure to furnish ST 3 returns, failure to pay interest, demand of Service Tax confirmed, exemption under Notification No. 25/2012, non-taxable activity, construction of non-commercial building, exemption under JNNURM or RAY scheme, payment of service tax by main contractor, demand on sub-contractor, valuation of taxable service, intention to evade tax, remand to Commissioner (Appeals).

Service Tax liability and Exemption under Notification No. 25/2012:
The Service Tax Department alleged that the appellant failed to discharge their Service Tax liability and other related obligations. The appellant argued that the activity carried out by them, including the construction of bus shelters and a conventional center, falls under non-taxable categories. They relied on Notification No. 25/2012, claiming exemption under Sr. No. 13(b) for works related to JNNURM or RAY schemes. The appellant contended that the service provided under these schemes is exempt from service tax, as per the mega exemption Notification 25/2012. They emphasized that the projects undertaken were non-commercial in nature and therefore not liable for service tax.

Payment of Service Tax by Main Contractor and Demand on Sub-contractor:
The appellant further argued that the main contractor had already paid the service tax on their behalf, as per the contract terms. Citing legal precedents, the appellant asserted that sub-contractors are not required to pay service tax when it has been paid by the main contractor. They presented cases where it was held that the liability of tax rests with the main contractor, not the sub-contractor. The appellant contended that since the service tax had already been paid by the main contractor, no further tax could be demanded from them.

Valuation of Taxable Service and Intention to Evade Tax:
The appellant raised concerns regarding the valuation of taxable services under the Works Contract Service. They argued that only the service portion in the execution of works contract is taxable, not the entire works contract value. They criticized the adjudicating authority for demanding service tax on the full value of work executed, labeling it as excessive and unfair. Additionally, the appellant disputed the charge of "intention to evade payment of tax," stating that invoking the extended period for tax recovery was not legally justified.

Remand to Commissioner (Appeals):
Upon careful consideration of the submissions, the Tribunal found that the service tax liability and exemption aspects required further clarification. The Tribunal noted that the authorities had not provided clear findings on the exemption, valuation, and ingredients of the service in question. As concrete evidence to substantiate the charge of tax evasion was lacking, the matter was remanded to the Commissioner (Appeals) for a fresh appellate order within a specified timeframe. The impugned order was set aside, and the appeal was allowed for remand to address the unresolved issues effectively.