2024 (3) TMI 284 - AT - Service Tax

Classification of service - Commercial or Industrial Construction Service or Works Contract Service? - Supply of Tangible Goods Service - extended period invoked merely on the basis that service tax has not been paid and periodical Returns were not filed - intent to evade or not. Commercial or Industrial Construction Service - HELD THAT - The issue is settled in favour of the appellants HP SINGH CHADHA AND DP SINGH CHADHA VERSUS COMMISSIONER OF CGST, LUDHIANA 2024 (1) TMI 680 - CESTAT CHANDIGARH by this very Bench relying on the Hon ble Apex Court judgment in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT Supply of Tangible Goods Service - HELD THAT - It is found that neither the show - cause notice nor the impugned order records any proof of the possession and effective control of the machinery, supplied by the appellants to M/s L T, was with the appellant themselves. In the absence of such evidence, demand can be sustained only on the basis of averment on the part of the appellant that they have also supplied the operators of the machinery. It is not coming forth in the impugned order as to whether the appellant was paying the wages to the operators and were having effective control of the goods supplied by them. In the absence of the same, demand cannot be sustained. Extended period of limitation - intent to evade or not - HELD THAT - The fact that the show-cause notice has been issued based on the financial records maintained by the appellants; extended period has been invoked on the grounds that the appellants did not obtain registration; paid the tax as applicable and file the Returns; in addition to this, no other express evidence was put forth to show any mala fide intent on the part of the appellants to evade payment of tax. Under these circumstances, Revenue has not made out any case for invocation of extended period - the Revenue has not made out any case for invocation of extended period. The demand cannot be sustained on merits and on limitation also. Accordingly, the appeal stands allowed.

Summary

Issues:
The issues involved in the judgment are the demand for recovery of service tax on various taxable services, invocation of extended period for non-payment of tax and non-filing of returns, and the sustainability of demand on the grounds of possession and control of tangible goods supplied.

Demand for Recovery of Service Tax:
The appellant, engaged in providing taxable services, challenged the demand for recovery of service tax. The Commissioner confirmed a demand of Rs.8,54,376/- on account of "Commercial or Industrial Construction Service" and "Supply of Tangible Goods Service." The appellant contended that the service fell under "Works Contract Service" and that possession and effective control of the machinery supplied were transferred to the recipient.

Invocation of Extended Period:
The extended period was invoked due to non-payment of tax and non-filing of returns by the appellant. The appellant argued that they were under a bona fide belief that service tax was not payable, especially for services related to the construction of roads. The appellant maintained that 97.5% of the demand was dropped by the Commissioner, hence extended period invocation was unwarranted.

Sustainability of Demand on Tangible Goods Service:
The Tribunal found that the demand on "Supply of Tangible Goods Service" could not be sustained as there was no evidence of possession and effective control of the machinery supplied by the appellant. The lack of proof regarding payment of wages to operators and effective control of the goods led to the conclusion that the demand was not substantiated.

Judicial Precedents and Findings:
The Tribunal referred to previous judgments and held that the burden of proving mala fide conduct lies with the Revenue. It was emphasized that specific averments challenging the conduct of the assessee must be made in the show cause notice for the extended period to be invoked. Since no such specific averments were present, and no willful default was evident, the extended period of limitation could not be invoked.

Conclusion:
The Tribunal concluded that the Revenue did not establish a case for invoking the extended period. Therefore, the demand for recovery of service tax could not be sustained both on merits and limitation grounds. Consequently, the appeal was allowed in favor of the appellant.