2024 (3) TMI 456 - AT - Service Tax

Invocation of extended period of limitation - shortage in payment of service tax - appellants did not pay service tax properly and further, not made proper disclosures to the department - construction of Subansiri Dam/Tunnel for the period 2012-13 - HELD THAT - The appellant was under the impression that they had already suffered the service tax by way of deduction at source, by the main contractor on the said activity. Thus, there does not appear to be any deliberate attempt or intention on the part of the appellant to evade service tax in the facts of the case. Demand with respect to construction of elevated structure for BMRCL - HELD THAT - Admittedly, when the project was awarded to the appellant, the same was exempt from service tax under Notification No. 25/2012-ST. During execution of project, the said exemption was withdrawn w.e.f. 01.03.2016. Thereafter, admittedly, this appellant was pursuing with the Principal BMRCL for release of funds towards payment of service tax, which took some time and upon release of such funds, admittedly, appellant had deposited such tax with interest. Hence, SCN is bad and is hit by the provisions of Sec 73(3) of the Finance Act, which provides that in such cases where tax and interest are paid without dispute, no SCN needs to be issued. Payment of service tax under RCM on Royalty paid to State Government - HELD THAT - Evidently, the matter is sub-judice before the Apex Court (9 Judges Bench). Whereas, earlier the 7 Judges Bench of the Apex Court in the case of India Cements Ltd Others vs State of Tamil Nadu Others 1989 (10) TMI 53 - SUPREME COURT have held that Royalty is Tax and set aside the cess imposed on such Royalty. Admittedly, no service tax is leviable on the amount of tax. In this view of the matter, the demand is only by change of opinion or interpretation of Statute. There is no case of fraud or mis-statement, etc., on the part of the appellant. The issue involved is wholly interpretational in nature. In this view of the matter, we hold that the SCN issued invoking extended period of limitation is bad - impugned order set aside - appeal allowed.

Summary

Issues:
The judgment involves the issue of whether the extended period of limitation has been rightly invoked.

Construction of Subansiri Dam/Tunnel:
The Appellant, engaged in execution of works contracts, constructed Dam/Tunnels across Subansiri River in Arunachal Pradesh from 2004 to 2017. The demand for service tax for this project under the extended period was challenged on the grounds that previous audits and SCNs had already addressed the tax liability for this project. The Tribunal held that the extended period cannot be invoked as the department was aware of the activity, and subsequent SCNs on the same issue are time-barred. The Tribunal referred to relevant case laws and held that the extended period is not available to the Revenue in such cases.

Bengaluru Metro Rail Project (BMRCL):
The construction of the metro rail project was initially exempted from service tax up to a certain date. The Appellant corresponded with BMRCL regarding the release of service tax after the exemption was withdrawn during the project execution. The Appellant made efforts to pay the tax before the investigation started, and the full tax amount with interest was paid before the issue of the SCN. The Tribunal held that no penalty is attracted as there was no suppression, only a delayed payment for reasons beyond control. Citing relevant case law, the Tribunal ruled that when tax and interest are paid before the SCN, no notice needs to be issued.

RCM demand on Royalty paid to State Government:
The demand for service tax under reverse charge mechanism on Royalty paid to the State Government was challenged, citing the sub-judice status of the matter before the Apex Court and conflicting views on the taxability of Royalty. The Tribunal noted that the demand was based on a change of opinion or interpretation of the statute, and extended period cannot be invoked in such cases. Referring to relevant legal precedents and stay orders, the Tribunal held that the demand was not sustainable.

Conclusion:
The Tribunal found that there was no case of fraud or misstatement on the part of the Appellant, and the issues raised were interpretational in nature. The SCN invoking the extended period of limitation was deemed invalid, and the appeal was allowed. The impugned order was set aside, and the Appellant was entitled to consequential benefits as per the law.