2024 (4) TMI 329 - AT - Service Tax

Invocation of Extended period of Limitation - willful mis-statement or suppression of facts or not - levy of penalty under section 78 of FA - renting of immovable property service - contract for supply, erection, commissioning and installation of retail visual identity signages elements - abatement claim - receipts towards works related to signages at roads and airports - sales declared in the balance sheet - reverse charge mechanism for legal and professional services. Extended period of Limitation - HELD THAT - It is a well settled legal position that although every service tax assessee operates under self-assessment, extended period of limitation cannot be invoked unless one of the five elements essential for invoking extended period of limitation is established. It is also a well settled legal position that suppression of facts does not mean mere omission but the suppression with an intent to evade. Admittedly, the Commissioner invoked extended period of limitation and imposed penalties under section 78 under the wrong understanding of law that the intent to evade is not necessary to invoke extended period of limitation and to impose penalty under section 78. Therefore, the entire demand beyond the normal period of limitation of 18 months during the relevant period cannot be sustained and needs to be set aside regardless of the merits of the case - the penalty imposed under section 78 also needs to be set aside. Demand of service tax on the services provided to M/s Indra Systems India Pvt. Ltd. and M/s Poonam Hasija Neha Hasija was dropped by the Commissioner giving an abatement towards the cost of the material from the gross receipts - HELD THAT - The Commissioner recorded that there were three purchase orders and after examining the purchase orders came to the conclusion that the appellant had correctly claimed abatement of 60% towards the value of the goods and promptly discharged the service tax liability. Therefore, he dropped the demand. Revenue is only aggrieved by the fact that his findings were not the same as the allegations in the SCN. The Commissioner was correct in considering both the allegations in the SCN and also the submissions made by the assessee in defence and arriving at a conclusion. Nothing is in the appeal by the Revenue to substantiate that the Commissioner had either not read the contracts or read them wrongly. There are no reason to interfere with the findings of the Commissioner and reject the Revenue s appeal on this ground. Demand of service tax towards the signboards installed by the assessee on the roads and airports - HELD THAT - Revenue is asked to supply copies of the documents related to the VCES Scheme so that this contention could be examined. Learned authorized representative has placed on record a letter dated 06.10.2023 from the Assistant Commissioner confirming that neither the VCES application nor any documents could be found despite sincere and rigorous efforts. In view of this, the Revenue s appeal on this ground cannot be entertained because the very basis was that some declaration was made under the VCES which declaration is not available at all. Service tax on signages installed by the assessee at roads - HELD THAT - The service tax has to be levied as per the Finance Act, 1994 and the definitions therein and as per the common understanding in India. OECD stands for organization for Economic Corporation and Development which is a group of some developed countries. Their laws or regulations or guidelines do not form law in India just as Indian laws do not apply in those countries. In works contract service, the exception for payment of service tax is made for work related to construction of roads and it cannot be extended to other things, such as, road signages. It is found that the assessee s appeal on this ground needs to be rejected and the impugned order should be upheld. Demand of service tax on the sales declared in the balance sheet was dropped by the Commissioner holding that this income was entirely from sales receipts - HELD THAT - It needs to be pointed out that for service tax to be levied three things are essential namely (a) the service provider must provide a service to the service recipient; (b) the service so provided must be a taxable service during the relevant period; and (c) a consideration must have been received for providing the taxable service. Unless all these three elements are established, no service tax can be charged. Merely because any amount has been received in the accounts of any person, service tax cannot be charged unless the amounts so received were a consideration for providing taxable services. The burden of proving any fact rests on the person whose case fails, if no evidence is presented by either side. In the case of SCNs, if no evidence is presented by either side, the allegations in the SCN fail and, therefore, it is for the Revenue to provide evidence that taxable services were rendered and consideration has been received. There is nothing in the appeal of the Revenue to establish that the amount received were not for sale of goods, but were received for providing the taxable services. In view of the above, the appeal by the Revenue on this count also needs to be rejected. The matter is remanded to the Commissioner for the limited purpose of calculation of the amount of service tax within the normal period - Appeal disposed off.

Summary

Issues Involved:

1. Invocation of extended period of limitation.
2. Confirmation and dropping of service tax demands on various grounds.
3. Imposition of penalties u/s 78 of the Finance Act, 1994.

Summary:

1. Invocation of Extended Period of Limitation:

The assessee contested the invocation of the extended period of limitation, arguing that none of the five essential factors (fraud, collusion, willful mis-statement, suppression of facts, or contravention of provisions with intent to evade payment of duty) were present. The Tribunal noted that the Commissioner erred in invoking the extended period of limitation and imposing penalties u/s 78 without establishing the intent to evade payment of service tax. The Tribunal held that "mere suppression is not adequate for the purpose of recovery of tax for the extended period as well as for imposing penalty." Consequently, the entire demand beyond the normal period of limitation of 18 months was set aside, and the penalty imposed u/s 78 was also set aside.

2. Confirmation and Dropping of Service Tax Demands:

(a) Renting of Immovable Property Service: The service tax demand of Rs. 17,15,134/- was dropped by the Commissioner, and there was no appeal by either side, thus attaining finality.

(b) Contract for Supply, Erection, Commissioning, and Installation of Signages: The service tax demand of Rs. 1,28,46,824/- was dropped by the Commissioner, and there was no appeal by either side, thus attaining finality.

(c) Services to M/s Indra Systems India Pvt. Ltd. and M/s Poonam Hasija Neha Hasija: The service tax demand of Rs. 1,01,390/- was dropped by the Commissioner after allowing abatement towards the cost of material. The Tribunal upheld the Commissioner's decision, rejecting the Revenue's appeal on this ground.

(d) Signages at Roads and Airports: The Commissioner partially confirmed and partially dropped the demand of Rs. 2,28,73,103/-. The Tribunal rejected the Revenue's appeal due to the unavailability of VCES documents and upheld the demand of Rs. 44,49,868/-, rejecting the assessee's appeal that signages should be considered part of roads.

(e) Sales Declared in Balance Sheet: The Commissioner dropped the demand of Rs. 32,07,57,568/-, holding that the income was entirely from sales receipts. The Tribunal rejected the Revenue's appeal, noting the absence of evidence to support the contention that the receipts were for taxable services.

(f) Recovery of Cenvat Credit: The recovery of Rs. 47,37,237/- was confirmed by the Commissioner, with no appeal by either side, thus attaining finality.

(g) Reverse Charge Mechanism for Legal and Professional Services: The service tax demand of Rs. 4,709/- was confirmed by the Commissioner, with no appeal by either side, thus attaining finality.

3. Imposition of Penalties u/s 78 of the Finance Act, 1994:

The Tribunal set aside the penalty imposed u/s 78 due to the incorrect invocation of the extended period of limitation without establishing the intent to evade payment of service tax.

Conclusion:

The Tribunal dismissed the Revenue's appeal and partially upheld the assessee's appeal on the question of invoking the extended period of limitation. The matter was remanded to the Commissioner for the limited purpose of calculating the amount of service tax within the normal period of limitation. The penalty imposed u/s 78 was set aside.