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2024 (4) TMI 434 - AT - Service TaxRecovery of Service Tax alongwith interest and appropriation of amount already deposited alongwith penalty under Section 77(1)(a), 77(1)(c) 78 of Finance Act 1994 and Late fees for non filing /late filing of each of half yearly/quarterly returns during the period Oct 2010 to Sept. 2015 in terms of Rule 7C of the Service tax Rules 1994 read with section 70 of Finance Act 1994 - entitlement to benefit of exemption being the services provided by them as a sub-contractor to the main contractor. W hether the adjudicating authority was correct in dropping the demand of Rs 87, 14, 512/-? - HELD THAT -T he notification 17/2005 -ST dated 07.06.2005 provided exemption to site formation and clearance excavation and earthmoving and demolition and such other similar activities in the course of construction of roads airports railways transport terminals bridges tunnels dams ports and other ports with effect from 16.06.2005 - The aforesaid notification exempts all the activities related to construction of public utilities as described above. In the instant case we note that only the respondent s contracts are merely for excavation and not construction. The Notification is very clear that such services are exempt only if it is in the course of construction which is not the case here. There are catena of judgements which hold that the wordings of a Notification have to be interpreted strictly and cannot be expanded to conclude any extraneous interpretation. The issue of the liability of service tax on subcontractors stands settled by the decision of the Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI-LB where it was held that it is not possible to accept the contention of the learned Counsel for the Respondent that a sub contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the subcontractor.All decisions including those referred to in this order taking a contrary view stand overruled. T he respondent was liable to pay service tax on the taxable services provided by him for the period prior to 01.07.2012. However it is observed that adjudicating authority has ordered appropriation of an amount of Rs. 53, 31, 429/- which was collected as service tax from the service receiver on exempted services and deposited to the Government account in terms of provisions of section 73A (2) of the Finance Act. It would be appropriate to remand the matter to the adjudicating authority for recalculation of the demand if any taking into account the amount already so paid. Whether the Commissioner had erred in imposing penalty @50% under section 78 of the Act? - HELD THAT - It is by virtue of a proviso that the benefit of reduced penalty at 50% has been made available only with effect from 08.04.2011. Consequently the benefit of this proviso could only have been exercised by the Commissioner for the period post 08.04.2011. In view of the above it is agreed that the Commissioner has erred in imposing penalty at 50% for the period prior to 08.04.2011. Appeal allowed by way of remand to calculate service tax liability of the respondent for the period prior to 01.07.2012 as well as for recalculation of the penalty under section 78 leviable thereon.
Issues involved:
1. Whether the adjudicating authority was correct in dropping the demand of Rs 87,14,512/-? 2. Whether the imposition of 50% penalty u/s 78 of the Finance Act, 1994 is correct? Summary: Issue 1: Dropping the Demand of Rs 87,14,512/- The adjudicating authority dropped the demand of Rs 87,14,512/- on the ground that the services provided by the respondent were related to "site formation and clearance, excavation, earth moving, demolition" in relation to exempted services such as construction of roads, tunnels, and bridges. The authority examined work orders and certificates and concluded that these services were exempt from service tax under Notification No. 25/2012-ST w.e.f. 01.07.2012 and Notification No. 17/2005-ST for the period prior to 01.07.2012. However, the Tribunal noted that the exemption was only applicable if the services were provided in the course of construction, which was not the case here as the respondent's contracts were merely for excavation. The Tribunal cited previous judgments to support this interpretation and concluded that the respondent was liable to pay service tax for the period prior to 01.07.2012. The matter was remanded to the adjudicating authority for recalculation of the demand, taking into account the amount already paid. Issue 2: Imposition of 50% Penalty u/s 78 of the Finance Act, 1994 The Tribunal observed that u/s 78(1) of the Finance Act, 1994, the penalty imposable is equal to 100% of the service tax evaded. The benefit of reduced penalty at 50% is available only w.e.f. 08.04.2011. The adjudicating authority had imposed a 50% penalty for the period prior to 08.04.2011, which was incorrect. The Tribunal agreed that the Commissioner erred in imposing a reduced penalty for the period prior to 08.04.2011 and directed recalculation of the penalty under section 78. Conclusion: The appeal was allowed by way of remand for recalculating the service tax liability for the period prior to 01.07.2012 and for recalculating the penalty under section 78.
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