2024 (4) TMI 680 - AT - Service Tax

Levy of service tax - works contract service - construction of a new building or a civil structure or a part thereof or a pipeline primarily for the purpose of commerce and industry - Boundary wall is a part of the building or is it a civil structure or a part of the building or civil structure? - Extended period of limitation - penalties - HELD THAT - Admittedly, service tax was payable on the construction of a new building or a civil structure or a part thereof. The appellant s contention is that boundary wall is not a part of the building nor is it a civil structure. This submission cannot be accepted. A boundary wall is invariably a part of the building or a civil structure. It needs to be noted that service tax was payable not only when the entire building or a civil structure is built but it was also payable when a part of it is built - the submission of the appellant that the boundary wall is not a part of the building and is also not a civil structure, cannot be agreed upon. Therefore, regarding the demand on merits, the issue is decided against appellant. Extended period of Limitation - Suppression of facts or not - HELD THAT - During investigation itself, the appellant agreed and paid the service tax. Had the appellant been discharging its obligations and filing ST 3 returns, it would have been the responsibility of the department to scrutinise them with the records and raise a demand. The appellant in this case neither disclosed the rendering of this service nor paid service tax on it nor filed the returns. This qualifies as suppression of facts with intent to evade payment. Therefore, the extended period of limitation was correctly invoked in this case. Imposition of penalties under section 77 and 78 of the Finance Act - HELD THAT - Whenever any service tax is not paid by reason of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of service tax, penalty under section 78 can be imposed. In other words, the same elements which make the extended period of limitation invokable also make the assessee liable to penalty under section 78 - Since it is already held against the appellant on the question of extended period of limitation, there are no reason to take a different view with respect to penalty under section 78. Section 77 is a general penalty for offences. Since the appellant had failed to pay self assess service tax correctly and pay it and file returns, we find the penalty of Rs. 10,000 on the appellant under section 77 is also just and fair. The impugned order is upheld - Appeal dismissed.

Summary

Issues:
The issues involved in this case are the demand for service tax on the construction of a boundary wall, invocation of the extended period of limitation, and imposition of penalties under sections 77 and 78 of the Finance Act, 1994.

Demand for Service Tax on Boundary Wall Construction:
The appellant contested the demand for service tax on the construction of a boundary wall, arguing that a boundary wall is not a part of a building or a civil structure as per the relevant section. However, the Tribunal disagreed, stating that a boundary wall is indeed considered a part of a building or civil structure. The Tribunal emphasized that service tax is applicable not only to entire buildings or civil structures but also to their parts. Therefore, the appellant's contention was rejected, and the demand on merits was upheld.

Invocation of Extended Period of Limitation:
Regarding the invocation of the extended period of limitation, the appellant claimed that it was wrongly applied. However, the Tribunal found that the appellant had not paid service tax on the rendered service nor filed the required returns for a significant period. The Tribunal noted that the appellant's failure to disclose the service, pay the tax, or file returns amounted to suppression of facts with an intent to evade payment. Consequently, the extended period of limitation was deemed correctly invoked in this case.

Imposition of Penalties under Sections 77 and 78:
The appellant contested the imposition of penalties under sections 77 and 78 of the Finance Act. The Tribunal clarified that penalties under section 78 can be imposed when there is fraud, collusion, wilful misstatement, or suppression of facts with intent to evade payment. Since the extended period of limitation was upheld due to the appellant's actions, the Tribunal found no reason to differ on the penalty under section 78. Additionally, a penalty under section 77 was considered fair due to the appellant's failure to pay self-assessed service tax correctly, leading to the imposition of penalties. Consequently, the penalties under sections 77 and 78 were upheld as just and fair.

In conclusion, the Tribunal dismissed the appeal and upheld the impugned order, emphasizing the applicability of service tax on the construction of a boundary wall, the justified invocation of the extended period of limitation, and the fair imposition of penalties under sections 77 and 78 of the Finance Act, 1994.