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2024 (4) TMI 681 - AT - Service TaxNon-payment of service tax - commercial and industrial construction service - rendering of service even before registering with the department on 11.6.2007, but it had not paid any service tax on such services - non-payment of service tax on some projects/contracts on the ground that they were charitable/educational hospitals or projects - non-payment of service tax on certain residential construction on the ground that they were residential units - collection of some amounts as service tax in some of the running bills on these projects, but did not deposit these amounts in the exchequer - non-inclusion of value of materials supplied free of cost by its clients in the value of taxable services - non-payment of service tax at all in respect of the services rendered by it from April 2009 to June 2010. Demand for the services provided prior to 1.6.2007 are concerned, the demand is under the head commercial and industrial construction service - HELD THAT - During this period, the appellant was not registered with the service tax. From 1.6.2007, the appellant is registered under the head Works Contract Service and paid service tax on the service. There is no dispute that the nature of the service was the same both before and after 01.06.2007 - Works Contract Service is a contract which involves rendering of service along with transfer or deemed transfer of property in goods. For instance, if a builder constructs a building under a contract including the cost of materials, not only does he render the service but he also transfers the property in the material used such as bricks, steel, cement, etc. while rendering the service. Such services are distinct from contracts for sale of goods or contracts for rendering services and are known to commerce as a separate species of contracts. Such contracts became chargeable to service tax as works contracts service w.e.f 1.6.2007 and there was no charge of service tax on such services prior to 01.06.2007 as held by the Supreme Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT - the demand of service tax on works contracts executed prior to 1.6.2007 under the head commercial or industrial construction service cannot be sustained. Demand for the period after 1.6.2007 - suppression of facts or not - time limitation - HELD THAT - The appellant cannot claim exemption from service tax on the ground that its client was exempted under some provision of income tax. If it wants to claim exemption from service tax, it is its responsibility to show how it was covered by an exemption notification or exemption clause under the provisions of the service tax. Similarly, if it wants to claim exemption from income tax, it has to show how it is exempted under the laws of income tax. However, it is found from Annexure B(1) of the SCN that the amounts which it had received from these three organisations were received clearly beyond the normal period of limitation and hence any demand on this count is hit by limitation. Construction of residential complexes - HELD THAT - It is found that the demand for the normal period of limitation was not under construction of residential complexes but only under the head of Works Contract Service and hence this submission is also irrelevant. Composition scheme - demand raised on the gross amounts received without any abatement towards the value of the goods - HELD THAT - The reason for not allowing abatement as recorded in paragraphs 44 and 45 of the impugned order is that the appellant had not opted for payment of service tax under Works Contract Composition scheme. In this factual matrix, when it is undisputed that goods were used in execution of the contracts and the value of the goods is not available, it will not be open to the department to charge service tax on the entire gross amounts received including the value of the good transferred. Service tax cannot be charged on the value of the goods sold or otherwise transferred as a part of the contract. It is found that even if the appellant had not opted for the composition scheme by submitting a letter in writing as required during the relevant period, if it is otherwise eligible for the benefit of the composition, it cannot be denied for the technical fault of not submitting a letter within time. Accordingly, the demand for the normal period of limitation under this head is confirmed allowing abatement under the Composition scheme. The last submission on merits of the case is that the impugned order confirmed demands on the value of the free materials supplied by the clients of the appellant - HELD THAT - It is found from the SCN that demands have been made on this account. It has been decided by the larger bench of this Tribunal in M/S BHAYANA BUILDERS (P) LTD. OTHERS VERSUS CST, DELHI OTHERS 2013 (9) TMI 294 - CESTAT NEW DELHI-LB that the value of supplies made free of cost by the service recipient cannot be included in the taxable value for calculating service tax. This decision was upheld by the Supreme Court in COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT . Therefore, the demand on this account needs to be set aside. Appeal allowed in part.
Issues Involved:
1. Demand for service tax under different categories. 2. Invocation of extended period of limitation. 3. Imposition of penalties. Summary: 1. Demand for Service Tax under Different Categories: - The appellant was accused of not paying service tax on various services before and after registration, including 'commercial and industrial construction service' and 'works contract service'. - The Tribunal held that demand for service tax on works contracts executed prior to 1.6.2007 under 'commercial or industrial construction service' cannot be sustained as there was no charge of service tax on such contracts before this date. - Post 1.6.2007, the appellant was registered under 'Works Contract Service' and paid service tax accordingly. The appellant's claim for exemption on services rendered to certain charitable organizations was dismissed, but the demand was time-barred. 2. Invocation of Extended Period of Limitation: - The Tribunal found that the extended period of limitation u/s 73 was wrongly invoked. The reasons cited for invoking the extended period, such as failure to register before 11.6.2007 and non-disclosure of gross amounts, were not justified as the appellant was not liable to service tax on works contracts before 1.6.2007. - The Tribunal concluded that the demand for the period prior to October 2009 was time-barred and cannot be sustained. 3. Imposition of Penalties: - The penalties imposed on the appellant were set aside. The Tribunal found that the appellant's failure to opt for the Works Contract (Composition) scheme in writing did not justify denying the benefit of the scheme. - The Tribunal also held that the value of free supplies by the client cannot be included in the taxable value for calculating service tax, following the precedent in Bhayana Builders (P) Ltd. vs Commissioner. Conclusion: - The demand under 'commercial and industrial construction service' for the period before 1.6.2007 is set aside. - Demands beyond the normal period of limitation are set aside. - For demands within the normal period, the appellant is entitled to the Works Contract (composition) scheme, and the value of free materials supplied by the client cannot be included in the taxable value. - The matter is remanded to the original authority for recalculating the service tax accordingly. - All penalties are set aside, and the appellant is eligible for consequential relief.
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