2024 (6) TMI 449 - AT - Service Tax

Invocation of extended period of limitation to demand Service Tax - suppression of facts with intention to evade payment of tax exists or not - alleged non-payment/short payment of service tax - demand of Service Tax u/s 73 of the Finance Act, 1994, interest, and penalty - inclusion of value of free supply materials in their assessable value. Extended period of limitation - HELD THAT - The appellant has categorically informed the Department that according to them, the service rendered by them is not liable to Service Tax and hence, they are not paying Service Tax on the said services rendered by them to JSPL. However, on receipt of the above said letter, no action has been taken by the Department against the appellant. The demand of Service Tax in the present case has been raised for the period from 2007-08 to 2009-10. The Show Cause Notice in the present case has been issued on 07.06.2012 which is beyond the normal period of limitation - it is also noted that the appellant has disclosed all the information to the Department and did not suppress any facts. Accordingly, it is observed that suppression of facts with intention to evade payment of tax does not exist in this case. Hence, the demand of Service Tax by invoking the extended period of limitation is not sustainable. Demand of service tax under the category of works contract service for the period from 2007-08 to 2009-10 - HELD THAT - The construction of complex, which is constructed by a person directly engaging any other contractor and intended for personal use as a residence, is not liable to Service Tax. In the present case, the residential complexes constructed by JSPL in their Angul and Raigarh units were meant for the use of their employees. It is observed that the activity of works contract service undertaken by the appellant for JSPL falls within the ambit of the definition of personal use . Accordingly, the service rendered by the appellant for JSPL is not liable to Service Tax under the category of works contract service. Inclusion of value of free supply materials in the assessable value for the purpose of payment of Service Tax - HELD THAT - It is observed that in the case of COMMISSIONER OF SERVICE TAX ETC. VERSUS M/S. BHAYANA BUILDERS (P) LTD. ETC. 2018 (2) TMI 1325 - SUPREME COURT the Hon ble Apex Court has held that the value of free supply materials is not includable in the assessable value. In the present case, the appellant is not liable to pay Service Tax for the services rendered. Hence, the question of including the value of free supply materials in the assessable value for the purpose of payment of service tax, does not arise. In view of the discussions above and by relying on the decision cited, it is held that the demand of Service Tax by including the value of free supply materials in the assessable value is not sustainable. Service tax on advance received for the purpose of rendering works contract service - HELD THAT - These advances have been received by the appellant towards the above services rendered - the appellant is not liable to pay Service Tax for the services rendered, the demand of Service Tax on the advances received is not sustainable. Interest and penalty - HELD THAT - Since the demand itself is not sustainable, the question of demanding interest and penalty does not arise. The demands confirmed in the impugned order are not sustainable - the impugned order is set aside - appeal allowed.

Summary

Issues:
Demand of Service Tax under works contract service, Inclusion of free supply materials in assessable value, Liability on advances received, Invocation of extended period of limitation.

Analysis:
The case involved a dispute regarding the demand of Service Tax on works contract services provided by the appellant to a company. The Commissioner issued a Show Cause Notice alleging non-payment of Service Tax, including interest and penalty. The appellant contended that they stopped paying tax based on legal advice that the services rendered were exempt due to being for personal use. The appellant argued that there was no intention to evade tax and that the extended period of limitation should not apply.

The Tribunal noted that the appellant had informed the Department about not paying Service Tax based on legal advice. The demand was for the period beyond the normal limitation period. As there was no suppression of facts by the appellant, the Tribunal held that the demand invoking the extended period was not sustainable.

Regarding the works contract services, the Tribunal analyzed the definition of "Residential Complex" and "personal use" under the Finance Act, 1994. It concluded that the services provided by the appellant for the construction of residential complexes meant for personal use of employees were not liable to Service Tax under works contract service.

In addressing the inclusion of free supply materials in the assessable value, the Tribunal cited a Supreme Court decision stating that the value of free supply materials should not be included. As the appellant was not liable to pay Service Tax, the demand based on including the value of free supply materials was deemed unsustainable.

The Tribunal also found the demand on advances received towards works contract services unsustainable. Consequently, the Tribunal set aside the impugned order, allowing the appeal filed by the appellant. As the demand was not sustainable, the question of interest and penalty did not arise.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the demands confirmed in the impugned order were not sustainable, and set aside the order.