2024 (8) TMI 1101 - AT - Service Tax

Classification of services - construction of roads services or construction of complex services - works contract services - best judgment assessment resorted to under section 72 of the Finance Act - appellant had already paid service tax, as applicable, even before the SCN was issued - applicability of section 73 (3) of the Finance Act. The submission is that the appellant was told by some consultant that it need not pay service tax and therefore based on that advice it had not obtained service tax registration and had not paid service tax. HELD THAT - It is found that the intent can only be infered from the facts of the case. In this case, the violation of the Act or Rules is evident and it also evident that as a result the appellant had not paid service tax which it had to pay. The plea that it s consultant had advised it not to pay service tax and, therefore, it had no intent to evade cannot be accepted. If this is accepted as a ground, anybody rendering taxable services and not paying tax can simply take the plea that some consultant had advised him not to pay service tax and not take registration and service tax - in the provisions related to invoking extended period of limitation under section 73 and imposition of penalty under section 78 are identical to the provisions of section 73 (4) - there are no reason to take a different view in this regard to the extended period of limitation or imposition of penalty under section 78. The rest of the demand of service tax is upheld. The amounts already paid by the appellant as service tax need to be appropriated against the remaining part of the demand. Interest will be payable as appropriate and any amounts of interest already paid shall be adjusted towards it. Penalty imposed under section 78 of the Finance Act needs to be recomputed accordingly. Appeal allowed in part.

Issues Involved:
1. Classification of services for tax purposes.
2. Applicability of service tax exemptions.
3. Invocation of extended period of limitation.
4. Validity of penalties imposed under sections 77 and 78 of the Finance Act.
5. Applicability of section 73(3) of the Finance Act.

Detailed Analysis:

1. Classification of Services for Tax Purposes:
The appellant argued that the services rendered, specifically the widening of roads, should be classified under "construction of roads" and thus be exempt from service tax. The Tribunal found that certain services provided by the appellant, including the construction/restoration of roads for the Delhi Development Authority (DDA), construction of boundary walls for DDA land/park, and construction of Metro Station and car parking for DDA, were not commercial in nature and therefore excluded from the ambit of service tax.

2. Applicability of Service Tax Exemptions:
The appellant claimed that the services related to the construction of roads and other public works should be exempt from service tax. The Tribunal agreed that the construction/restoration of roads, boundary walls for parks, and Metro Station parking were not subject to service tax. However, the appellant had already paid service tax on other services such as the construction of additional facilities (community hall, shopping center), swimming pool for DDA, and work done for Brahamputra Infrastructure Ltd. (BIL) as a sub-contractor.

3. Invocation of Extended Period of Limitation:
The appellant contended that the show cause notice (SCN) was barred by limitation as there was no evidence of fraud or willful misstatement. The Tribunal found that the appellant had not registered for service tax, had not filed returns, and had not paid service tax until after the investigation. The extended period of limitation under section 73 was correctly invoked due to the appellant's suppression of facts and intent to evade payment of service tax.

4. Validity of Penalties Imposed Under Sections 77 and 78 of the Finance Act:
The Tribunal upheld the penalties imposed under sections 77 and 78. The appellant's failure to register, file returns, and pay service tax constituted a violation of the Finance Act and Service Tax Rules, justifying the penalties. The penalty under section 78 was to be re-calculated based on the revised service tax demand.

5. Applicability of Section 73(3) of the Finance Act:
The appellant argued that no SCN should have been issued as they had paid service tax voluntarily along with interest. The Tribunal held that section 73(3) is subject to section 73(4), which excludes cases involving fraud, collusion, or willful misstatement. Given the appellant's violations, the case fell under section 73(4), and the issuance of the SCN was justified.

Conclusion:
- Demand Partly Set Aside: The demand for service tax on construction/restoration of roads, boundary walls for DDA land/park, and Metro Station and car parking for DDA was set aside.
- Demand Partly Upheld: The rest of the service tax demand was upheld.
- Penalties and Interest: The penalty of Rs. 5,000/- under section 77 was upheld. The penalty under section 78 was to be recalculated based on the revised service tax demand. Interest payable under section 75 was to be adjusted against any amount already paid.
- Remand for Denovo Order: The matter was remanded to the original authority for passing a denovo order for computation based on the Tribunal's findings.

(Order pronounced in open court on 12/07/2024.)

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