2024 (12) TMI 350 - AT - Service Tax

Recovery of Service tax with interest and penalty - classification of services - Work Contract Service - denial of benefit of exemption claimed by the appellant under N/N. 25/2012-ST - HELD THAT - The impugned order has proceeded to confirm the demand made on the basis of amounts reflected in the TDS return after denying the benefit of the exemption claimed by the appellant. Appellant has in submissions made before me not agitated the issue of exemption denied but have agitated the matter on re-computation of demand. There are merits in the submissions made that demand needs to be recomputed. The demand made needs to be recomputed by treating the services provided to PVVNL as work contract service either on the basis determination of labour charges as per the work order or by allowing the benefit of composition scheme and partial recharge as per notification No 30/2012-ST. For limited purpose of re-computation of demand matter is remanded back to the original authority. The penalty imposed under section 78 is also set aside, to be recomputed after re-computation of the demand. Appeal partially allowed and the matter remanded to original authority for re-computation of demand and penalty under Section 78.

Issues Involved:
1. Confirmation and reduction of service tax demand and interest.
2. Imposition and reduction of penalties under various sections of the Finance Act, 1994.
3. Classification of services provided and applicability of exemptions.
4. Re-computation of demand based on classification and exemptions.

Detailed Analysis:

1. Confirmation and Reduction of Service Tax Demand and Interest:

The appeal challenges the Order-in-Appeal which modified the original order by reducing the service tax demand to Rs. 9,00,763/- along with interest. The original demand was based on the taxable value of services provided by the appellant from October 2014 to June 2017, as reflected in FORM 26AS. The appellant was found to have short-paid service tax, with discrepancies noted between their ST-3 returns and the amounts reflected in their financial documents. The tribunal upheld the reduced demand amount, agreeing with the appellate authority's findings that the appellant had not provided sufficient documentation to justify a further reduction or exemption.

2. Imposition and Reduction of Penalties:

The appellate authority reduced the penalty under Section 78 of the Finance Act, 1994, to match the service tax demand of Rs. 9,00,763/-, while maintaining the penalty of Rs. 10,000/- under Section 77(1)(d). However, it set aside the penalty of Rs. 10,000/- under Section 77(1)(c) for non-furnishing of records and the late fee of Rs. 20,000/- for non-filing of ST-3 returns. The tribunal further remanded the penalty under Section 78 for re-computation in light of the re-evaluation of the demand.

3. Classification of Services and Applicability of Exemptions:

The appellant argued that the services provided to Purvanchal Vidyut Vitran Nigam Ltd. should be classified as "work contract services," which would allow for the benefit of a composition scheme and partial reverse charge mechanism. The tribunal noted that the appellant failed to provide sufficient evidence to support the claim for exemption under Notification No. 25/2012-ST, as the services did not fall under the exempted categories. However, it acknowledged that the classification as work contract services was not disputed and required re-evaluation for proper computation of tax liability.

4. Re-computation of Demand:

The tribunal found merit in the appellant's submission regarding the need for re-computation of the demand. It directed that the services provided to PVVNL be treated as work contract services, either by determining the labour charges as per the work order or by allowing the benefit of the composition scheme and partial recharge as per Notification No. 30/2012-ST. The tribunal remanded the matter back to the original authority for re-computation of the demand and penalty, emphasizing the need for a swift resolution due to the age of the case.

Conclusion:

The appeal was partially allowed, with the tribunal remanding the matter for re-computation of the demand and penalty under Section 78. The original authority was instructed to complete the remand proceedings within three months. All other parts of the impugned order that were not challenged were upheld.

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