9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 1017 - AT - Service TaxLevy of service tax - interior decoration service - appellant is undertaking orders for supplying assembling fixing installation and erection of cubicles/modular furniture - wilful suppression of facts or not - extended period of limitation. Whether for the relevant period the demand made on the appellant for rendering Interior Decoration Services is tenable? - HELD THAT - Since the services provided by the appellant in the instant case is of the nature of a composite works contract involving sale of goods as well as work and labour and is clearly not a contract of services simpliciter given the law laid down by the Apex Court in CCE v. Larsen and Toubro 2015 (8) TMI 749 - SUPREME COURT and Total Environment Building Systems Pvt Ltd v. Deputy Commissioner of Commercial Taxes 2022 (8) TMI 168 - SUPREME COURT without going into further details of the dispute or quantification of tax liability it is held that the impugned order to the contrary confirming the demand of service tax liability on the appellants under the category of interior decorator service cannot sustain and is liable to be set aside. Whether the invoking of extended period of limitation is tenable? - HELD THAT - There is no allegation that the appellant is not regularly filing its returns or have not reflected the manner of its levy of service tax in its invoices. In such circumstances when the appellant was inspected and audit conducted and the audit queries replied to there could not be a case of suppression and the Department could not have invoked the extended period of limitation as has been held in a line of decisions such as CCE Bangalore v Pragathi Concrete Products (P) Ltd 2015 (8) TMI 1053 - SC ORDER Rajkumar Forge v UOI 2010 (8) TMI 796 - BOMBAY HIGH COURT to cite a couple. Conclusion - i) The demand for differential service tax on the appellant for the period April 2006 to February 2007 under the category of Interior Decorator Services is not tenable and is set aside. ii) The invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act 1994 is legally unsustainable in the absence of any allegation or evidence of wilful misstatement or suppression of facts with intent to evade tax and the demand made beyond the normal limitation period is barred by limitation. iii) The demand of differential service tax interest and penalty imposed by the original and appellate authorities are quashed. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are: A. Whether the demand for differential service tax on the appellant for rendering "Interior Decoration Services" during the period April 2006 to February 2007 is tenable under the Finance Act, 1994. B. Whether the invocation of the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, for demanding service tax beyond the normal limitation period, is legally sustainable in the absence of any allegation of wilful misstatement or suppression of facts with intent to evade tax in the show cause notice. 2. ISSUE-WISE DETAILED ANALYSIS A. Tenability of Demand for Service Tax on "Interior Decoration Services" Relevant legal framework and precedents: The demand relates to service tax under Section 65(105)(q) of the Finance Act, 1994, pertaining to "Interior Decorator Services". The appellant was engaged in supplying, assembling, fixing, installation, and erection of cubicles/modular furniture. The appellant paid service tax only on 33% of the value, claiming abatement on 67% of the value, which was disputed by the Department. Key statutory amendments are crucial: Section 65(105)(zzzza) defining "Works Contract" service was introduced only by the Finance Act, 2007, effective from 1st June 2007, along with Rule 2A in the Service Tax (Determination of Value) Rules, 2006. Prior to this, composite works contracts involving supply of goods and labour were not taxable as service contracts simpliciter. The Supreme Court in CCE v. Larsen and Toubro (2015) held that the charging provisions of Section 65(105) applied only to service contracts simpliciter and not to composite works contracts involving transfer of property in goods. It was held that prior to 1st June 2007, service tax was not leviable on the service element of works contracts as there was no statutory definition or levy applicable to such composite contracts. Subsequently, in Total Environment Building Systems Pvt Ltd v. Deputy Commissioner of Commercial Taxes (2022), the Supreme Court reaffirmed that service tax on works contracts was leviable only from 1st June 2007 onwards, rejecting attempts to revisit the Larsen and Toubro decision. Court's interpretation and reasoning: The Tribunal noted that the appellant's activity was a composite works contract involving both supply of goods and labour. The appellant had discharged sales tax liability under the TNGST Act for the goods supplied. The adjudicating authority and the Commissioner Appeals denied the benefit of Notification No.12/2003-ST (which allows exclusion of cost of goods from taxable value) on the ground that the CA certificate submitted did not substantiate the cost of materials consumed properly. However, the Tribunal held that since the appellant's activities constituted a composite works contract prior to 1st June 2007, the levy of service tax on the entire value as "Interior Decorator Service" was not sustainable in law. The Tribunal relied on the Supreme Court's decisions above to conclude that the demand for service tax on the appellant for the relevant period was untenable. Key evidence and findings: The appellant had supplied a CA certificate showing payment of VAT on goods supplied. The appellant had also consistently classified the service as "Interior Decoration" based on departmental advice. The authorities' rejection of the CA certificate on valuation grounds was found to be without proper basis, but the Tribunal did not delve into valuation issues since the fundamental question of taxability itself was resolved against the Department. Application of law to facts: The Tribunal applied the statutory amendments and the binding Supreme Court precedents to the facts, concluding that prior to 1st June 2007, service tax was not leviable on composite works contracts. Since the appellant's service fell within this category, the demand was unsustainable. Treatment of competing arguments: The appellant argued that the activity was a works contract and not purely an interior decoration service, relying on Supreme Court rulings and the absence of service tax liability prior to 1st June 2007. The Department contended that the appellant had to pay service tax on the gross amount charged for interior decoration services. The Tribunal accepted the appellant's submissions and rejected the Department's contrary stance. Conclusion: The Tribunal set aside the demand for differential service tax on the appellant for the period April 2006 to February 2007, holding that the levy was not tenable. B. Tenability of Invoking Extended Period of Limitation Relevant legal framework and precedents: Section 73(1) of the Finance Act, 1994 provides a normal limitation period of one year plus return period for demanding service tax. The proviso to Section 73(1) allows extending the limitation period if the duty has not been levied or paid by reason of "wilful misstatement or suppression of facts with intent to evade payment of duty". The Supreme Court in CCE v. HMM Ltd (1995) held that for invoking extended limitation, the show cause notice must explicitly allege wilful misstatement or suppression of facts with intent to evade duty. Absence of such an allegation renders invocation of extended limitation period invalid. Similar views have been expressed in CCE & ST v. Triveni Engineering & Industries Ltd and CCE Mumbai v. Toyo Engineering India Ltd. In Uniworth Textiles Ltd v. CCE (2013), the Apex Court emphasized that the burden of proving mala fide or suppression lies heavily on the revenue and that such allegations must be clearly pleaded and proven. Court's interpretation and reasoning: The Tribunal observed that the show cause notice issued to the appellant did not allege any wilful misstatement or suppression of facts with intent to evade tax. The appellant had promptly replied to audit queries and had openly disclosed its classification of services and tax payments. There was no evidence of concealment or fraudulent conduct. The Tribunal held that in the absence of any such allegation or evidence, the Department could not invoke the extended period of limitation. The demand made beyond the normal limitation period was therefore barred by limitation. Key evidence and findings: The appellant's reply to audit queries in April 2008, soon after the audit in March 2008, clearly stated the appellant's position on classification and tax liability. The appellant regularly filed returns and reflected tax collection in invoices. No concealment or suppression was found. Application of law to facts: Applying the settled legal principles, the Tribunal concluded that the extended period of limitation could not be invoked without explicit allegations and evidence of wilful misstatement or suppression. The absence of such allegations in the show cause notice and the appellant's transparent conduct precluded the Department from demanding tax beyond the normal period. Treatment of competing arguments: The Department contended that the extended period was rightly invoked due to short payment of service tax. The appellant argued that the demand was barred by limitation as no such allegations were made. The Tribunal sided with the appellant, citing binding Supreme Court precedents. Conclusion: The Tribunal held that the demand invoking the extended period of limitation was untenable and set aside the demand made beyond the normal limitation period. 3. SIGNIFICANT HOLDINGS "A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines 'taxable service' as 'any service provided'. All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases." "Therefore, on the principle of stare decisis, we are of the firm view that the judgment of this Court in the case of Larsen and Toubro Limited (supra), neither needs to be revisited, nor referred to a Larger Bench of this Court... The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service element in such works contract liable to service tax w.e.f. 1st June, 2007. By the said amendment, works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed under the heading 'Service Tax'." "Therefore, in order to attract the proviso to Section 11A(1) it must be alleged in the show cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or wilful mis-statement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been noticed or that the assessee was guilty of wilful mis-statement or suppression of fact. In the absence of such averments in the show cause notice it is difficult to understand how the Revenue could sustain the notice under the proviso to Section 11A(1) of the Act." Core principles established include:
Final determinations on each issue:
|
