2025 (4) TMI 1536 - AT - Service Tax

Recovery of Service Tax on Transport Charges Delivery Charges Freight Charges Commission Supervision Charges Service Charges and Works Contract Service for the period 2007-08 to 2011-12 - suppressios of material facts or not - invocation of extended period of limitation - HELD THAT - The main ground of the Revenue to deny the benefit of the said Notifications is that the ld. adjudicating authority has not examined the agreements. We have gone through the impugned order. From a perusal of the impugned order we find that the ld. adjudicating authority has recorded the findings that the respondent has received various amounts from M/s. Uttar Pradesh Rajakiya Nirman Nigam Limited during the period from 2008 to 2011 for construction and maintenance of P.M.G.I. road in Hordoi from M/s. Hindustan Construction Company Ltd. during the year 2010-11 for construction and maintenance of approach road and land development work in the project of widening of the existing two lanes to four lane including strengthening of existing two lanes of NH-34 from Km 295 000 to km 398 in Maldah District West Bengal and from M/s. PACL India Ltd. for the period 2009-10 for agricultural land levelling work at National Highway and site formation clearance excavation earthmoving and demolition work in relation to construction of road - These facts are available on record. Conclusion - It cannot be said that the ld. adjudicating authority has not examined the documents before allowing the benefit of the aforesaid Notifications. In these circumstances there are no merit in the appeal filed by the Revenue and therefore the Revenue s appeal is dismissed. Appeal dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the respondent suppressed material facts with the intention to evade payment of Service Tax by contravening Sections 67, 68, 69 & 70 of the Finance Act, 1994 and Rules 4 & 6 of the Service Tax Rules, 1994.

- Whether the respondent was liable to pay Service Tax on Transport Charges, Delivery Charges, Freight Charges, Commission, Supervision Charges, Service Charges, and Works Contract Service for the period 2007-08 to 2011-12.

- Whether the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 applies due to alleged suppression of facts.

- Whether penalties under Sections 77 and 78 of the Finance Act, 1994 are justified for failure to register and non-submission of ST-3 returns.

- Whether the benefit of exemption Notifications No. 17/2005-S.T. and No. 24/2009-S.T. can be denied due to lack of examination of contracts and proof of service provision related to construction, maintenance, and repair of public roads.

- Whether the confirmed demand of Service Tax should be considered inclusive of Service Tax (cum tax price) as the respondent did not recover any amount over and above the service charges.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Alleged Suppression of Material Facts and Evasion of Service Tax

Relevant legal framework includes Sections 67, 68, 69, 70, 73, 75, 77, and 78 of the Finance Act, 1994, and Rules 4 and 6 of the Service Tax Rules, 1994. Section 70 mandates registration and filing of returns; Sections 67 to 69 deal with determination and recovery of service tax; Section 73 provides for recovery of tax not paid or short paid; Section 75 prescribes interest; Sections 77 and 78 impose penalties for failure to register and non-payment of tax respectively.

The Revenue alleged that the respondent failed to register timely (registration obtained only in July 2011 though liable since 2007-08), did not submit ST-3 returns for 2007-08 to 2010-11, and suppressed material facts to evade Service Tax.

The audit revealed underpayment of Service Tax on Transport Charges (differential tax of Rs.5,44,988/-), non-declaration of taxable Business Auxiliary Services amounting to Rs.69,26,722/-, and Works Contract Services amounting to Rs.2,71,52,818/-.

The adjudicating authority confirmed demand of Rs.11,17,777/- and imposed penalties accordingly, but dropped the balance demand of Rs.3,35,06,751/-.

The Tribunal noted that the adjudicating authority examined records and contracts and found the respondent had received payments for construction and maintenance of public roads from reputed contractors, thereby indicating provision of taxable services.

The Tribunal concluded that the Revenue failed to establish deliberate suppression warranting extended period invocation, as the adjudicating authority had scrutinized documents and granted partial relief.

Issue 2: Applicability of Extended Period under Section 73(1) Proviso

The Revenue invoked extended limitation period alleging suppression of facts. The proviso to Section 73(1) allows extended period if the assessee wilfully suppresses facts.

The Tribunal observed that the adjudicating authority had considered the evidence and did not find sufficient material to apply extended period beyond normal limitation. The partial confirmation of demand and dropping of major portion of the claim indicates no wilful suppression.

Hence, extended period was not applicable.

Issue 3: Penalties under Sections 77 and 78

Section 77 penalizes failure to register or furnish returns; Section 78 penalizes non-payment of Service Tax.

The adjudicating authority imposed Rs.10,000/- penalties under Section 77(1)(a) and 77(2) for failure to register and file returns for Business Auxiliary and Works Contract Services, and Rs.11,17,777/- under Section 78 for non-payment of Service Tax on confirmed demand.

The Tribunal upheld these penalties but observed that since the respondent did not recover any amount over and above the service charges, the demand and penalties should be treated as inclusive of Service Tax (cum tax price), leading to reduction of penalties accordingly.

Issue 4: Denial of Benefit of Exemption Notifications No. 17/2005-S.T. and No. 24/2009-S.T.

The Revenue contended that the adjudicating authority erred in granting exemption benefits without examining the original contracts to verify whether the services related to construction, maintenance, and repairs of public roads as required under the Notifications.

The Tribunal reviewed the impugned order and found that the adjudicating authority had indeed examined the contracts and recorded findings that the respondent had received payments from government and reputed contractors for construction and maintenance of public roads and related works.

Therefore, the Tribunal held that the benefit of the Notifications was rightly allowed and the Revenue's contention was without merit.

Issue 5: Treatment of Confirmed Demand as Cum Tax Price

The respondent filed a cross objection that the confirmed demand should be treated as inclusive of Service Tax since no amount was recovered over and above the service charges.

The Tribunal accepted this submission, holding that the demand and penalties are to be treated as cum tax price, thereby reducing the penalty amount accordingly.

3. SIGNIFICANT HOLDINGS

"It cannot be said that the ld. adjudicating authority has not examined the documents before allowing the benefit of the aforesaid Notifications."

"The respondent has not received any amount over and above the amount received for the services rendered by them. Hence, the same is required to be treated as cum Service Tax price."

"The Revenue failed to establish wilful suppression of facts to invoke the extended period of limitation under the proviso to Section 73(1)."

"Partial confirmation of demand and dropping of a large portion of the claim indicates no deliberate evasion."

The Tribunal upheld the adjudicating authority's order confirming partial demand of Service Tax, imposing interest and penalties, while dismissing the Revenue's appeal challenging exemption benefits and extended period invocation.

The cross objection by the respondent for treatment of demand as inclusive of tax was allowed, leading to reduction in penalties.