2014 (11) TMI 167 - AT - Service Tax

Applicability of Notification No. 12/2003 - determination of value of goods - completion and finishing services in relation to building or civil structure - Held that - Appellants on being found out having illegally availed of Notification No. 15/2004-ST and Notification 1/2006-ST have attempted to get covered under Notification No. 12/2003-ST. But it is seen from the adjudication order as well as from their submissions in this appeal that they have only given the overall values of goods and materials purchased by them financial year wise and have failed to show with documentary evidence the goods and materials specifically sold to various service recipients in the context of provision of the service for which invoices were raised and payments received. That exemption notifications (except the promotional/beneficial notifications) are to be interpreted strictly has been repeatedly held in various judgments like in the case of Konkan Synthetic Fibres Vs. CC (Import) Mumbai 2012 (3) TMI 273 - SUPREME COURT OF INDIA . The benefit of exemption Notification No. 12/2003-ST cannot be granted merely on the basis of overall estimation/approximations put forth and without any documentary proof specifically indicating the value of goods and materials sold in respect of the individual recipients of service as per the contracts entered into by the appellants with each of them. They have failed to produce such documentary proof so far. The appellants insist that they have such documentary proof and would be able to produce the same. In such a situation, it is only fair that the case is remanded to the adjudicating authority to enable the appellants to do so. - Matter remanded back - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Denial of benefit under Notification No. 12/2003-ST.
2. Eligibility for Notifications No. 15/2004-ST and No. 1/2006-ST.
3. Suppression of facts and intention to evade service tax.
4. Applicability of service tax on composite contracts prior to 01.06.2007.

Detailed Analysis:

1. Denial of Benefit under Notification No. 12/2003-ST:
The appellants contended that they were eligible for the benefit under Notification No. 12/2003-ST, which exempts the value of goods and materials sold by the service provider to the recipient of service from service tax, provided there is documentary proof specifically indicating the value of the said goods and materials. The adjudicating authority denied this benefit, stating that the appellants did not provide such documentary proof. The Tribunal noted that the appellants had given overall values of goods and materials purchased but failed to show documentary evidence of goods and materials specifically sold to various service recipients. The Tribunal emphasized that mere plausible explanations or approximations are insufficient for the purpose of Notification No. 12/2003-ST. The case was remanded to the adjudicating authority to enable the appellants to produce the necessary documentary proof.

2. Eligibility for Notifications No. 15/2004-ST and No. 1/2006-ST:
The Show Cause Notice required the appellants to justify their claim for the benefits under Notifications No. 15/2004-ST and No. 1/2006-ST, which were not applicable to completion and finishing services. The appellants admitted during the investigation that they had claimed these benefits. The Tribunal upheld the adjudicating authority's decision to deny the benefits of these notifications, as the appellants did not contest their eligibility for these notifications during adjudication or in their appeal before CESTAT.

3. Suppression of Facts and Intention to Evade Service Tax:
The adjudicating authority found that the appellants had deliberately claimed the benefit of Notifications No. 15/2004-ST and No. 1/2006-ST, which were clearly not applicable to their services, and had not disclosed that the service for which the exemption was claimed was completion and finishing services. This was deemed as suppression of facts with the intention to evade service tax. The Tribunal agreed with this finding, stating that the appellants' actions clearly established suppression of facts. The judgments cited by the appellants did not help their case as they did not deal with a situation where the benefit of an exemption notification was claimed so blatantly to evade service tax.

4. Applicability of Service Tax on Composite Contracts Prior to 01.06.2007:
The appellants argued that their contracts, being composite contracts, were not liable to service tax prior to 01.06.2007 when works contract service was made taxable. The Tribunal rejected this contention, citing the judgment of the Hon'ble Delhi High Court in the case of G.D. Builders, which held that service tax can be levied on the service component of any contract involving service and goods, and the service element should be bifurcated and taxed. The Tribunal emphasized that the classification of service is determined as per the definitions of various taxable services prevalent during the relevant period, and the introduction of a new taxable service does not mean that the service was not taxable prior to that.

Conclusion:
The Tribunal set aside the impugned order and remanded the case for de novo adjudication to enable the appellants to produce documentary evidence required for the benefit of Notification No. 12/2003-ST. The adjudicating authority was directed to consider the appellants' submissions afresh regarding the admissibility of the benefit of Notification No. 12/2003-ST and re-determine the demand of service tax and penalties accordingly.