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2016 (2) TMI 646 - AT - Service TaxDemand of service tax was confirmed on the ground that the appellant had provided Commercial or Industrial Construction Service (CICS), Maintenance and Repair Service , and Site formation and clearance, excavation and earthmoving and demolish Service to Giral Lignite Thermal Power Project during the period 08.06.2005 to 17.10.2008 but did not pay service tax on the gross amount received from the service recipient. Held that - it is evident that the appellant was not unjustified in holding the reasonable belief that works contracts were not taxable under the Finance Act, 1994prior to 01.06.2007 because even the speech of the Hon ble Finance Minister quoted above gave the same impression. Indeed there was a great deal of confusion whether works contracts were vivisectable and liable to service tax prior to 01.06.2007, so much so that the Hon ble President CESTAT setup Larger Bench of five Members to decide the issue and the issue was thus decided by the Larger Five-Member Bench of CESTAT in the case of L&T - In these circumstances, it is not possible to sustain the allegation of wilful misstatement / suppression of facts on the part of the appellant. - Demand set aside - Decided in favor of assesee.
Issues:
1. Eligibility for abatement under notification No. 15/2004-ST. 2. Taxability of works contracts under the Finance Act, 1994. 3. Non-identification of components of the impugned demand under each service. 4. Allegation of wilful misstatement/suppression of facts. 5. Time-bar on the demand period. Issue 1: Eligibility for abatement under notification No. 15/2004-ST: The appellant contended that they were entitled to 67% abatement on the gross amount received, as the value of free supplies provided by the service recipient was not included. The Tribunal agreed with this contention, citing the judgment in the case of Bhayana Builders (P) Ltd. Vs. CST, Delhi. This decision supported the appellant's claim for abatement. Issue 2: Taxability of works contracts under the Finance Act, 1994: The appellant argued that the works contract service became taxable under the Finance Act, 1994 only from 01.06.2007, while the service in question was completed before that date. They believed that works contracts were not liable to service tax before 01.06.2007, leading to their non-registration. The Tribunal acknowledged the confusion surrounding the taxability of works contracts before 01.06.2007, as highlighted in the speech of the Hon'ble Finance Minister. The Tribunal noted that the appellant's belief was reasonable, especially considering the larger bench decision in the L&T case. Consequently, the demand was not sustainable under this issue. Issue 3: Non-identification of components of the impugned demand under each service: The impugned demand was confirmed under three different services without specifying the amount attributed to each service. The Tribunal observed this lack of identification but deemed it non-fatal. However, the appellant consistently maintained that the service was rendered under composite (works) contracts, which were not taxable before 01.06.2007. The Tribunal found the appellant's belief justified, given the ambiguity surrounding the taxability of works contracts pre-2007. Issue 4: Allegation of wilful misstatement/suppression of facts: The Tribunal dismissed the allegation of wilful misstatement or suppression of facts against the appellant. It noted that the confusion regarding the taxability of works contracts before 01.06.2007, as highlighted in the Finance Minister's speech and the larger bench decision, supported the appellant's position. As a result, the demand could not be sustained on the grounds of wilful misstatement or suppression. Issue 5: Time-bar on the demand period: The Show Cause Notice was issued on 23.06.2010, pertaining to the period 08.06.2005 to 17.10.2008. The Tribunal found that the entire impugned demand fell beyond the normal one-year period, rendering it time-barred. Consequently, the demand was deemed invalid due to being outside the statutory time limit. In conclusion, the Tribunal ruled in favor of the appellant, waiving the pre-deposit requirement and allowing the appeal based on the various legal and factual considerations discussed in the judgment.
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