2016 (12) TMI 1330 - AT - Service Tax

Pre-deposit - Evasion of tax - Works Contract Services - deliberate suppression of facts - Held that - qualification of specific works executed by the appellants under the category of Works Contract Services , being (i) Ambedkar Vihar Awasiya Yojna, Allahabad (ii) Ambedkar Vihar Yojna, Allahabad & (iii) Ambedkar Vihar Awasiya Yojna, Allahabad, appear to be not taxable, being flats constructed for lower income groups - also in respect of all five projects as noticed in the impugned order, there is no findings by the ld. Commissioner if any residential block constructed have 12 or more residential units. Apparently, all the constructions appear to be for residential purposes and not commercial purposes - the levy of service tax appears to be doubtful in absence of details and findings recorded by the ld. Commissioner. Appellant directed to deposit 7.5% of the disputed tax by way of predeposit after adjusting tax already paid. Pursuant to such deposit, balance amount of tax, interest and penalty shall remained stayed till disposal of appeal.

Summary

Issues:
Service tax liability for works contract services from 2007-08 to 2011-12, penalties under Sections 76, 77, and 78 of the Finance Act, 1994, non-compliance with Service Tax Act and Rules, challenge to show cause notice (SCN) before Allahabad High Court, details of works contracts awarded, non-submission of reply to SCN, legality of service tax demanded, computation of service tax, interest, and penalties, representation to ADA for payment of service tax, ADA's non-profit status and sovereign function, break-up of total tax amount, invocation of extended period of limitation, satisfaction recorded in impugned order regarding works contract services, levy of service tax on residential constructions.

Analysis:
The appellant appealed against the Order-in-Original confirming a service tax liability of ?74,07,820 for the period from 2007-08 to 2011-12, along with penalties under various sections of the Finance Act, 1994. The appellant was registered with the Service Tax Department in 2008 under "Works Contract Services." The Revenue issued a show cause notice (SCN) as the appellant had not discharged the service tax liability. Details of works done and payment receipts were requested, leading to the determination of service tax liability based on the gross amount received. The appellant challenged the SCN before the Allahabad High Court, which clarified the liability for service tax on works contracts completed before specific dates. Despite opportunities, the appellant failed to provide details of tax-free works executed. The Commissioner passed the impugned order based on the appellant's non-compliance and confirmed the service tax liability and penalties.

The appellant contended that the service tax demanded for the period before June 1, 2007, was illegal, and the computation of service tax, interest, and penalties was incorrect. The appellant had requested the ADA to pay the service tax for works contracts started before June 1, 2007, but ADA, a non-profit organization, deemed the service tax inapplicable due to its sovereign function. The Tribunal directed the appellant to deposit 7.5% of the disputed tax as a predeposit, with the remaining amount stayed pending appeal disposal. The Tribunal questioned the levy of service tax on residential constructions without specific findings by the Commissioner, indicating doubts about the applicability of service tax in absence of detailed records.

In conclusion, the Tribunal directed the appellant to make a predeposit and stayed the balance tax, interest, and penalties pending appeal resolution. The issue of service tax liability for works contracts, compliance with statutory provisions, and the applicability of service tax on specific projects were thoroughly examined, highlighting the importance of proper documentation and compliance with tax regulations.