2017 (9) TMI 160 - AT - Service Tax

Construction of complex service - non-payment of service tax - Held that - the residential complexes built for married military troops is not liable to service tax as they do not require any approval from any authority. Further, we also note that the tax liability cannot be also sustained on the second ground that these complexes are built for personal use by the Ministry of Defence by allotment to married military personnel - there is no service tax liability for construction activities carried out by the appellant in connection with their contract with Ministry of Defence. CENVAT credit - duty paying documents - Held that - the appellants have categorically explained each one of the objections raised against allowing credit - These documents can be re-verified by the Original Authority alongwith the explanations offered by the appellant - matter on remand. Preferential location charges - demand with interest paid before issuance of SCN - Section 73 (3) - Held that - as the service tax amount with applicable interest has already been discharged even before the issue of show cause notice, the matter is fit for closure under Section 73 (3). Business exhibition service, availed outside India - export of services - Penalty - Held that - expenditure towards business exhibition held outside India will not create liability as import of service - service tax liability of ₹ 54,384/- confirmed towards this service is not sustainable - Considering that these tax amount paid on reverse charge basis is eligible for credit to them, no penalty can be imposed in such revenue neutral situation - penalty set aside. Appeal allowed - part matter on remand.

Summary

Issues:
1. Liability to service tax on construction of complex service under Section 65 (105) (zzzh) of the Finance Act, 1994.
2. Dispute regarding Cenvat credit availed by the appellant.
3. Demand of service tax on "preferential location charges" under Section 65 (105) (zzzzu).
4. Service tax demanded under the category of "advertisement - sale of space or time" and "business exhibition service."

Issue 1: Liability to service tax on construction of complex service
The appellant contested the tax liability on the grounds that approval from an authority under any law was not required for construction projects meant for defence personnel. The Tribunal considered correspondence between the contractors, DG (MAP) of the Defence Ministry, and the CBEC, which clarified that no service tax would be levied if no approval was required for construction projects for defence personnel. The Tribunal relied on precedents and held that construction activities for married military troops, not requiring approval, were not liable to service tax.

Issue 2: Dispute regarding Cenvat credit availed
The lower Authority disallowed Cenvat credit availed by the appellant on the basis of incomplete documents and discrepancies in amounts. The Tribunal noted that the appellants submitted all invoices during adjudication and explained objections raised against allowing credit. The Tribunal found merit in the appellant's submissions and suggested re-verification of documents by the Original Authority to determine the correctness of credit availed.

Issue 3: Demand of service tax on "preferential location charges"
The appellant had already paid the entire demand along with interest before the issue of show cause notice. The Tribunal agreed that the matter should have been closed without issuing a demand under Section 73 (3) as the service tax amount had been discharged. The Tribunal found that the appellant had a bona fide belief regarding the service being part of overall construction service, warranting closure under Section 73 (3).

Issue 4: Service tax demanded under "advertisement - sale of space or time" and "business exhibition service"
The Tribunal held that the liability on business exhibition services availed outside India and paid in foreign exchange was not sustainable. The Tribunal referred to a precedent and set aside the service tax liability confirmed for this service. The Tribunal also considered the reconciliation of taxable value in ST-3 returns and P&L account, finding no malafide intent and thus no penalty was imposed on this account.

In conclusion, the Tribunal allowed the appeals filed by the appellant by setting aside the impugned orders on various grounds discussed and analyzed thoroughly.